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Springing Ahead

Choice Hotels To Increase Extended Stay Lineup With Planned Acquisition Of WoodSpring Suites

Wednesday, December 27, 2017
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The wave of consolidation that we’ve seen among the big brand companies in the lodging industry over the past 12-24 months continued recently with the announcement that Choice Hotels International will be acquiring WoodSpring Suites and its franchise business from WoodSpring Hotels Holdings,LLC.

The deal, which was for a cool $231 million and is expected to close in the first quarter of 2018, marks the first major acquisition for Choice in more than a decade. (The company bought the Suburban Extended-Stay brand in2005.) In fact, the Silver Spring, MD-based, publicly traded Choice Hotels has sat on the acquisition sidelines far longer than anyone could have expected. For the past several years, long-time President and CEO Steve Joyce—who turned over the reins to Patrick Pacious in September—made no secret of his desire to bolster Choice’s brand portfolio through an acquisition.

As with most major deals these days, it’s all about scale. The addition of the economy WoodSpring Suites brand will dramatically increase the company’s extended-stay lineup, which already includes MainStay Suites and the aforementioned Suburban Extended Stay flag. Choice has been unable to significantly move the needle in terms of growth with the latter two brands as together they combine for a little more than 100 properties.

Meanwhile, the WoodSpring brand currently includes some 240properties with another 25 hotels expected to open in 2018. With the recent sale of nearly 100 properties, the brand offered Choice an asset light business which boasts an easy-to-operate model with low overhead helping to produce abetter ROI for owners. As an example, in the past three years, WoodSpringSuites experienced unit growth of some 25 percent with an estimated 45 percent increase in franchise fee revenue.

In addition, the extended-stay segment has become something of a favorite for franchisors as it continues to outperform the lodging industry’s other segments and has shown itself to be somewhat recession proof. Another appealing fact for choice when it comes to WoodSpring is that’s a new construction brand so its existing assets are in relatively good condition with an average of only 8 years old, roughly half of that of its competitive set. WoodSpring had announced plans to introduce a new prototype within the next year as well.

Meanwhile, for veteran Jack DeBoer it’s yet another success story in the segment he built when he pioneered the all-suite concept. DeBoer started the Residence Inn brand in the mid-70’s, and the entire extended-stay concept for that matter, before cashing out and selling the chain to Marriott International in 1987. A year later, he co-founded the Summerfield Hotel Corporation, which Hyatt subsequently bought. In 1995, he launched Candlewood Hotels, which he sold to InterContinental Hotel Group.

Value Place—which was started by DeBoer in 2003—underwent a somewhat unprecedented rebranding to WoodSpring Suites in 2015, which ultimately positioned the company for the acquisition.The WoodSpring brand—which includes 9 more upscale properties that are under the WoodSpring Suites Signature flag—stands to benefit from the increased marketing muscle of Choice, as well as the company’s rewards program and reservation system.

Choice has stated it plans to hire the franchise team, but whether terms can be worked out with senior leadership, such as WoodSpring’s President and CEO Gary DeLapp, remains to be seen.

Of course, whether or not this deal will ultimately represent a good value for Choice at $231 million also remains to be seen. But one thing we do know is given the way that the brand landscape has changed over the past two years, it’s pretty safe to assume there will be another deal before long.

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