SAGAR KUMAR, A hotel owner, developer and manager in Studio City, California, has a portfolio of more than 25 hotels that range across price segments. Included in the mix is a Rodeway Inn, one of Kumar’s prized possessions and highest-revenue-generating properties despite its no-frills reputation.
Kumar and his team have developed hotels as well as divested assets that no longer meet their business objectives, but for the past 15 years Kumar has held on to the 32-room property in Los Angeles’ Beverly Hills neighborhood.
“When we acquired the building, it was a retirement home. We converted it to a hotel, but the rooms are quite small. Because of the room count, it made sense to make it into a Rodeway Inn,” Kumar said.
The Rodeway Inn sits across the street from CBS Studios but Kumar wanted to boost its visibility by plugging it into a global reservation platform, provided by Choice Hotels International, the brand parent.
The property is a money maker. With just basic guest accommodations, hotel commands an ADR of $120 to $130. In the summer, Kumar said, it can get $200 a night. “The franchise fee structure is low enough for us to do business, and we get the benefit of the Choice CRS and its loyalty customers. Since we don’t pay premium royalty rates, we can set the rate depending on the market demand.”
The business value is what attracts owners to the 56-year-old Rodeway Inn brand, say Choice Hotels brand executives Caragh McLaughlin and Craig Mustard.
“Rodeway Inn makes up 11 percent of Choice’s portfolio,” Mustard said. “It has a lot of interest because it has fewer requirements than its competitors and a powerful CRS.”
In December, Choice saw the opening of its 600th Rodeway Inn. Yogesh and Leena Shah own the Rodeway Inn Osceola in Osceola, Arkansas, their third franchised property with Choice Hotels.
In many cases, owners who could have licensed a higher-priced brand decide on a Rodeway Inn because it makes sense for their market.
Patrick Pacious, president and CEO of Choice Hotels, said brands such as Rodeway Inn create cash flow for owners. “All of our brands grew last year,” he said during an interview with Asian Hospitality in January at the Americas Lodging Investment Summit in Los Angeles.
Choice’s economy brands might serve as entry-level offerings to new franchisees, but seasoned owners recognize what it takes to generate a profit. Pacious said some Choice franchisees have purposely transitioned a hotel out of the midscale or upper midscale into an economy tier brand if a PIP investment no longer makes sense. Others make the switch to command more business on their street corner.
“We have seen franchisees make more money in this segment and do more business in this segment,” said Mustard, head of domestic brand management, economy brands. “If you are on a street with a bunch of midscale hotels fighting over the same business, why fight? Why not go to a different price segment and be more profitable by catering to a different set of guests?”
Deciding on whether to reflag “depends on where you are in the renovation or business cycle,” said McLaughlin, head of brand portfolio, Quality, Clarion, economy brands. “Dropping down a price tier may be the best strategy because it meets customer expectations in that tier. The economy hotel is appropriately placed and gives guests what they expect at that price point.
“Part of this business is real-estate as well as hospitality focused,” she said. “You have to be strategic and smart with commercial real estate and run a really good hotel.”
Choice acquired Rodeway Inn in 1990. It has been a staple in many Asian American hotel businesses, in many cases serving as an entry into franchising and a stepping stone to larger deals. “I have had people with Econo Lodges and Rodeway Inns come to me and say, ‘I am ready for the next step,’” Mustard said. “It’s nice to see hoteliers with Econo Lodges and Rodeways still in their portfolios. We see that a lot as they grow their business and move up the chain scale.”
Rodeway Inn is Choice Hotels’ budget brand while Econo Lodge is an upper economy offering, Mustard said. Rodeway Inns are mostly located along coastal highways and main streets through downtowns. In 2017, Rodeway Inn generated higher occupancy, ADR and RevPAR than Econo Lodge, which has more licensing requirements and has hotels spread out across the country, mostly in secondary markets.