REPORT FROM THE U.S.—Budgetel is back in business.
After changing hands on multiple occasions over the course of its 40-year history, the economy brand Budgetel Inns & Suites—which at one point went from more than 150 properties down to one—is finding its footing, headed up once again by Doug Collins, former chairman and CEO of America’s Best Franchising.
The Budgetel brand was purchased by Atlanta-based Hospitality Lodging Systems on 1 November 2014. Before that, the brand was managed by ABF. When Vantage Hospitality Group announced in July 2014 that it would acquire ABF’s brands, the company said it would not assume the sublicense to the Budgetel brand.
“When Vantage agreed to purchase the other brands, Budgetel became available. We had had a history with the brand, so it was a natural fit,” Collins, now chairman and CEO of Hospitality Lodging Systems, told HNN.
Collins acquired licensing and management rights for the Budgetel brand in 2008 while serving as chairman and CEO of ABF, a position he held since the company’s inception in January 1993. He left ABF in February 2014 to form his own family-owned businesses: Hospitality Lodging Systems and the hotel brokerage firm DC Hospitality. Based on his familiarity with the brand, he reacquired licensing and management rights for Budgetel.
Collins declined to state the price of the brand acquisition. He did state plans for aggressive expansion that call for a doubling of the 19-hotel portfolio within the next six months.
History of the brand
The Budgetel torch has been passed many times during its decades-long history.
The brand was founded in 1974 in Oshkosh, Wisconsin, by Stephen Marcus from The Marcus Corporation. In 1986, the company began to franchise the brand.
In February 1998, Marcus Corporation announced Budgetel’s name change to Baymont. At the time of the announcement, the company owned and franchised 153 properties in 30 states. One Budgetel property was kept open in Wisconsin so the name would still be registered with the trademark office.
In July 2004, the company announced it had signed a definitive agreement for the sale of its limited-service division to La Quinta Corporation. In this agreement, La Quinta purchased the Baymont Inns & Suites, Woodfield Suites and Budgetel Inns brands.
The acquired portfolio, according to La Quinta’s third-quarter 2004 earnings release, included: 90 Baymont Inns & Suites hotels (including one management contract); seven Woodfield Suites properties; and one Budgetel hotel. The company also acquired all of the trade rights associated with the Baymont, Woodfield Suites and Budgetel brands as well as the Baymont franchise system. The price tag was approximately $415 million, according to the release.
In November 2005, Blackstone Group acquired La Quinta for $3.4 billion. Many Baymont properties were converted to La Quinta hotels. The Baymont name was then sold to Cendant Hotel Group (now known as Wyndham Worldwide) in July 2006.
Budgetel did not get lost in the mix. Blackstone sold the brand’s trademarks and franchise operations for the United States and Canada in March 2007 to an Atlanta-based investor group headed by Mukesh “Mike” Patel and R.C. Patel.
“We absolutely saw tremendous value in the name (Budgetel),” Rajiv Trivedi, executive VP of franchise and chief development officer at La Quinta, told HNN. “We knew that it was a well-recognized name; we knew it was a name that has market value; we knew it was a name known among consumers quite well. We knew the name had a very good reputation in the economy segment.
“At the time when we sold the Budgetel name, it was the right business decision for our company. We were not intending to move forward with reestablishing that name, and we wanted to find a fair market value and sell it to a group that actually could take advantage of it and reestablish the brand,” he added.
Trivedi did not disclose the amount of the sale but said it was a “fair value for both sides,” and it was a “win-win” transaction.
In 2009, the Budgetel torch was passed yet again to be managed by America’s Best Franchising. It stayed there until Vantage bought the company’s brands in July 2014 but did not acquire the sublicense to the Budgetel brand.
The present
Now that the brand sits with Collins again at Hospitality Lodging Systems, he speaks of a growth plan that aims to double the chain within the next six months.
There are 19 Budgetel properties open for operations. On 7 January, the company announced it had signed agreements to add five more to the portfolio. The hotels are conversions in Tallahassee and Pompano Beach, Florida; Macon, Georgia; Marion, Indiana; and Watsonville, California.
“You need two things to have a business: You need a product and a customer. There’s a lot of product out there that fits the Budgetel mode, and there’s a lot of customers out there looking for the type of accommodations that Budgetel can give them at a fair price,” he said.
Collins said the brand is growing through conversions, but the company will welcome new construction.
“But there is a lot of product out there looking for the right positioning, and we think that the conversion market is probably our growth pattern,” he said.
Although there is a focus on expanding the brand throughout the United States, Collins said there also has been interest from India in China. There is one Budgetel hotel open in China.
“We are going to expand the brand internationally. We have no constraints geographically. The United States and Asia would be the two primary locations,” Collins said.
“I think the name is a very attractive name. I think it says what it is—clean, comfortable, safe rooms. I believe that the time is right to expand it. It has been at the level of properties it has for a few years now. I think that what Hospitality Lodging Systems can give the brand and where we are in the economic cycle, that the prospects for Budgetel are very strong,” he said.
“It’s a great economy brand name. It’s iconic. It means what it says,” Daniel Daniele, adjunct instructor at DePaul University, who in 1998 was senior VP of development for Budgetel Inns, told HNN. “There’s a great opportunity for conversions of brands coming out of other systems. This is a great roadside interstate franchise business.”