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The Place for Value

Longtime hotelier Jack DeBoer shares insight on the state of the industry.

Monday, February 07, 2011
Ron Word
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Jack DeBoer is known in the hotel industry as an innovator who created the extended-stay concept with Residence Inn. He later co-founded Summerfield Hotel Corp. and Candlewood Hotel Corp. His latest venture is the extended-stay hotel chain Value Place, which has more than 175 locations.

DeBoer and Jim Abrahamson, president of IHG’s Americas region, are the keynote speakers at the 23rd annual Hunter Hotel Investment Conference, scheduled March 6-8 at the Atlanta Marriott Marquis.

DeBoer, founder and chairman of Value Place in Wichita, Kan., shared his view on the state of the hotel industry to Buyer Interactive.

BI: What is your view of the state of the hotel industry? Are things turning around ?
JD: They are looking a little better right now. We’ve got a long slog to get back to the way it was in 2007 in most of the country. I think the industry is ahead of 2009 in 2010, but that’s coming off a real low. I see it being a long slog to get back to 2007, but it’s better than 2009.

Generally, if you want to pick a number, from what I see in the regular lodging business, but not our product, they are probably up 15 percent from the low last year, but they are still 15 percent behind where they were in 2007, and that next 15 percent is going to be a while.

BI: How should hotel owners and managers be positioning themselves while the economy is returning?
JD: It’s pretty practical: keep your properties up to date, but handle nickels like manhole covers. That’s the only strategy I know. My personal properties, other than Value Place, we are spending money to upgrade, but that’s what we do in normal times. So, I don’t see any reason to reposition. It is what it is and it’s just going to be tough.

BI: Are there too many hotel rooms being built around the country?
JD: We are not overbuilt, we are under demolished. They are a lot of rooms out there that are really subpar, and because people are watching their nickels, it’s draining off business, even as the recovery begins, for the properties that deserve the business.

I view the industry with a couple of things. One is the day to have dumb development and dumb operating decisions get covered up by a robust market is gone. You better be paying attention, you better know what you are doing or you are going to get your head handed to you and that will be true for the foreseeable future, in my opinion.

I also think that the center of the business is the mid-price and the entire range of mid-price has become a commodity. There is a good product on every corner in this country and they have smiling front desks, clean rooms and nice free breakfasts and so what do you do to compete other than sit around and wait for the economy to come back? I don’t think there is an opportunity, a major opportunity, in the middle to build new product. Obviously, there are exceptions: Washington, New York and the East Coast. They don’t even know that the country is going through all this hell.

On balance, this is no time to invest in the mid-range of the lodging industry, in my opinion. If you are going to be in lodging you better choose Triple A-plus locations, in places like New York, Washington, or go down in price point.

BI: How is Value Place doing?
JD: Value Place is doing well and has been doing very well all through this downturn. And the reason for that is that part of the world is clearly under demolished in that there are roadside hotels built at the end of war in the 50s and so on, that are still out there and still in the inventory.
They are not safe, they are not good, but they are cheap.

As the world comes back, there is a great opportunity to have a good clean, safe, low-price property that can compete with the U.S. highway hotels of the 50s. That’s why Value Place does well. We have 175 open now and they are doing well. We’re strong. We are up over last year, we were up over the year before. We didn’t get hurt by the downturn because were are low-priced, we are clean and we are safe. It’s simple.

Ron Word
Hotel Interactive® Editorial Division
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