LAST YEAR FINISHED with continued growth for Extended Stay America, and a substantial part of that growth was through the company’s relatively new entrée into franchising. Early this year, Colonial Heights, Virginia-based KARA Hospitality, managed by Mitesh Amin, broke ground on ESA’s first franchised new-build hotel.
In 2018’s fourth quarter ESA saw a net income of $39.4 million and $211.8 million for the full year, according to its final report for the year. Its RevPAR grows 0.9 percent for the fourth quarter and 2 percent for the year.
It also brought its pipeline up to 57 hotels and refranchised 70 properties, said ESA President and Chief Executive Officer Jonathan Halkyard.
“We sold 72 hotels during the year, at an average pro forma free cash flow multiple of approximately eighteen times with all, but one of those hotels retaining long-term franchise or management agreements,” Halkyard said during the company’s fourth quarter earnings call. “We grew our pipeline to nearly 7,000 rooms or 10 percent of our existing base in 2018 with roughly 75 percent of that pipeline being franchised hotels.”
The company entered franchising as part of its ESA 2.0 strategy, a strategy Halkyard said he has accelerated. That plan involves selling non-core assets while retaining franchise agreements and the sale of new franchises.
“We have over 60 hotels in the pipeline as of this morning and approximately, three fourth of this pipeline are franchisee hotels, showing the strong demand for these hotels from third parties,” Halkyard said. “Just two weeks ago, I was at the groundbreaking of our first new franchisee-built hotel with KARA Hospitality and we expect to make additional progress on franchisee newbuilds, as well as conversions by our franchise partners further in 2019.”
KARA Hospitality and ESA held the ground-breaking ceremony for the new four-story, 92-room ESA hotel in Colonial Heights, Virginia, in early February. It is scheduled to open in 2020 and will include the brand’s new StayPlay lobby design and other new features, such as all vinyl plank flooring throughout, modernized kitchens with open cabinetry, solid surface countertops, raised platform beds with storage and black-out shades. It also includes a fitness center and guest laundry/vending area, complimentary grab and go breakfast, HD-TV with chromecast streaming capability and pet-friendly rooms.
“We had been exploring several hotel flags early last year for this and several other sites, and the timing was perfect, when ESA announced their opportunities for franchising last year. Having stayed at ESA hotels many times, I thought this hotel brand would be ideal for our area,” Amin said in his comments at the ceremony. “Our guests will be able to enjoy of the conveniences of the quick access to Fort Lee, with a bus stop a block away. We have a grocery store, car rental, and multiple restaurants walking distance from the hotel.”