Choice Hotels finishes acquisition of WoodSpring Suites brand and franchises
Choice Hotels International, which is one of the largest hotel companies in the world, has completed its acquisition of WoodSpring Suites
For those who are unfamiliar with WoodSpring Suites, it is important to note that it is an extended-stay lodging brand. The acquisition by Choice Hotels International was first announced on December 18, 2017. Experts say that its completion is expected to add nearly 240 total extended-stay hotels spread throughout 35 states. This will greatly bolster the Choice Hotels portfolio, giving it an overall collection of more than 350 extended-stay properties. Existing brands in this portfolio include MainStay Suites and Suburban Extended Stay, among many others.
WoodSpring suites has often been recognized as the United States’ fastest growing economy extended-stay hotel brand. Industry experts often attribute this status to a demonstrated ability to expand its franchisee base, which has become arguably the most effective growth strategy in the modern hospitality industry, particuliarly within the United States.
Over the past three years, WoodSpring Suites, has experienced a 21 percent RevPAR growth as well as a 48 percent Gross Room Revenue (GRR) growth over the last three years. It has also increased its net units by more than 25 percent since 2014. This total includes nearly 20 properties that were currently under construction at the time of the acquisition. With its track record of identifying additional new market opportunities for continued growth, as well as its focus on new construction, WoodSpring Suites gives Choice Hotels an expanded portfolio of properties that on average were largely built within the last seven years.
Choice Hotels acquired WoodSpring Suites’ brand, franchise options, marketing, and development for $231 million. That price, however, is subject to customary closing adjustments, although experts do not expect this to be significant. This sizable acquisition was paid for through a combination of cash on hand and through borrowings under Choice’s existing credit facility.
Within the financial world and the hospitality industry, this acquisition is widely expected to be accretive to financial performance in 2018, although it will exclude one-time transaction and integration fees.
When it comes to the U.S. tax reporting process, Choice’s move to acquire WoodSpring constitutes an asset purchase. As a result, the company will receive tax benefits that will most likely lower the ultimate purchasing price of the deal.
Overall, WoodSpring is an asset-light franchise-heavy business that has market leading potential. It is firmly-rooted in the extended-stay segment of the industry within the United States. It also complements Choice’s existing extended-stay business with its ability to serve a wider range of guests, including the all-important business traveler segment. The sense of this deal likely had something to do with the speed in which it was completed. It’s telling that the transaction was announced and closed within a scant 45-day period.
Let’s take a look at a few projects currently underway by Woodspring Suites:
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