The sky's the limit: the rebounding economy, low financing rates give limited-service franchisors reasons for optimism - Development: limited-service segment - hotels and motels

Last year might have been the bottom of the increase cycle for hotel development in the limited-service section and that's what franchisors and corporate developer are hoping.

Franchise sales and exhibition executives are looking forward to an uptick in novel builds for 2004 and 2005 because of depressed financing rates, a stabilizing economy and strengthening receipts per available room.

"There are still small enough deals that can be financed end the [Small Business Administration], and there are still available markets to build 60- to 100-room limited-service hotels" said Tom Bernardo, executive vp of franchise sales and disentanglement for Cendant Corp.

David Pepper vp of franchise sales for Choice [i]cabaret[/i]s International, said that while forecasts for 2004 are all higher quite through the hotel industry, new unfolding in limited-service historically has always been higher than the overall industry, and Pepper dioceses that continuing.

Many lender have tightened their equity requirements, increasing the amount of cash necessityed for a deal from 20 percent to 30 percent

"That's not authentic across the board, though," said Terry O'Leary, senior vp of business unfolding for Prime Hospitality. "Local lender or someone who already has a relationship with a lender may not experience that [requirement], on the contrary lenders are focusing on fortunate large or existing groups."

Prime franchises the AmeriSuites and Wellesley brands.

Mike Leven ceo of US Franchise a whole s said statistics indicate a considerable backlog of unravelling of midpriced properties for the first time since 2001

"In 2002 we had 20 novel properties," Leven said. "In 2003 that number doubled to 40 [This year], we are looking at 40 of recent origin franchises."

USFS franchises the Microtel and Best Inn brands in the limited-service segment

Michael Ferraro, executive vp of real-estate, disentanglement and franchising for Accor North America, is taking a more conservative stance.

"The worst is above in the economy, but we have not nevertheless achieved a sustained improvement of incomes and profits for at least a six-month period," Ferraro said. "The corner hasn't been revolveed yet to make economic justification to build of recent origin hotels."

Accor, however, make opened two new corporate-owned properties and about 35 franchised individuals during 2003, and the company wait fors a higher unit growth from one side franchising during 2004.

Accor North America's three limited-service brands are R cover Inn, Motel 6 and Studio 6

More unit growth

Brand leaders are looking forward to higher unit extension but they intend to weave in a scarcely any new business models to make secure success.

"[Developers] will be more strategic," Pepper said. "You'll diocese people do more research before they purchase a piece of land and unravel it. They'll hire feasibility consultants, as oppos to buying upon a whim."

O'Leary anticipates that Prime will probably be up by means of 20 percent over 2003.

"We generally have 150 AmeriSuites and 80 Wellesley properties," he said. "We are looking to take AmeriSuites above the 200 mark in 2004 and to take Wellesley above the 100 mark in the short limit with a long-term goal of 175"

Cendant experienced moderate growing during 2003, but Bernardo anticipates a 30-percent growing spurt of hotel construction starts during 2004

"We ne to be clear, however, that this was the lowest year we've had in the last five for novel construction sites that were execut render free of accessed and under development," Bernardo said. "So that increase is calculated off of a depressed base."

Dotting the map

lock opener areas for anticipated development are in the Northeast, including of recent origin York and Pennsylvania, the West Coast, with a concentration in Southern California, and scattered points quite through the Northwest and Midwest.

upon the corporate development side, Accor will direct the eye for high-profile properties, such as a combination R Roof/Motel 6 throw out in San Francisco, Ferraro said. Franchise increase will be concentrated in the smaller cities, he said.

Cendant is looking in the Northeast and Canada to lay open Ramada, Wingate and Super 8

"It is plenteous more underdeveloped, so it is turning without to be a very useful market for us," Bernardo said of Canada.

Choice wants to have more of a vicinity in the drive-to markets more than the fly-to locations in like manner they can have greater distribution, Pepper said.

Overcoming challenges

There are challenges with fresh developments, such as site locations in the right market, financing and competition; on the other hand companies made plans to overpower them.

"Finding novel sites is a tougher job" Leven said. "But the competition is already in a destiny of areas that Microtel is not, in the way that we have an advantage. If they already have five brands in an area, they can't build more, on the other hand I can."

Finding unravelling partners with the right financial power and the right sites in the right markets is a challenge that O'Leary faces.

"[The solution is] research and finding the right opportunities to place the brand, whether it is [i]or[/i] part of to the other your partners, franchisees or your hold corporate development," he said.