Extended Stay America steps into the franchising ring

ESA 2.0 (Extended Stay America expects in the coming months to return to unit growth, with a target portfolio of 700 Extended Stay America branded properties by 2021.)

Extended Stay America today revealed its first ever franchising program as well as a return to new hotel builds, the first for the company in a decade.

As part of the brand’s previously-announced ESA 2.0 property hotel plan, Extended Stay America expects in the coming months to return to unit growth, with a target portfolio of 700 Extended Stay America branded properties by 2021, approximately 70 percent of which will be owned/operated and 30 percent franchised. The company will also adopt an asset merchant approach to its large real estate holdings.

HOTEL MANAGEMENT caught up with executives from Extended Stay America at the 2017 New York University Hospitality Industry Investment Conference, where company president and CEO Gerry Lopez was upfront about the company's approach to franchising, and why it hadn't embarked on the concept before now.

"We were busy doing other things," Lopez said, referring to the company's large-scale consolidation effort which narrowed its offerings down to a single brand with 625 properties. During that time, Lopez said ESA also busied itself by deciding exactly who the company's ideal franchising partners were -- and more importantly, who they weren't.

"Our business model is focused around working with partners who are already in the business," Lopez said. "We want savvy hoteliers with access to capital. We aren't going for masses of franchisees, we want a couple dozen that understand the economic power of [the extended stay] business model."

By concentrating on fewer, but larger, franchisees, ESA is looking to maximize consistency while creating a presence for itself in as many markets as possible. By 2018, Extended Stay America will be actively franchising, with interested partners having options to convert existing assets, buy and franchise existing hotels from Extended Stay America or build new franchised properties.

ESA 2.0 was developed using guest input.

Over the last five-plus years, Extended Stay America has invested over $1 billion in portfolio-wide renovations and other capital improvements. These investments helped set the foundation for a plan now known as ESA 2.0. Speaking at NYU, ESA's COO, Thomas Bardenett, told HOTEL MANAGEMENT that the company studied guest preferences, and also conducted surveys and took images of how they interacted with their rooms.

"We really learned how people use our rooms," Bardenett said. "We learned our guests prefer open shelving to closed shelves, and in many cases they were asked to double up two to a room. That mean we needed to convert more rooms to doubles."

Using this data, ESA's redesign includes reimagined common areas and an exclusive double-queen room layout, affording guests more privacy.

ESA also announced new appointments to its executive team with managing directors of real estate, Judi Bikulege and Steven Scheetz; and managing director of real estate development, Stephen Miller.

Having joined the Extended Stay America team as managing director of real estate in March 2017, Judi Bikulege is responsible for value enhancement of ESA’s eastern U.S. real estate portfolio. A 35-year hospitality veteran, Bikulege has a background in finance, mergers and acquisitions, development, asset management, risk management and operations. Prior to joining the team, she served as a private consultant with an emphasis on the hospitality industry; EVP of Capital Markets for Gencom; and SVP of business affairs at Morgan Hotel Group.

Also having joined the team as managing director of real estate in March 2017, Steve Scheetz is responsible for ESA’s real estate, development and growth in the western half of the USA. Scheetz brings over 25 years of institutional real estate private equity and hospitality investment experience to Extended Stay America. Over his career, Scheetz has had involvement with 12 different lodging companies, including six public NYSE companies, totaling over 1,450 hotels and $14 billion in value. Scheetz has also held senior executive roles at Gatehouse Capital, WMC Management/Olympus Real Estate Partners, The Hampstead Group and most recently at Heartland Capital & Affiliates.

Another industry veteran, Stephen Miller joins Extended Stay America as a managing director of real estate and development. Most recently with Interstate Hotels & Resorts as SVP of development, Miller was responsible for working with investors and capital groups in acquiring full-service and select service hotels throughout North America. Having held senior level positions with hotel companies including Carlson Hotels Worldwide, Interstate Hotels & Resorts and Embassy Suites, Miller brings his knowledge of both hospitality and portfolio enhancement to ESA 2.0.