Extended Stay America parlays nearly 30 years of experience and ongoing innovation to help franchisees optimize new-build performance.
CHARLOTTE, North Carolina ‒ Developers who see the extended stay hotel construction process simply as a means to an end may be shutting down a key driver for project ROI. Done right, proactive management of the construction cycle can make a new-build extended stay hotel pencil out.
What it’s definitely not is DIY. Complexity layered throughout the development process requires 360-degree expertise and resources both at the brand and construction enterprise levels. In-depth sector knowledge and specialization can help optimize the opportunities and manage the challenges inherent in classic extended-stay models and market-responsive prototypes.
Answering that need, Extended Stay America (ESA) prioritizes end-to-end collaboration to help franchisees identify potential upside, avoid costly missteps and keep new development projects on time and on budget, from groundbreaking to ribbon-cutting.
ESA’s franchise development team, along with its construction and design team, leverage nearly three decades of best practices gained from hundreds of projects, as well as first-hand knowledge acquired during its own recent ground-up construction of 14 new prototype corporate hotels to enable its franchisees in uncovering hidden cost efficiencies and overlooked potential for margin-building changes.
Phillip Lee, Extended Stay America
“We've been engaged in every aspect of the new construction process,” said Phillip Lee, ESA’s director of construction. “Working alongside our franchisees and on our own projects, we’re constantly trying to find ways to streamline the construction process and control costs. Whether it’s changing design slightly or finding new materials that better serve owners and guests long term, we see this shared expertise as a pillar of our customer service.”
Adding to Lee’s comments, Paul Fraser, ESA’s vice president of real estate, said, “We want to have conversations with our franchisees. We tell them, ‘We know what you’re going through.’ Our teams have frequently experienced similar situations with our construction efforts, or we may have encountered them on another ESA franchisee’s new-build hotel.”
Fraser continued, “Our owner support focuses on increasing the franchisee’s ability to perform and hit their financial returns because we’re doing the exact same thing. If we can benefit and pass that learning on, we’ve accomplished that part of our mission.”
However, Fraser stressed that ESA continues to learn from its franchisees. “We are open. If a franchisee has a different way to meet our objectives and standards, we are always willing to listen and learn from our franchisees. In fact, we have implemented some of their solutions into our brand standards and specifications.”
We are constantly evaluating our prototypes and specifications with franchisees and stakeholders to help streamline construction and procurement and to reduce costs where it makes sense.
Phillip Lee
In this exclusive interview, Fraser and Lee demonstrated how ESA’s signature blend of expertise and innovation makes the nationwide numbers work for new-build hotels ‒ which account for 90% of the company’s robust pipeline.
Here, they share insights on strategies to better manage new extended stay construction projects.
1. Enlist help from brand experts in evaluating the site’s range of opportunities and challenges. Fraser or Lee make multiple in-person site visits to assess potential problems and prevent them from escalating before they negatively impact the schedule or financials.
Fraser cautioned that, “Cheap land isn’t always a bargain. The location has to fit the demand model for an extended stay hotel. And, you must weigh any additional cost such as bringing in infrastructure for utilities that may not be readily available in the area. Also, what are the schedule impacts for municipalities that don’t currently have these utilities in place? Your site development costs could skyrocket if you have to bring in these services alone.”
2. Matching the right parcel to the correct building footprint is vital. Sometimes, smaller footprints can help reduce the land and site development cost, but that doesn’t mean “always.”
”ESA can work with developers to make sure their approved building modifications fit “nicely” into the sites they have in mind. ESA has produced prototypes that give developers the flexibility to work with their architect to scale the building size and shape to help meet their needs and budgets.
Paul Fraser, Extended Stay America
3. Making smart decisions on building materials can impact construction costs. ESA’s efforts for continual product improvement also include pricing reviews to help pinpoint opportunities to create cost savings while improving quality, according to Lee.
“For instance, market drivers pushed up the cost of wood during COVID. So, stick-built framing was not cost effective at that time,” he said. “But the cost of wood has come down over the last few years. Now it’s not only the cheapest but the best adapted material to achieve quality construction in a tighter timeframe. All of our new prototypes are stick-built, but we do allow developers to modify design based on their individual preferences as long as it meets brand standards.”
4. Product selection focuses exclusively on top performers. Lee pared down supply costs by simplifying material requirements for construction.
“Why would we offer three types of flooring when we know which specifications work best for our projects and guests?” Lee questioned. “By identifying the correct product for our needs, we’re in a position to go to manufacturers, tell them what product we want to use in all our hotels and negotiate volume discounts we can pass along to franchisees.” It also simplifies all aspects from production to installation and sign off.
“Having built 14 ESA corporate new-build hotels ourselves gets us front and center into what it can take to be successful. We want to pass those learnings onto our franchisees,” Fraser said.
Lee added, “We are constantly evaluating our prototypes and specifications with franchisees and stakeholders to help streamline construction and procurement and to reduce costs where it makes sense.
“Overall, supply chains and product pricing have stabilized. But shortages can still arise. That’s another area where our expertise can provide solutions. Recently, a project was facing delays in opening because municipal codes called for a certain type of electrical panel for the hotel that had been difficult to source in a timely manner. I talked with the contractor on site, and based on our past relationships, we found a company that manufactures similar panels in our backyard in Charlotte. We discussed our requirements; the company delivered a beautifully made product and this franchisee had one less hurdle to get the project up and running.”
Having built 14 ESA corporate new-build hotels ourselves gets us front and center into what it can take to be successful. We want to pass those learnings onto our franchisees.
Paul Fraser
5. Proactive project management is vital in the two-month run-up to opening. “How the developer manages the end of the project can be critical to cost controls and on-time opening,” Lee said. “Even for seasoned owners, it’s not easy to get the data service into the hotel at the right time, get power, pass the fire inspection, get the certificate for the elevator. But, if you’re not on top of every detail and you fail to meet these milestones, it could cost you an extra two months or more before you open for business.”
He added, “In addition to our site visits, we set up weekly phone calls over the last two months of a new-build project to go through the schedule with the developer or owner and see how things are progressing. Since extended stay is all ESA does, we can pass along lessons learned over our extensive owner/operator history and over our experience with hundreds of projects to help anticipate and offer potential solutions before they stall the project or erode ROI.”
6. Ongoing communication is key to expanding not only ESA’s expertise but also its relationships with franchisees. “Our phones are always open,” Fraser said. “We encourage regular communication throughout the lifecycle of a construction project ‒ whether it is during our scheduled site visits or recurring meetings. Our team also fields calls from developers as questions arise. Our franchisees’ success is the linchpin of our corporate success. So, it’s vital that we continue growing our knowledge base and updating our prototypes to generate better results across the construction life cycle.”
Mary Scoviak is custom and design content director for Hotel Investment Today by Northstar.
The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.