Choice Hotels International’s purchase of WoodSpring Suites sets franchiser on course to grow family of brands, said CEO Patrick Pacious.

CHOICE HOTELS INTERNATIONAL has closed on its acquisition of WoodSpring Suites, and Choice Hotels CEO Patrick Pacious said the $231 million deal that gave it 250 hotels will not only grow the franchiser’s extended-stay footprint but will also attract investment into other Choice Hotels’ brands – existing and maybe some new brands.

WoodSpring Suites is just the beginning of Choice Hotels’ strategy to grow its presence either through acquisition or through new brand launches in the very near future.

WoodSpring Suites is an extended-stay brand in the upper economy segment, but it has attracted “sophisticated” real estate investors who are building portfolios of WoodSpring Suites hotels, ranging from 10 to 20 hotels in key markets, Pacious said during an interview with Asian Hospitality at the Americas Lodging Investment Summit last month in Los Angeles.

One reason Choice Hotels was drawn to the deal, Pacious said, is extended stay is the fastest growing hotel segment in the U.S. “and WoodSpring Suites has had significant unit growth of 25 percent over the past five years, and they figured out how to do franchising.”

WoodSpring Suites was owned by WoodSpring Hotels Holdings LLC, a portfolio company of Lindsay Goldberg. The brand was previously known as Value Place, a basic, no-frills economy brand. In 2015 the company renamed it WoodSpring and upgraded the prototype to attract higher rate and customers seeking a step up from traditional economy stays. The company owned and managed many of its hotels, but along with the rebranding it launched an aggressive franchising campaign. At the time of Choice Hotels’ purchase, it had 138 franchised hotels.

WoodSpring Hotels also owned and managed more than 100 of the hotels. A private real estate fund sponsored by Brookfield Asset Management Inc. has completed its purchase the company-owned hotels. The WoodSpring hotel management operations will remain a separate company has been renamed Nationwide Hotel Management Co. LLC.

“In addition to the current portfolio, the partnership is expected to serve as a source of future growth for the brand and Choice Hotels,” said the company in a statement announcing the deal closing.

Added to the MainStay and Suburban brand family, WoodSpring Suites brings the number of franchised extended-stay hotels to 350.

“We were really attracted by WoodSpring’s business model,” Pacious said, getting to reason number two. “A lot of acquisitions are done and justified on how much cost we can take out; this was not done on that investment thesis. This was thought of as: ‘I have 100 extended stay hotels; when I close on the WoodSpring acquisition I’ll have 350; I’m buying a prototype that’s fantastic; and I’m getting a development team that knows what they are doing.

“We are really excited by their business model, rather than us trying to form it into Choice Hotels family, we are looking at what they are doing and figuring out how we can invest in that more and keep on [the brand’s] growth trajectory.”

He likened WoodSpring Suites investors to those developing Cambria Suites, an upscale, full-service hotel by Choice. Besides doing joint ventures with moneyed developers such as Fillmore Capital Partners, Choice Hotels is cutting development deals with hoteliers who have not done business with the franchiser in the past for lack of upscale options.

Pacious said investors who are developing portfolios of WoodSpring Suites are interested in Cambria. “We have 37 Cambria hotels opened with 70 in our pipeline; we are on our way to 100, easily,” he said.

Considerations Choice Hotels included in deciding on the WoodSpring buy and any brand acquisition for that matter, include whether Choice can improve a return on investment for the owner of that real estate asset, Pacious said. “Can we drive more business, more same store sales? Secondly, does it make sense for our shareholders, and that’s all about paying the right price.”

WoodSpring Suites is not the last acquisition Choice Hotels will make. Meanwhile, company also will explore developing its own brands, said Pacious, who has been with the company for a decade and became its CEO in September.

“Half of our brands are ones we have launched, and the other half is acquired,” he said. “We are always out there looking, but it has to fit the criteria. We like a family-of-brands approach which others in the industry have gone away from, but it’s a strategy we are pursuing.

“Once Cambria gets to 75 units, we will have reached critical mass and I will start to think of developing upper upscale and upscale extended-stay brands,” he said.