Typical Value Place exterior
The extended-stay hotel market is heating up in Middle Tennessee, and Value Place franchisees are looking to stake their claim.
Value Place currently has three properties in the area, and nine altogether in the state. Franchisees operate hotels in Murfreesboro, Lebanon and Clarksville, all of which were built in 2008 and 2009.
The company and its franchise owners are looking to break ground on other sites in the coming months, says Dan Weber, chief executive officer.
“All of our sites in Tennessee are doing well, and we’re seeing an increase in occupancy as the area weathers the recession,” Weber explains. “We’re looking to continue expanding our brand, and the Nashville and Middle Tennessee market seems like a great place for us to fill in.”
The extended-stay chain, which was begun by Residence Inn founder and industry guru Jack DeBoer in 2003, operates in the low-cost, short-term housing segment of the hotel market. The company and its franchisees target areas where there is plenty of construction, as they often house transient construction workers, as well as regions where economic growth is steady, Weber says.
The CEO and members of the Value Place corporate team were in Nashville earlier in the fall to meet with current and potential franchisees and found the climate to be welcoming.
In-house laundry
“We’re looking at four to six locations in the Nashville area, beginning in 2013, and when we saw all the development just within Nashville itself, we knew we had a great match for the area,” Weber says.
“We have a strong construction trade, and the building situation is fairly vibrant in Nashville compared to other cities.”
Why the Midstate stands out
The company looks at economic generators, employment numbers, workforce education levels, cost of living and more when it evaluates a market. Those figures are tallied along with franchisee interest, and if an area is a fit for either a corporate-owned or franchisee property, then dirt gets moved.
“Our guests are transitional people in the marketplace, such as construction workers or mobile nurses, as well as local residents who are moving in or out of a home, and people who are there for just sheer leisure,” Weber says.
“One of the things which stood out to us was the fact that the cost of living in Nashville is only 88 percent of the national average, while its per-capita income figure was 109 percent of the national average.”
Currently there are 178 Value Place locations nationwide. They have evolved over time, and now are four stories tall, with 124 rooms around a central, interior corridor. The newer facilities also boast energy-efficient lighting, laminate flooring and other improvements.
The Investment
In-room kitchen
Becoming a Value Place franchisee is no small proposition, so Weber says he is encouraged by the growth in Tennessee and the interest in new sites.
“It is anywhere from $3.2 million to $4 million in terms of construction costs, and that figure can go up to $5 million when you factor in real estate costs,” he says. “Banks have become more comfortable with lending, but an investor right now is still going to have to put up around 40 percent equity in order to get a loan.
“But when we met with local developers and business people, we not only were well-received, we also were shown some real estate that looked good to us in terms of building corporate-owned properties, as well.”
Tennessee’s business climate drew in one franchisee, Evan Carzis of New York, whose DC Hospitality also owns some warehouse properties in Knoxville and the Tri-Cities. The company operates Value Place properties in Murfreesboro and Knoxville.
“We’ve always liked Tennessee, and at this point in time we’re actually looking at building additional facilities, probably in the Midstate area,” Carzis says. “We’re looking at the Nashville and Chattanooga markets, but also Knoxville, for the early part of 2013 and over the next three to five years.”
Value Place appeals to DC Hospitality because “it’s an extremely efficient, simple model, and it suits people who are looking to save some money over a longer stay, but also have a nice place to be in,” Carzis says, who adds that he “could go anywhere, but we’ve been made very welcome by all levels of government in the state.”
Value Place’s corporate offices are keen on the region as well, so look for them to possibly step up if franchisees fall short of the growth number that Weber says he and his team have targeted.
“Right now we own and operate 44 of the 178 properties, and we’d like to keep that same ratio as we work toward a goal of doubling our properties in the next five years,” he says. “How we fill in a market will really depend on if we have the right partner in place, but we’ll definitely be growing regardless.”