Choice
Hotels' SOAR program, designed to increase hotel ownership for underrepresented
entrepreneurs, executed its first contract since being reintroduced. Here’s a look at the program and
the deal.
BETHESDA, Maryland — Choice
Hotels International announced this week that it has awarded its first contract
for its newly reintroduced SOAR program, which is designed to create hotel ownership opportunities
for underrepresented entrepreneurs.
The recipient, Damon
Healey, managing principal of Washington, D.C.-based Eternal Companies,
executed a contract on May 30 to convert two properties in Georgia to Choice’s
Suburban Studios extended-stay brand: the 92-key Suburban Studios Columbus Bradley
Park in Columbia, Georgia, and the 73-key Suburban Studios Macon North in Macon,
Georgia.
Unlike many owners in the
program, Healey has hospitality experience (he was vice president and head of
real estate for Brookwood Hotels, a portfolio company of Brookfield Asset
Management).
“Choice has, if not the best,
one of the best franchise models, especially in the extended-stay category.
That’s why I’m thrilled that our hard work and dedication, with the help of
SOAR and our investors, including partners also within the African American
community, have paid off,” Healey said in a news release. “The level of support
we have received from Choice on how to navigate hotel ownership every step of
the way has been next level. I hope my journey will help inspire others to get
into hotel ownership.”
Hotel Investment Today talked to
John Lancaster, vice president of franchise development and strategic programs
at Choice Hotels, about the SOAR program and how Healey’s deal came together.
Lancaster said Choice introduced
its Emerging Markets program (now SOAR — Supporting Ownership Access and
Representation) more than 20 years ago. The program has awarded and financially
supported over 370 franchise agreements for underrepresented minority and
veteran entrepreneurs in that time, including 28 in 2023 (which includes nine
contracts to African American owners and 17 with women owners through the
company’s “HERtels by Choice” program).
Suburban Studios Columbus Bradley Park
While Lancaster doesn’t have any specific projections, he wants to expand the SOAR program as much as possible and is excited that through June, Choice has completed 12 deals in the program, which is ahead of its 2023 pace.
He said most of the owners in
the program don’t have previous hospitality experience, which makes the
education component all that more important.
“The majority of these hotel
owners haven’t had the opportunity to own a hotel before,” Lancaster said.
“These deals may take upwards of anywhere from a year to two years [because] we
are educating and holding their hands. It may be, in some cases, where we’re
teaching them what RevPAR is, or what ADR is, and going step-by-step.”
Lancaster said Healey attended
Choice’s annual convention in 2023, including a meeting of CHOAAA (Choice Hotel
Owners African American Alliance) and learned about the opportunity. At this
year’s convention, Healey signed the deal. He said Healey’s experience was also
atypical because of how fast he was able to get the mandated PIPs done for the
conversion to Choice.
“Normally, when we take a hotel
and convert it, it typically takes three to four months… but with his
intentionality and focus on creating this PIP and getting it done in about 30
days, we were able to open [that much faster].”
Lancaster said Choice wants to
provide around $25 million to women and underrepresented minorities by 2025 as
part of the SOAR program (he said key money was used for Healey’s deal, for
example).
It’s putting that owner together with those particular capital investments, those particular economic development boards, those TIFs and other types of lending so that they may be able to access and get their equity.
John Lancaster
Extended-stay is a popular
choice for members of the program because of the current development market,
but Lancaster said Choice’s Ascend soft brand collection is also a popular choice, citing hotel conversions in South Boston, Virginia, and Lafayette, Louisiana.
All told, Lancaster said about
60% to 70% of the deals in the program over the past year were conversions. He said many of the program’s
owners may have experience in multifamily but not as a franchisee.
“You may have someone who’s very
well versed in franchising but doesn’t understand the real estate portion of
it,” Lancaster said. “The biggest thing you have to do is let them know
there’s a partnership for 20 years. It’s almost like you’re married.”
Finding capital for
new owners
The biggest thing holding owners
back, Lancaster said, is the equity injection necessary for owning the asset.
He cited the example of a $10 million hotel with an LTV of 60% to 70%. Finding the
$3-4 million in equity to make the deal happen can often be a challenge.
Then, add the challenge of finding the capital, which is where Lancaster
said Choice’s team can help.
“It’s educating the capital on
that hotel asset… A lot of hotels are getting their debt through regional
banks, so it’s educating those regional banks,” he said. “Those regional banks
are well-rooted in the neighborhood… So, they want to see it succeed.”
The program also teaches owners
how to work with municipalities and the government on things like how to
procure tax incentive funds (TIFs).
“It’s putting that owner
together with those particular capital investments, those particular economic
development boards, those TIFs and other types of lending so that they may be
able to access and get their equity,” Lancaster added.
Lancaster said that includes
working with lenders that are well versed in Choice and its franchises (he
mentioned that Healey’s deal was financed with Scottsdale, Arizona-based Arriba
Capital).