ORLANDO—As the opening session for this year’s La Quinta conference kicked off here at the Hilton Orlando, the midscale hotel brand’s President and CEO Wayne Goldberg told the gathered general managers, owners and suppliers that 2014 was La Quinta’s “winningest year ever.”
Goldberg had some strong numbers to back up this claim. The company now has 867 hotels open worldwide, with 86,500 rooms in 47 states. RevPAR growth was a solid 8 percent for the year, and the adjusted EBITDA was a healthy $375.5 million, an increase of more than 10 percent over the previous year.
Why 2014 was big
In 2014, La Quinta opened 45 franchise hotels with more than 4,000 rooms (37 hotels and approximately 3,100 rooms on a net basis), grew its franchise base 8 percent and increased its pipeline by 11 percent. In addition, 80 new agreements were signed for future properties.
As of the end of the year, the company had a pipeline of 207 franchised hotels with more than 17,000 rooms in the United States, Mexico, Canada, Colombia, Honduras, Nicaragua, and Guatemala. Notably, 50 percent of all franchise agreements signed in 2013 and 2014 came from existing franchise partners, indicating a willingness to reinvest in the brand, and management turnover was just 16 percent.
La Quinta also announced its new Del Sol prototype hotel last year, currently poised to launch this spring in College Station, Texas. The prototype, Goldberg said, will be for hotels with 90 rooms or more, and aims to maximize revenue per square foot. Catering in particular to the millennial demographic, these hotels will have a large “great room” where guests can socialize or just sit by themselves to unwind. "This prototype is relevant for any market,” Goldberg said. "It could be incorporated into secondary, tertiary, or any kind of markets.” The prototype, he added, will be buildable in a way that he expects to be cost-neutral. The Urban prototype will remain in place for smaller properties of fewer than 90 rooms, but Goldberg expects that Del Sol will become the more popular model.
Significantly, 2014 was the year that La Quinta made its debut as a publicly traded company. In the year following the IPO, Goldberg said, the company’s financial situation “is stronger than ever.” In the fourth quarter of the year, Jim Cramer, host of CNBC’s Mad Money, dedicated a significant portion of his show to the company and explained why he felt it was a stock worth watching. He later had Goldberg on as a guest himself:
Ultimately, last year, La Quinta raised $700 million in net proceeds and paid off $195 million in debt.
Looking ahead to 2015
With properties in 47 of the United States and a growing presence in Canada and Mexico, La Quinta is also expanding further into Latin America, with properties in the pipeline for both Guatemala and Nicaragua. Eleven percent of La Quinta’s pipeline is international, and while Goldberg noted that the brand could try to branch out in Europe and Asia, it also has room to grow domestically. “We will be disciplined in how we grow the brand,” he said diplomatically, but noted that for the time being, the team will focus on Mexico and Central & South America.
But for all the expansion and new prototypes, La Quinta has no plans to launch any new brand. “Show me an example of how being one brand is a disadvantage,” Goldberg challenged the crowd on the first day of the conference. “We’re focused on growing one good quality standalone brand.” Based on data from Smith Travel Research, he added, La Quinta is the fastest-growing select-service brand over 10 years over its top competitors, even though the company is half size of its biggest competitors. “We have room to grow,” he said, “and we are growing. Brand awareness is very strong.”
Bobby Bowers, SVP at Smith Travel Research, agreed, sharing a common quote: “The industry is not overbuilt. It’s under-demolished.” He encouraged the gathered general managers to think about more development on the way, to be mindful of their own product, to be competitive, to focus on their guest and to be sure that everything works and is spotless. For 2015, STR is anticipating La Quinta to have a RevPAR of 6.4 percent.