The extended-stay segment remains one of the most prosperous in hospitality, and the WoodSpring Suites brand is taking advantage of that upward momentum. In February, Choice Hotels International opened its 250th WoodSpring hotel, and it is following up this milestone with a deal to develop 27 new WoodSpring properties across Michigan, North Carolina, Nashville and Jacksonville, Fla.
The deal is one of the largest for WoodSpring, which opened 14 properties and executed 25 transactions in 2018. Currently the company has adopted a growth mindset, with more than 100 properties in its development pipeline and plans to open 35 hotels in 2019.
For its newest venture, WoodSpring partnered with Checo Purchase Company, a subsidiary of Concord Hospitality. Ron Burgett, VP of WoodSpring Suites development at Choice Hotels, said the project closed thanks to Choice’s relationship with Concord Hospitality and culminated after roughly six months of negotiation.
“For the first few months prior to meeting with Concord, we looked at our opportunities with extended-stay hotels in the U.S. We knew we had a lot of pockets throughout the country where we were open for development,” Burgett said. “Detroit and southern Michigan kept popping up for demand … but there wasn’t a lot of building going on there for the past several years. Now there are a lot of opportunities to capture that demand.”
Mark Laport, president/CEO of Concord Hospitality, said the agreement also marks the launch of another Concord Hospitality subsidiary: Common Oaks Lodging. This company will provide management and development services for the forthcoming 27 WoodSpring hotels.
Spread Out
The agreement with Checo calls for one hotel in Jacksonville, one in Nashville and 25 throughout North Carolina and southern Michigan. The company primarily is targeting small markets, the type of markets that thrive on extended-stay business, and Burgett’s goal is to remain the fastest growing name in the segment.
Burgett is confident WoodSpring will come out on top despite rising construction and labor costs. Balancing the rising costs is the fact that these hotels can be built for less than $75,000 per key, on average, and extended-stay hotels also tend to be lean on operating costs while remaining profitable during downturns.
“We operate these things very efficiently,” Burgett said. “There isn’t a lot of extra space on property that isn’t generating revenue. We run our properties with less than 10 employees. Also, there is a lot of white space in economy extended-stay, so there is plenty of room for us to grow.”
For example, Burgett said WoodSpring sees many opportunities in North Carolina, and chose that state as the first stop on its development timetable because of Concord Hospitality’s affinity for the location. After all, Concord is based in Raleigh, N.C., and the company has invested resources into its team for continued real estate development.
“[Concord] also has a robust real estate team that will help find sites for development,” Burgett said. “That’s a big part of this partnership, finding the sites. We have the developers and the cash, and Concord has the sites.”
Crane Spotting
Similarly, Burgett said WoodSpring has had its eyes on the Detroit development landscape, and said the time is right to enter the market.
“We look for cranes,” he said. “There is a lot of growth in Detroit right now. Manufacturing is on the rise. There are a lot of support businesses popping up, lots of new hospitals building infrastructure. Right now we are talking about Detroit’s northern suburbs, all the way up to Grand Rapids.”
Not long after inking the deal with Checo, WoodSpring signed a deal with ServiceStar Hospitality, a subsidiary of Denver-based investment management firm ServiceStar Capital Management, to develop 14 new WoodSpring hotels throughout Colorado, Arizona and Nevada. Clearly the brand has legs, but Burgett said WoodSpring is not likely to start opening hotels in city centers any time soon. After all, Choice has other brands for that.
“If you remember we were at one time called Value Place. We changed our name to WoodSpring just before Choice acquired us [in 2017] … because we wanted to be in the ‘value’ segment, but not lower economy,” Burgett said. “Our roots were in highway locations, not even suburban markets. When we changed our name, though, we got a little more play, and it became easier to get entitlements in cities. We just recently started looking into major markets.”