Pulling Together

I'm in the spacious lobby of the La Quinta Inn & Suites DFW-Airport North in the booming Dallas suburb of Irving, about to interview La Quinta chiefs Wayne Goldberg and Rajiv Trivedi. It's a hot July day and the 140-room hotel is full. The lobby is irregularly shaped, a fountain in its middle. The feeling is gracious, and the Southwestern design carries over to the guestrooms, which open onto vestibules with unusually high ceilings. For a select-service product, this hotel feels decidedly upscale. The complimentary continental breakfast is largely over, and the lobby isn't that busy. Still, it feels cozy, and the lighting — thanks to many windows, and sliding doors opening onto the back yard pool area — is generous.

The DFW-North is one of 20 La Quintas in greater Dallas, with three in the airport area along. La Quinta has long been assosiated with Texas, where it boasts 100-plus properties; it started in San Antonio in 1968. In the past six years, La Quinta has quietly spread far beyond the Lone Star State, primarily thanks to a vigorous franchising program. As of mid-August, there were 605 La Quintas around the country. Of those, 236 were franchises; the franchise pipeline as of then was 178.

“La Quinta is a phenomenon like the way Hampton evolved,” says Goldberg, La Quinta's president and chief executive officer. “La Quinta's position is to grow very aggressively with franchise and our corporate-owned assets.” The Blackstone Group bought La Quinta in November 2005 for $3.4 billion.

“With the support and leverage of Blackstone, we have the ability to invest significantly in our brand,” adds Goldberg, who, like many other of its executives, held executive positions with Red Roof Inns before joining La Quinta. “The combination of investing in our owned assets, franchise program and overall growth puts us in position to be dominant in the lodging business.”

Key to La Quinta's growth is Trivedi, executive vice president of franchising.

“About 55 percent of our growth comes from within,” Trivedi says. “Franchisees who already have one or two La Quintas are going for a third or fourth one.”

As of mid-August, 75 franchise contracts had been executed for La Quinta. In 2006, the brand signed 97 such deals altogether, says Trivedi, crediting franchisee enthusiasm to easy access to top management and a one-to-one relationship with regional directors.

Franchisees deal with their regional director of operations from the day they sign their agreement until the end of the term. Each of the eight directors in place today handles about 40 properties so they can work “with franchisees very closely and be true consultants.” Their counterparts at other franchise companies handle 75 to 100 properties, he says.

TEAM PLAYERS

It's not just leanness that defines La Quinta corporate, suggests Trivedi. It's experience. “The people in our services team have managed multiple locations and gone through new construction projects and under-performing markets and are familiar with La Quinta resources,” he says. And while their bell tower design distinguishes La Quintas, so does “the culture of friendly staff.”

“I do not tell my franchisees they're my clients,” says Trivedi. “Anything we decide about the brand is guest-focused, and we make decisions to impact one of three areas: improved top line for the operation, improved guest satisfaction and reduction in operational cost.”

Take bedding. La Quinta went with a combination bedspread-duvet instead of the triple sheeting popular with other brands. That cuts housekeeping and laundry costs, he says.

“We mandate quality and specifications but not (color) schemes as long as they're modern and approved by us,” Trivedi says. In addition, “franchisees know La Quinta does not have any financial gains by having approved vendors giving some sort of payback to the company”

La Quinta has come a long way since it began franchising in 2001 — under serious financial stress. In early 2006, mere months after its purchase by Blackstone, there was speculation that its fledgling franchising operation, then involving fewer than 50 properties, would be gutted. But instead of shedding it, Blackstone chose to beef it up. “Blackstone made a commitment to aggressively support our franchisees, and we have had one of the highest growth years in 2007,” Trivedi says. “And in 2006, we opened the highest number of franchise properties since the inception of the program in 2001.”

The average La Quinta is 85 to 90 rooms and per-key construction cost ranges from the high $50,000s to the high $60,000s, without land. The competition is Hampton, Holiday Inn and Fairfield. There are La Quintas in 45 states at airports, along highways, in suburbs and major metros.

“Raj and his group have done an excellent job in growing the chain through franchising,” says Temple Weiss, executive vice president of acquisitions and development. “We're looking to supplement that with about 25 new hotels through acquisitions. We believe we can grow the chain by 100 units a year.”

One of Weiss's trophy projects is conversion of the former Jewish Federation building in downtown Chicago to a 238-key La Quinta, set to open at the end of next year. While far bigger than most La Quintas, it otherwise embodies the brand's owned-hotel thrust: strategically located hotels in major cities. Blackstone is pumping about $350 million into acquisitions this year, Weiss says; that's over and above the $100 million earmarked for renovation of 350-plus older La Quintas.

