Before he stepped in as president and CEO of Extended Stay America, Gerry Lopez was excited at the prospect of seeing the business from the other side of the front desk. As a self-described hotel client for the past 32 years, nearly his entire professional career has been spent on the road, and he jumped at the chance to influence the industry from within.
Lopez joined ESA after stepping down as president and CEO of movie theater giant AMC, and he said the two businesses share a surprising number of similarities.
“We call our customers ‘guests’ at both companies, but the biggest difference is that at AMC you get them for a couple of hours, whereas at ESA our average stay is a month,” Lopez said. “The only other significant difference is that in theater about 30 percent of revenue and a disproportionate amount of profit comes from food-and-beverage, whereas in hotels 98 percent of revenue comes from bookings. Other than that, having a motivated group to service guests and make the experience pleasant and consistent—well, to put it frankly, the man who replaced me at AMC came from hospitality!”
Simply put, Lopez’ time at AMC had run out. With his contract up, and him finishing the job he was brought in to do (taking the company public and signing a distribution deal with Paramount Home Video), he was looking for a new opportunity in ESA. When asked if he was troubled or nervous about stepping into the top leadership position in an industry where he had no previous experience, Lopez said he has always felt like a newcomer, regardless of the industry.
“My head of office at AMC had been there for 40 years, so I knew I would feel like the new guy there until the day I died,” he said. “What’s important to me is to take my experience and use that to help my team win. There is no more lonely a feeling than winning alone, and I take personal pride in leaving a place better than when I found it.”
Splitting the Difference
Although many hotel companies operating today have a brand focused on extended stay, Lopez said Extended Stay America’s concentration on the segment allows the company to have a laser-like focus on its niche guests, and it shows: The average length of stay in most extended-stay properties clocks in at around five nights at a time, while ESA’s stays are closer to 25 or 26 nights. In addition, the company configures its rates to benefit the extended-stay guest and not mimic those of standard hotels, and this can be achieved partly because of how ESA positions its properties.
“The macro factors that drive our demand are healthy and getting healthier,” Lopez said. “Construction, healthcare and IT are our three industry verticals. As much activity that is taking place on the supply side in hospitality, very little of it is focused on extended stay and even less is on economy, and that is where we make our money.”
Additionally, ESA develops its hotels outside of the urban core, in markets where other development is taking place. The company is thriving in the growing secondary and tertiary markets in the U.S., and also benefits from having a single brand. Lopez said that ESA doesn’t feel the pull to diversify its brands at this time, and isn’t interested in creating new, slightly different hotels that compete with each other within a 5-mile radius.
“We may diversify eventually, and there is nothing wrong with that strategy, but we own, operate and manage all of the hotels we have,” Lopez said. “Sustainable branding, for us, is based on consumer demand and not developer needs.”
Flipping the Switch
Having been head of ESA for just one year, Lopez joined the industry at the perfect time to see hospitality turn from a fairly predictable industry into a whirlwind of uncertainty, but he isn’t complaining.
“When I joined, the economy was fairly orderly. Now we don’t know where we are, but I kind of welcome it as it creates more opportunities,” he said. “Our biggest challenges are tax reform and how that will affect infrastructure spending. We don’t know if it will happen or when, and we need to be prepared to hit that demand when it flares up.”
Lopez said the first time he truly felt at home at ESA was during a meeting when the company’s head of human resources told everyone in attendance who had been promoted to stand, and nearly everyone rose to their feet. After raising the stakes, asking who was promoted twice, then three times, all the way up to five or six and still seeing employees standing, he knew he was in the right place.
“For a guy like me, that’s pretty rewarding to see.”