The economy has hurt the travel industry across the board in the past few months, with the pipeline diminishing, with financial institutions losing the ability and confidence to lend for new projects and refinancing, and with both business and leisure travelers having to make cutbacks. These stories aren’t a mystery to anyone, and hotel companies, hotel owners and consumers have been working hard together to make the best of a bad situation and turn around a rough recession.

The good news is that it may be working. Many experts suggest that the worst is possibly in the rearview, and though recovery doesn’t mean immediately skyrocketing profits, operating trends moving positively is a welcome change.

As the industry rebounds, hotel investors and owners inevitably will be looking for new ventures (and if they’ve been smart, they have been already). Interestingly enough, in 2008, franchisee hoteliers eschewed their brand affiliation in favor becoming independent operators at a higher percentage than independent owners chose to affiliate with a new brand, according to Smith Travel Research. Though the exact reason for this is unclear, the outcome is that brands are competing heavily for hoteliers that are in fact looking for a new flag to fly at their hotel.

With that in mind, several hotel companies — Vantage Hospitality, Boomerang Hotels, America’s Best Franchising and InnSuites Hospitality — have seen unprecedented growth within their systems during this recession. AAHOA Lodging Business had the opportunity to interview them about how they’ve met with such success, how they’ve been able to gain market share and how they plan to foster future growth.

Vantage Hospitality

Now at 850 properties, Vantage Hospitality — the parent company of America’s Best Value Inn and The Lexington Collection — is the 11th largest hotel company in the world. The catch to that, however, is that the company started less than 10 years ago, and the Lexington brand — which has 45 properties operating or under construction to date — started in 2007.

The keys to Vantage’s success are many, according to Roger Bloss, president an CEO. First off, a 98 percent retention rate including terminated properties that haven’t progressed with the brand is a start. The company’s flat fee structure and 100 percent ROI promise are part of that equation, giving members the ability to thrive in good times and bad.

“Because we charge a flat fee instead of percentage of gross, we thrive and our hoteliers thrive,” says Bloss. “Not only do our members know how much they’re going to have to pay in fees so they can plan their budget, but also that works on the flipside for us as a corporation. You’re seeing companies having to make layoffs, stock prices going down, services cut back, and we continue to grow.”

With 32 new properties in first quarter 2009, Vantage has been able to keep its progress going forward even during the recession.

“Nowadays, you can change your franchise anytime you want, but if it works, why would you? If you provide the right service and the right product at the right price with the right attitude, there’s no reason to change, and that’s what we’ve done,” says Bloss.

The America's Best Value Inn located in Glen Rose, Texas.

Bloss attributes several other things to Vantage’s growth in the past 10 years. By conducting intensive research in building the company’s foundation, he explains that understanding and predicting the trajectory of the industry at the time has paid off greatly. Looking at trends in Internet and electronic distribution and its effects on consumer habits, coupled with the direction of hotelier organizations such as AAHOA and others, Vantage took a unique approach to the franchising model.

“I’ve been very involved with -AAHOA since its inception, and I could see the direction it and other associations were taking, and I thought the franchise model was ready for some retooling,” Bloss says. “So we decided not to negotiate our fees, set up the ability for short term agreements, and we meet all AAHOA’s 12 Points of Fair Franchising. We eliminated all the barriers that were roadblocks in deciding to select a brand.”

Meeting with an unprecedented amount of growth in its early years, Vantage set out with The Lexington Collection in 2007, positioning it across the world as an upscale brand. Lexington’s tagline is “Inspired by Individuality,” nodding to the fact that each property can choose its own look and feel, while maintaining a three- to four-diamond rating.

“Let’s face it, a lot of brands have standard looks everywhere you go, but when you go across the country or across the world, it’s nice to have some variety and some originality,” says Bloss.

Focusing very heavily on customer service, Lexington is able to maintain its quality through its experience, even if each property looks completely different. At the same time, the brand’s owners are able to share in Vantage’s membership platform. Therefore, an independent owner that is looking for some structure and a brand backing or a branded hotel looking for a bit more freedom in its design and experience can find the best of both worlds.

Boomerang Hotels

Boomerang Hotels, the parent company of GuestHouse International and Settle Inn & Suites, also has experienced extremely positive growth in the past few months. Particularly in the first quarter 2009, room inventory grew by more than 10 percent, with six GuestHouse conversion properties opening across the country and a new construction Settle Inn hotel welcoming guests in Fargo, North Dakota. Furthermore, five more properties were set to open in April.

The company only has been on the national franchise scene two and a half years, and it announced its parent company structure underneath the Boomerang Hotels name at its annual owners conference in -September 2008.

“We continue to grow organically, appealing to people who want to pay less rates in a major market,” says Tim O’Connor, senior vice president of brand management for Boomerang Hotels. “Settle Inn is a well-known name in the Midwest, but it’s fresh on the scene as a national brand, and with GuestHouse, we went in and cleaned up many of the hotels that were not on par with what we wanted, giving ourselves overall a fresh look and a great platform for growth.”

Gillette, Wyo., welcomes a new Settle Inn hotel.

O’Connor explains that both of these midscale brands had played in the upper economy tier, but now are seeing conversions from other brands that traditionally have performed well at a high level in the midscale, such as Holiday Inn Express, Comfort, and Country Inns & Suites, as well as from independent properties looking for a new brand affiliation. He says that conversions are their chief avenue for growth right now, but they are still putting new construction projects into the pipeline where they make sense and where they have potential.

“Our growth as a company has been a combination of things, both of pent up demand and an easing of the resistance to take a closer look at us,” says O’Connor. “The economy has been a factor because we can get the word out there to people who are looking for new ventures.”

