LA QUINTA ON THE PROWL
Move over, Marriott, Hilton and Starwood. La Quinta is poised to become one of the lodging industry's big dogs. Buoyed by last year's $400-million acquisition and smooth integration of the Baymont and Woodfield Suites brands, the Dallas-based owner/operator/franchisor of 590-plus select-service lodging properties is on the prowl for additional acquisitions.
And, as Chairman and CEO Butch Cash said last month at the company's annual convention in Orlando, growth may come outside of its core mid-market and economy segments.
“It's the right time to be a consolidator in the hotel industry,” said Cash in explaining one facet of the company's growth strategy. “Our long-term goal is to be a great lodging company, which means we must be in most markets. We can go in a lot of directions.”
And while Cash and company officials clearly have their sights set on adding more brands to the mix, it's also looking for strategic acquisitions to bolster its current lineup of flags. Last year, for example, La Quinta spent $22 million to purchase the three-property Tage Inns, a New England-based micro chain. The acquisition gave the company a much-needed toehold in the difficult-to-penetrate Northeast marketplace and provided a template for future similar acquisitions. The three former Tage hotels were converted into four La Quinta properties: one became a La Quinta Inn & Suites; one was sold to a franchisee, who will convert to either a La Quinta or a Baymont; and one was split into two properties, one a La Quinta and one a Baymont.
La Quinta's growth strategy takes multiple forms, including straight franchising, joint-venture developments, corporate development of new hotels and redevelopment of existing properties. Foreign expansion is yet another possibility. (One La Quinta is open in British Columbia and one was recently announced for Mexico.)
Redevelopment of aging properties is a particularly interesting initiative. The company recently opened a new 14-story, 350-room La Quinta Inn & Suites on the site of the original property in the chain, a 138-room motel built in anticipation of the 1968 HemisFair in San Antonio. Similar projects are in the works at the San Antonio airport and in several locations in the Dallas-Ft. Worth area.
The company also longs to increase its presence at airports and, most especially, in major center cities. La Quintas are already open in Manhattan, San Francisco and Boston, and the company has its sights set on downtown locations in Washington, Atlanta, Miami, Los Angeles and other cities, as well additional properties for New York.
“If these properties are done correctly, they are not only profitable properties in and of themselves, but they also act as halos around the brand,” President and COO David Rea told the group. “This halo effect can also help us obtain a pricing edge in non-central business district areas.”
Franchising sales should yield 50 or more La Quinta properties and 25 Baymont Inns this year, said Alan Tallis, president of franchising and the company's chief development officer. In '04, the company added 33 La Quinta and six Baymont franchised units. Most La Quintas will be new-construction properties, while most new Baymonts will be conversions from other brands (Hampton, Fairfield and Holiday Inn Express are likely candidates).
The company has some lofty long-term expansion goals. Rea told the convention audience that the combined La Quinta/Baymont system should have 85,000 rooms by 2007, up from the current 64,000 rooms. By then, nearly half of the system will be owned and operated by franchisees.
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