Best Value Inns offer a new kind of flag

TORONTO—America’s Best Value Inns started just eight years ago, but already the chain has about 780 properties in the U.S. and Canada, and will have a presence in China very soon. While the hotel chain has nine properties in Canada, it’s only now that they have hired industry veteran Bill Hanley to actively promote the brand known as Canada’s Best Value Inns in this country.

Hanley, who has held senior positions with Cendant International, Trusthouse Forte and Radisson, came out of retirement when approached by America’s Best Value Inn founder Roger Bloss to sell the concept. He was on hand at the recent Hotel Association of Canada conference to talk to delegates and promote the company.

“The show was very good for me,” he told CLN in an interview. “I’m more excited than before.” He added that the company is talking to three Canadian groups about possible Master Franchises for 10 or more hotels.

Hanley stresses that the Canada’s Best Value Inns system offers a number of advantages over a traditional franchise deal.

“Our system is based on a monthly flat fee rather than a percentage of gross rooms revenue,” he explained. “Under a franchise deal, monthly fees for a 100-room hotel would be about $14,600.”

He bases his calculation on a 100-room property operating 365 days a year with 60 per cent occupancy. That works out to 21,900 rooms occupied per year times $100/day, equalling $2,190,000 in room revenue per year. With a franchise fee of 8 per cent, that equals $175,200 per year, which divided by 12 equals $14,600 per month.

Hanley then calculated Canada’s Best Value Inns’ costs for a 100-room hotel. There is a one-time entry fee of $12,500 plus an application fee of $1,500 for a total of $14,000. Recurring monthly fees include an affiliation fee of $1,275, an advertising fee of $700 and a conference fee of $60 for a total of $2,035 per month.

“Our brand costs less to get in and less to stay in by far, for virtually the same services,” he said.

Company founder Bloss was a hotel owner and franchisee with Trusthouse Forte, president of Knight’s Inn and senior vice president with Cendant Hotels, who then bought a hotel in Las Vegas and managed other hotels. He felt that the franchise model was unfair. He spent $5 million on renovations for his Las Vegas hotel, and was able to increase his room rate by $20 per night, but the franchisor got 8 per cent of it. “He said, ‘wait a minute’—and started his own company,” explained Hanley.

Bloss drew a line down a page and on the left side listed what was good about a franchise – quality standards, third-party Internet exposure, and more sales, Hanley said. On the right side he listed the things that were onerous – the 8 per cent franchise fee, frequent traveller programs that cut his rates by up to 15 per cent, huge penalties to get out of multi-year agreements and high cost of entry ($25,000 to $35,000). He decided to create a company that would retain the good aspects of franchising and eliminate the negative side.

“Our contract is a one-year contract,” said Hanley. “At worst, the operator is at risk of losing 12 months of fees, while other companies have five, 10 and 15-year contracts.”

Nine Canadian hotels have chose the Canada’s Best Value Inn brand based on the Internet, or word of mouth. But in November, 2007 the company decided to make a determined effort to grow in Canada.

“We have prototypes for 40 to 60-room properties and we can expand that easily,” said Hanley. “You can use our prototypes or your own prototype, and we will give you the first year of membership fees free. We encourage people to bring in new product, since new sells better than old. All they would have to pay is a nominal advertising and conference fee.

“We also guarantee that if you don’t get in business each year revenue equal to the fees you would pay, you won’t have to pay the fees. This includes business brought in over the Web on the GDS brand-specific sites and brand distribution systems.”

While Canada’s Best Value Inns are positioned in the limited service lodging sector, for the last year and a half the company has also offered the Lexington Brand. Lexington is a 3 to 4.5-star offering. Currently, 12 Lexington hotels are operational, with 12 or 13 signed agreements for more.