With Cambria Suites, Choice Heads Upscale
Thursday, February 16, 2006
Choice Hotels International Inc., which made its name providing frugal travelers the austere, cheap comforts of the Econo Lodge and Comfort Inn, will soon offer baristas, flat-screen TVs, down pillows, and a color scheme of dark browns, taupes, and cinnabar.
The Silver Spring firm, one of the nation's most successful hotel franchisers, is preparing to launch an upscale brand called Cambria Suites in an effort to cash in on a sustained surge in business travel and to dip into the pockets of prosperous and stylish Generation Xers.
Choice's move into the upscale segment of the hotel industry puts it squarely in competition with Bethesda-based Marriott International Inc., with its thriving Courtyard by Marriott, and Hilton Hotels Corp., which has come on strongly with its Garden Inn. Starwood Hotels & Resorts Worldwide Inc. is entering the space with a chic brand called Aloft.
"I do think this is a good idea for" Choice Hotels, said David Katz, a hotel industry analyst with CIBC World Markets. "It's a fertile market."
And for Choice, which already has more than 5,200 hotels, it's a chance to increase its bottom line with a higher revenue generator. Because it franchises hotel brands, Choice receives a small percentage of yearly hotel revenue. Its low room rates mean it averages about $40,000 a year per location, according to analysts.
But with Cambria Suites, Choice intends to charge about $100 a night. That could mean royalty fees of $100,000 a location per year, analysts said. Also, the start-up franchise fee Choice charges will be higher -- $60,000 for a Cambria Suites location, versus about $30,000 for its other brands.
In return, hotel owners get the right to build a carefully designed product that Choice executives hope will persuade travelers to abandon established brands or move up from its own current offerings. Cambria Suites rooms will be 25 percent larger than many of its competitors, with separate sleep and living/work areas, each with a flat-screen TV and free wireless Internet. The lobby will have club lounge seating.
"We think this is a very exciting product, with a stylish contemporary design, that meets the needs and expectations of today's traditional traveler," said William Edmundson, a hotel industry veteran whom Choice hired last year to run the Cambria brand.
Analysts said the brand is specifically focused on the traveler who wants the comforts of home, despite strict budgets at the office.
"Companies are traveling more, but they are being much more cognizant of costs," said Samir Jain, a hotel analyst with Jefferies & Co. "This fits in perfect. It's still better than a mid-scale Comfort Inn, but it's not that luxurious where it costs too much."
The first Cambria Suites will probably open in Boise, Idaho, in December. Choice has 12 other contracts, including one in Bloomington, Minn., at the Mall of America. The company could open 50 to 60 Cambria sites in the next two years, analysts said.
Yesterday, the stock fell $2.55 to $45.88 after the company said it expects first-quarter profit of 19 cents to 21 cents a share, short of what some analysts had estimated.