Kyle Rogg, president and COO of Value Place, right, with Ron Burgett, EVP of franchise development.
Los Angeles – While Value Place chairman and extended-stay hotel legend Jack DeBoer was busy accepting a Lifetime Achievement Award at the Americas Lodging Investment Summit in January, the economy extended-stay brand’s president and COO was busy too, talking up the value of Value Place, its new design prototype, its revenue model and expansion.
Kyle Rogg, who joined the company in 2011 as president and COO, said he’s bullish on the economy extended-stay space, particularly because it’s an attractive product, he said, for franchisees. This is due to profitable margins boosted by a leaner operational model (most Value Place properties employ a mere five full-time employees and housekeeping is performed every other week).
“It’s not a tough sell for a franchisee. It’s financially sophisticated and an easy product,” Rogg said.
Investors have taken notice. In January 2013, Value Place secured a $100-million capital investment from Lindsay Goldberg, a private-equity firm with $10 billion of total capital under management.
Later in October, Value Place announced expansion plans in South Florida and Atlanta.
Currently there are 186 Value Places open in 32 states, 74 of which are company owned. And don’t expect Value Place to look to sell off its owned assets, as other hotel companies with an asset-light approach have done in recent years. “We see that 2:1 ratio continuing,” Rogg said.
The Value Place in Bryan, Texas, here and right, is near Texas A&M University.
In order to continue growth, Value Place recently hired Ron Burgett, the former head of franchise development at Red Lion Hotels, as its new EVP of franchise development.
Value Place’s entire model is based on price—and they are fine with that. It’s a cheap lodging option, used particularly by blue-collar types, road warriors on a tight budget and worker crews that might be on a job for a while. As such, it prices weekly, not daily, with rates beginning as low as $219 per week.
As Rogg and Burgett said, “We are interested in AWR [average weekly rate], rather than ADR [average daily rate and industry fundamental norm].”
Value Place’s value proposition is based on a clean and safe product (they take safety so seriously that guests are subject to background checks).
Rogg also said the brand has a new design prototype called 2.1, which is about better energy management, such as more efficient PTACs. He said the new prototype can save franchisees as much as 30 percent in costs. The first property to open using this 2.1 design was the Value Place in Alpharetta, Ga.
Burgett said the average length of stay at a Value Place is 33 days. Currently, Wi-Fi is not free and costs $9.95 per week. The brand is 100-percent new construction.
On financing new builds, Rogg said financial institutions still need better understanding of the product and the space as a whole. “The banks have to understand the model before they like it. You can do clean and safe [at a low price point],” Rogg said.
➔ by the numbers
Greater job creation
U.S. employers are expected to add 2.7 million jobs to the hotel industry in 2014, a gain of 2.0 percent.
Fifth year of growth
Increased hotel volume is resulting in a rise of nationwide occupancy 90 base points to 63.2 percent in 2014.
Room revenue up
A 4.8-percent increase in ADR will be the primary impetus for a 7.3-percent rise in nationwide room revenue during the year.
New supply coming
A growing construction pipeline will influence investment decisions throughout 2014 as the construction cycle shifts into a higher gear.
Source: Marcus & Millichap