Extended-stay hotel offers room, no frills

Chain is one of few expanding

Staff WriterNovember 5, 2009 

When a new Value Place extended-stay hotel opens in Apex in January, it will mark the first of what the chain hopes will become a network of properties scattered throughout the Triangle.

Though most hotel companies have hunkered down amid the credit crisis and the downturn in business travel, Value Place is pursuing an aggressive nationwide strategy that calls for 500 properties to be builtover the next five years. The company hopes to open at least six hotels in the Triangle within 10 years.

That the plans of the Wichita, Kan.-based company have not been scaled back because of the recession speaks to Value Place's no-frills business model. For about $200 a week, plus a $100 damage deposit, Value Place guests get a clean, safe place to stay and not much else.

Most of the amenities that guests now take for granted at traditional hotels, such as a coffee maker, high-speed Internet and regular cleaning service, cost extra.

The approach has proven attractive at a time when corporations are slashing travel budgets and more people find themselves in housing limbo because they have relocated but can't sell the home they left behind or simply because they are out of work.

"A lot of apartment dwellers don't want to commit to another year lease because they don't know where there job is going," said Gina McKee, Value Place's vice president of franchise development.

McKee said occupancy rates across Value Place's 160 properties have remained about 80 percent during the recession.

Occupancy levels in the entire extended-stay market were at 65 percent through the first nine months of the year, down 8.2 percent from the same period last year, according to Smith Travel Research, a Tennessee company that tracks the lodging industry.

Occupancy rates across the entire hotel industry were 56.6 percent during that time, down nearly 10 percent from the same period last year.

The first Value Place opened in 2003. The company owns 45 of its namesake properties, and the rest are owned by franchisees, including the 121-room hotel under construction in Apex at U.S. 1 and N.C. 55.

Carter Rise, a franchisee in Richmond, Va., who hopes to start construction on a Value Place on Capital Boulevard in Raleigh early next year, said the hotels fit the current economic environment.

"You get basic, ultra-clean, very safe lodging in a comfortable but not ostentatious room with minimal amenities," he said.

Value Place competes with other moderately priced extended-stay brands, such as Extended Stay America, Candle wood Suites and TownPlace Suites. Value Place's founder, Jack DeBoer, also founded the Residence Inn, Summerfield Suites and Candle wood extended-stay brands before selling them.

Although other chains have made some services optional, Value Place has decoupled just about everything from the cost of the room.

Linen service is $1 a day. High-speed Internet is $10 a week. Rooms are cleaned every other week unless guests pay $25 for weekly service. Kitchens come without dining and cooking utensils or a coffee maker. Value Place offers those items for sale to guests, who must pay for a minimum of a one-week stay.

The average length of stay is three months.

McKee said the Triangle market is attractive because of the large number of business travelers coming for extended visits and because so many people are moving into the area.

There are 33 extended-stay hotels with 3,782 rooms in the Triangle, according to Lodging Econometrics, a New Hampshire firm that tracks hotel development. J.P. Ford, a senior vice president with Lodging Econometrics, said nine hotels and 1,056rooms are on the drawing board.

Ford said economy brands such as Value Place have been grabbing an increasing share of the business traveler market of late.

"A lot of companies just don't have the travel budgets that they did during better economic times," he said.

Ford said these days it is also easier to get financing for a new Value Place, which costs from $3.5 million to $7.3 million to build, than a pricier hotel project.

Value Place charges a franchise fee of $49,600.

Still, Value Place's strategy of growing through franchisees will depend heavily on the lending markets improving.

Rise has property under contract at Capital Boulevard and Thornton Road but is still trying to nail down financing.

A franchisee who was building a Value Place in Garner ran into financial trouble and was foreclosed upon. McKee said the company is looking for another franchisee to take over the project.

david.bracken@newsobserver.com or 919-829-4548

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