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Value Place Prepares For a Growth Spurt

Economy Extended-Stay Chain Looks to New Markets

When you work for Jack DeBoer, you’d better be ready to move quickly and decisively. Dan Weber and Kyle Rogg learned that nearly immediately after joining Value Place about a year ago as CEO and COO. They got their first taste of DeBoer’s drive and ambition about two weeks after their arrival at Value Place headquarters in Wichita.

“We went to lunch where Jack gave us an 82-point memo of new ideas he had for the company,” says Rogg. “He’s more energetic at age 81 than anyone I know at half that age. The license plate on this car says, ‘Can Do,’ and that’s very much who he is.’”

DeBoer brought the two executives to Value Place specifically to kick-start growth of the 178-unit economy extended-stay chain that, like the rest of the industry, stalled during the recession. As an all new-construction chain (the company owns 43 hotels; the rest are franchised), the company must grow one property at a time without the benefit of conversions. So, for the last year Weber and Rogg have been working with existing franchisees, potential new developers and lenders to market the Value Place proposition.

Three new Value Places opened this year, the latest being a franchised unit in the oil boomtown of Williston, ND. Next month, a corporate-owned property opens in the Atlanta suburb of Alpharetta, followed by a hotel in Camp Springs, MD near Andrews Air Force Base. The Alpharetta property is the first to include all the components of the brand’s new 2.0 prototype. According to Rogg, the new product incorporates design and ff&e elements that make it easier to clean, less expensive to operate and more attractive to guests. Examples include hard-surface floors and wall-hung furniture, upgraded finishes and LED lighting, which Rogg says uses 80% less electricity than incandescent.

To drum up interest in the brand, particularly in markets where it has few or no properties, the development team held a series of meet-and-greets with existing and potential franchisees in four cities: Atlanta, Chicago, Seattle and Nashville. With an all-in price tag of less than $5 million for a standard property, Value Place is eligible for SBA-backed financing, and Rogg says lenders, are again showing interest in the product.

“We think we have a better mousetrap so it’s important we introduce the product in these markets,” says Rogg. “The company-owned property in Alpharetta is part of that effort. We already have three hotels in the Nashville area, and we want to take the brand further north and west, which is why we targeted Chicago and Seattle on the tour.”

Part of the pitch is to educate potential developers, including those who may already be in the hotel business, on the differences in owning and operating an extended stay property, and particularly one in the economy segment.

“Sometimes, hotel owners have a hard time getting their heads around the fact our occupancies are typically around 85% or higher,” says Rogg. “And compared to the rest of the extended-stay segment, we run lower average weekly rates but higher GOPs.”

He says the high profit margin is a function of the brand’s lean operating model: a typical 124-room unit has 4.5 or 5 full-time equivalent employees. “It’s hard for some people to understand how this is possible, but over 178 tries we’ve proven it works.”

The Value Place team also spends time in communities that may have a bias against economy extended-stay hotels. “We try to break the typical image that comes to a person when they see a product that’s priced at $189 to $199 a week,” says Rogg. “At that price point, their minds don’t go to clean and safe; it goes to dirty and unsafe. But if we can get community leaders into our properties we can break that stereotype, and it’s much easier to persuade them we’re good for their communities.”

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