Overall, Boomerang’s growth has been from a mix of operators. GuestHouse had traditionally been a conversion brand, and the company has kept it as such, but some new construction opportunities have cropped up as well.

“We’re looking for quality operators who know what they’re doing in this business for conversion projects, but we also are doing business with new owners in the industry,” O’Connor says. “I think we are appealing to new owners because we offer a fair value and a high level of trust through the way we do -business.”

America’s Best Franchising

In its 17th year, America’s Best Franchising plays in the upper economy sector with Country Hearth Inns & Suites, America’s Best Inns & Suites, and Budgetel Inns & Suites, the latter of which the company picked up in late 2008. Furthermore, America’s Best owns 3 Palms, an upscale independent and condo-hotel brand.

Breaking down into about 75 percent conversions and 25 percent new construction, America’s Best plans to add 50 to 60 franchises in 2009, a significant amount of growth for a company that has just more than 200 properties to date. In the first quarter alone, 13 properties totaling 952 rooms were signed, and 10 new properties totaling 652 rooms were opened. Many of the new agreements are from franchisees new to the system.

“We can show value to our franchisees in the long term,” says Doug Collins, president and CEO. “Not only do our hotels offer great service at reasonable rates, but also our Web sites are well maintained and customized; plus, we have a state-of-the-art reservation system that provides value to both our guests and our franchisees.”

An exterior shot of a Country Hearth Inn.

Not too big, but not too small, Collins says that the America’s Best system offers an agreement that provides great value to its owners, developing a mutually beneficial relationship between the company and its franchisees. Based on -AAHOA’s 12 Points of Fair Franchising, the company provides the ability to benefit from a franchise agreement, not be burdened by it. As a result, America’s Best continues to see its long-term relationships flourish.

“We believe we’re a perfectly positioned company, because while properties benefit from brands, they don’t need a large brand,” Collins says. “The Internet is the great equalizer, and midsized brands can outperform larger brands. The larger companies provide value, but we can compete by offering great services at a reasonable fee.”

With that in mind, Collins notes that keeping a quality infrastructure is the main point of focus for the company, making sure that the franchisees have all the tools to create the most valuable service. A comprehensive technology strategy — with individual Web sites for each property, creative brand Web sites and cross marketing between the two — helps each hotel in -itself.

“Individual properties are affected differently, and during this recession we’ve invested heavily in technology and training,” says Collins. “Many items to improve guest experience are not capital intensive.”

Furthermore, the company provides each property with a comprehensive franchise information system, where owners can track numerous items about their individual hotel, keeping them updated on everything that goes on at their hotels.

“How do we differentiate ourselves? We avoid areas of traditional conflict between franchisor and franchisee,” says Collins. “We do not accept vendor fees, we do not mandate vendors, plus we offer area protection and our contracts contain exit windows. We have not changed the way we do business, because we always do business in a hands on fashion. We are being very conscientious of our growth, and we’re more concerned with quality operators and quality properties than just growing to be the biggest.”

InnSuites Hospitality Trust

InnSuites Hospitality Trust has taken a slightly different approach to its success, and it only has 11 properties in its portfolio. As a boutique hotel collection, the company offers a simple, cost-effective boutique concept for an independent hotel to maintain the freedom it needs to be its own property, but with the marketing benefits of a brand. Mostly playing the Southwestern United States, the company is looking to expand elsewhere in North America, and recently has a property opening in Hollywood, California.

“With an independent brand you can go a little further in providing  unique amenities in each hotel while maintaining a high level of quality,” says Pamela Barnhill, Vice President of the InnSuites Boutique Hotel Collection. “There is something to be said for having the name and the image of an international brand, but at the same time, we can offer all those amenities and more with the added value of not having to pay $200 to stay in a cookie cutter.”

The InnSuites' location at the Tempe-Phoenix (Ariz.) Airport.

The Hotel Trinity in Fort Worth, Texas, is an example of InnSuites’ success. It converted from a midscale international brand and went to a boutique property affiliated with InnSuites. Yet, in 2008 and the beginning of 2009, it saw a $443,750 increase in gross operating profit over the previous year, rising from just barely breaking even. The Hotel Aspen in Flagstaff, Arizona, had a similar story, increasing operating profits by $234,350 in that same -period.

“It’s scary to move away from the known brand and image, but if you can give your guests something different, you can do really well,” says Barnhill.

As far as company growth goes, Barnhill says InnSuites is always looking for the right property at the right time in the right place. “If you try to get to a specific number, you often focus only on that number, and you can lose personal relationships and the level of quality.” 

That said, the right property is not a certain size, she says, nor does it need to offer a luxury spa or over-the-top amenities. Every Boutique Collection Hotel is individual. The differences can be something simple. For example, many of InnSuites’ properties are in the Sun Belt, and in an age where exterior corridor hotels are being phased out from many brand’s portfolios, that is not a precondition for a branded boutique.

“I think exterior corridor hotels can have lots of character, and they can be great for convenience, especially in a place where it’s hot and guests just want to pop outside for some fresh air,” says Barnhill.

For InnSuites’ Boutique Collection owners, nothing is mandated, but the company provides vendors and products that can provide value, it makes strong recommendations in terms of marketing and rates, and it is always available to provide assistance for owners.

“No matter what, we don’t change things in our hotels without being asked to do so, or without deciding on it jointly,” says Barnhill. “Overall, we offer casual suite luxury for less. Though that’s hard to define, it’s a mix of midscale and upscale, but we try to give every one of our guests something unique they wouldn’t expect.”

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