SPECIAL REPORT : FRANCHISING
America , conversions are favored .
While Four Points by Sheraton has been a primary franchising vehicle for Starwood , particularly for conversion properties , the company is also approving some conversion projects for Aloft , which until recently was a new-build-only brand . Last year , conversion Alofts opened at San Francisco International Airport and in Nashville , Tennessee , and additional conversions will open this year in Tucson , Arizona , and Calgary , Alberta , Canada .
The key to conversions for Choice is the transactions market , which Senior Vice President of Global Development David Pepper sees picking up in the upper midscale segments and below . “ When hotels are trading hands , you ’ ll see a lot more conversions , and when owners see business pick up they can better afford to do some PIPs , which can lead to flag changes ,” Pepper says .
Carlson is also relying primarily on conversions for franchise growth in its Radisson and Park Inn brands , taking aim at former Marriotts , Fairfield Inns , Courtyards , Holiday Inns and Holiday Inn Expresses .
Starwood ’ s Aloft Asheville ( North Carolina ) Downtown
from another flag . Choice , too , is emphasizing new construction , especially for its upscale Cambria Suites brand . The brand , which was slow to grow following its introduction to the industry in 2005 , now has 19 properties open , with 26 under development . Much of that activity is in urban locations , although the company recently approved the first non-U . S . Cambria at Calgary International Airport .
“ Because of the REIT and public money buying upscale select-service assets in those markets you ’ re seeing valuations rise so high it ’ s now time to build , because you can build for lessthan-replacement costs ,” Pepper adds . While New York City and other
Hilton Garden Inn Hollywood , California top-10 markets are getting most of the attention from franchisors — particularly for new development — the more improbable hot spots are markets , such as North Dakota , in the middle of the new shale oil boom .
“ Dickinson , North Dakota , has become the new New York City ,” says Nancy Johnson , executive vice president of development for Carlson Rezidor Hotel Group . “ Every brand wants to be there , and we have some developers looking at the market . But the banks are getting a little nervous about all the new product being added there , given that it ’ s a one-horse town .”
Around the world Although Starwood has a strong presence around the world , North America continues to drive its franchise business , with 75 % of licensed deals coming from the United States and Canada . Three brands — Four Points , Aloft and Element — account for nearly half of all Starwood ’ s franchise signings in 2012 .
Outside North America , Starwood ’ s franchise pipeline is smaller but driven mostly by Latin America and Europe . It is also starting to see more interest in franchising in India and Asia , but managed hotels are still more prevalent . Starwood ’ s President of Global Development Simon Turner adds that he is encouraged by Starwood ’ s increasing pace of franchising globally . “ There are fewer high-quality independent operators to choose from to operate and manage our hotels ,” Turner says . “ This is changing , and we continue to add franchisees to our list of preferred operators throughout the world .”
Choice employs a dual franchising
Development inches back While other brand companies focus on conversions , last year just 10 % of new Marriott properties were rebranded
22 HOTELS April 2013 www . hotelsmag . com