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Straddling Categories – Value Place

Not quite an apartment, not quite a hotel, Value Place is offering up a twist for economy extended stay guests.

Thursday, March 11, 2010
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These days, customers are craving value over almost anything else. And, in the case of Value Place Inns, that customer might be the franchisee as well as the end user. With 167 properties open, the seven-year-old brand is on the upswing with its unique approach that has many franchisees swinging their commitment behind this emerging brand.

Just last year alone, the company debuted 42 all-new construction properties for a brand that isn’t easily fitting into traditional categories. It’s a hotel, it’s an apartment…wait, it’s neither, according to Gina-Lynne Smith, President, Value Place Franchise Services.

“We asked ourselves the question if we are a hotel or apartment. We see ourselves as neither; we are a category creator. The Value Place concept defies typical nomenclature,” said Smith. The company’s new tagline says it best: “Hotel convenience with apartment essentials.”

That’s because the rooms at Value Place are rented for a week at a time, putting a new spin on the extended stay concept. But the concept of ‘value’ goes a lot deeper, according to Smith. On both the customer side and construction side, Smith said every item in the hotel was considered and reconsidered.

For example, staying at a Value Place is kind of like eating dinner ala carte. You pay for what you want, and get what you pay for. Want an in-room coffee maker? They’ll sell it you. How about dishes, bowls, flatware, skillets and pots? They’ll sell that to you, too. And unlike a lot of other brands at this end of the spectrum, high-speed Internet access also requires a $10 a week fee.

Housekeeping is kept to once every other week, and if a guest wants new linens it’s up to them to exchange them at the front desk.

Add in value engineering on the facility, and it only takes the equivalent of four or five full-time employees (FTE) to keep the place humming. An equivalent extended stay hotel would take two to three times the staff, said Smith, and up to 24 FTEs in a transient hotel.

“That opportunity for margin gives franchisees strong financial potential. When you treat nickels like manhole covers you can get the finances the right way. And if you build [a prototype] correctly then you have tremendous opportunity for great financial outcome,” said Smith.

The current Value Place prototype comes in three iterations: one with 108 rooms; one with 116; and the other with 124. Building sizes are 40,192 sq. feet, 42,564 sq. feet, and 44,936, respectively, with three room plans: a 264 sq. foot studio; a 319 sq. foot studio sleeper; and a 319 sq. foot studio double.

There are currently 164 properties open and 15 new ones under construction. The company manages 84 of them for owners.

Not surprisingly, Value Place was created by industry legend Jack DeBoer. He essentially created the category when he came up with the Residence Inn concept, a brand he later sold off to Marriott. He continued refining the idea with other extended stay brands like Summerfield Suites and Candlewood Suites. Then, in 2001, he realized there was no equivalent product for the economy segment, so he went on to create Value Place. His rationale was that there were many individuals who needed to travel on their own dime and wanted a more affordable option than the brands that existed at that time.

“We have seen the most success with this brand than all of the others in our history. In fact, a lot of our team is an amalgamation of people that have worked with those brands in the past. It’s what sets us apart. The vision we are offering and the same quality of product as those other brands, but with value-oriented price,” said Smith.

Now, about that weekly stay requirement. Smith said it’s actually a cornerstone philosophy of the brand that helps maintain the safety of guests on site. She said it promotes a residential culture at the hotel and makes the property more like a neighborhood than a hotel. And Value Place also takes an upfront deposit, scans all driver’s licenses and also does a sex offender check to make sure all guests pose no threat to another.

And to keep a family friendly atmosphere, there are no pay-per-view movies, which Smith said are focused heavily on adult films. “We give up that rev stream but we believe we are gaining more market share by having that anyway,” said Smith.

While results vary by property, the brand is running in the mid-70s for occupancy. And construction costs are rapidly sinking as well, with Smith seeing costs equivalent to 2004. On average they’ve dropped 25 percent or more in the last year and continue to drop.

“Our product is easily adaptable to so many lifestyles and needs. We went from 18 months ago with 40 percent construction workers to replacing that business with relocations, those transitioning from homes or family crisis issues. We are the Target or Wal-Mart of the hotel industry,” said Smith.

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