Franchising, however, is La Quinta's primary vehicle. When former development chief Alan Tallis lured Trivedi from his post as vice president of operations for the former Cendant Corp., there wasn't a single La Quinta franchise. In addition to clarifying lines of responsibility for franchisees, the two enhanced the training program. “Our trainers stay at the property for 10 days — prior to opening, during opening and post-opening,” Trivedi says. “They work with each shift to make sure they understand our systems, program and culture.” (Tallis left La Quinta in 2006 and now is a consultant for Ashford Hospitality Trust.)

“We were going through changes and people were apprehensive,” he says. “It was important for me to do two things for the team. One was to comfort them. Two was to create an environment where the feeling was if you do the best you can, you can always emerge as a winner.”

RETREAT TO REGROUP

When Trivedi took over, employees worried that franchising would compromise La Quinta's quality at the property level. “To our surprise, our greatest success is that the La Quinta franchisee is on average the owner of four other hotels,” he says, mainly Hilton-, Marriott-or InterContinental-related. “Ninety percent of our growth has been through new construction, and the pipeline is 90-percent new construction. The quality we brought in has increased guest satisfaction, and our RevPAR year-to-date has increased about eight percent over last year. Our segment — select-service without f&b — is growing about 5.5 percent.”

Reporting directly to Trivedi are four vice presidents: Jeff Palla, franchise services; David Wilner, western U.S.; Steve Wilson, Wilner's counterpart in the East; and Oliver Evancho, another Red Roof veteran, in charge of franchising and development administration. Robyn Fuller, assistant general counsel, also works for him.

“We're a hotel company first and foremost,” says Palla. “We look at the total profitability of individual hotels. We don't make money every time franchisees order a particular brand of coffee from a vendor.” Wilson says franchisees who have been loyal to other brands are migrating to La Quinta. “Not only do they see the services they receive from our franchise people are second to none, they also see our performance is superior to other brands. Their bottom line is also better; more importantly, the relationship we have with franchisees, through construction and operation, is much more friendly.”

“I often hear the comment, I can't believe you picked up the phone,” says attorney Fuller.

The standard term is 20 years, with the royalty rate starting at four percent and rising a half-percent after two years. There's an incentive. “Those that meet or exceed the franchise average in guest satisfaction get that half-point back in a rebate,” Palla notes. In 2006, more than $270,000 in such rebates went back to La Quinta franchisees. “We proudly gave that money back because those properties are taking care of our guests.”

ONE BIG FAMILY

To nurture guiding concepts of fun and kinship, Trivedi and Evancho devised a staff retreat. In late summer 2006, La Quinta franchising executives spent four days at at a state park about 150 miles west of Dallas. (They just spent a similar stay in New Mexico.)

“We camped out, with 10 guys in one room,” says Wilner. “And 10 girls to one room,” adds Fuller.

“When we say we're a tight-knit group, we mean it,” says Wilson.

“The culture of our department is defined by Raj, and because he comes from a family of hoteliers, he has that culture. We have a working relationship with our franchisees and business partners,” Wilson says. “We are now a large brand that is in demand, and our franchisees are experienced developers of quality hotels. Most have a portfolio and an understanding of quality standards and guest satisfaction.

“We're like the neighborhood grocery store as opposed to the department of motor vehicles.”

“Our goal is to open 100 properties a year, approximately 75-percent franchise, 25-percent corporate,” says Goldberg. La Quinta's president and CEO says La Quinta is well-positioned in the South and Southwest and on the coasts. It's spreading nicely elsewhere.

“To get competitive, we needed to get our franchise growing in the Northeast and Midwest,” he says. So Blackstone converted Baymonts it owned to La Quinta, then sold the Baymont brand to Wyndham. “Now the La Quinta brand is much better-distributed nationally,” Goldberg says.

Converting former Fairfield Inns gave La Quinta a bigger footprint in New England and converting former Wellesley Inns in New Jersey, New York and Florida to La Quinta “sparked interest in in parts of the country where we didn't have a presence before.

“A lot of our competitors don't own and operate hotels. We own and operate hundreds. We can roll out and show programs at our corporate hotels before we ask a franchisee to invest a penny,” he says.

“When we ask our franchisees to invest in the brand and the product, we are investing our own dollars right beside them.”

“One of the best parts about working with La Quinta and Raj is that our franchisees are our partners,” says Evancho. “If our franchisee in Kingwood (a Houston suburb) has a problem, Oliver and Raj have a problem. It's not just a job. You're part of it.”


For more information and related articles, go to www.LHonline.com

THE BIG IDEAS

Take a multi-pronged approach

Grow through franchising and acquisition. Maintain renovation to keep the whole product up-to-date.

Cultivate the culture

Use retreats as a break from the daily grind and a way for employees to develop “family” ties.

Bond with your operators

Keep your bureaucracy lean so owners and operators can reach you to work with you.

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