Coming off its successful initial public offering in April, La Quinta had a solid performance across the board in 2014, including an 8 percent increase in system-wide revenue per available room (RevPAR) and 8 percent growth in its franchise unit base. In the words of President and CEO Wayne Goldberg, 2014 was La Quinta’s “winningest year ever.”
“The La Quinta brand is stronger than ever,” Goldberg told 1,500 attendees at the brand’s annual conference in Orlando last week. “Our financial position is more solid, our franchise growth platform is more robust, and our team is more diligent and enthusiastic than ever to create meaningful value for our employees, customers, and shareholders.”
Additional full-year 2014 highlights include a 4.4 percent increase in average daily rate (ADR) and a 220 basis points bump in occupancy to reach 66.8 percent. Total adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 10.4 percent to $375.5 million.
In 2014, the 47-year-old company opened 45 hotels and 3,900 rooms, including its sixth property in Mexico. La Quinta ended the year with a total of 867 hotels (514 franchised/353 owned) and more than 86,000 rooms across 47 U.S. states, Canada, and Mexico. The development pipeline grew 11 percent from 187 to 207, which represents more than 17,000 rooms. Approximately 50 percent of franchise agreements signed in 2013 and 2014 came from existing franchise partners.
Although La Quinta is half the size of its biggest competitors in terms of number of properties, STR data shows it is one of the fastest growing select-service brands in the upper midscale and midscale segments. La Quinta has a presence in 65 percent of STR’s 600 market tracks, which means it has plenty of potential targets for development. “That leaves us a lot of room to continue to grow,” Goldberg said. And being a standalone brand doesn’t put the company at a disadvantage, he added. “We’re focused on growing one good quality, standalone brand.”
To keep the brand fresh and relevant, La Quinta introduced its Del Sol prototype last June. The prototype is designed to maximize revenue-producing square feet for owners while improving guest satisfaction and comfort. The first property with the new look is scheduled to open in College Station, Texas, this month and another 45 Del Sol properties are under construction or in the planning stages.
In addition to growing the brand domestically, La Quinta has dedicated operational and marketing resources to expanding its presence in Latin America and South America. According to EVP and Chief Development Officer Rajiv Trivedi, 12 percent of La Quinta’s pipeline is international. The company will open a few hotels in Mexico this year and next, and one is on the way in Honduras. “We started putting concentrated efforts in those markets within the last 24 months, and now we are starting to see an even greater level of interest in our brand,” he said.
Trivedi said an improving economy, a gaining middle class, and a lack of select-service hotels make Latin America an attractive market. “We believe our focus in Latin America can yield greater results for us as a brand and our franchise partners in the near future.”
For the full year 2015, La Quinta anticipates comparable system-wide RevPAR to increase between 5.5 and 7 percent compared to 2014, expects to open between 50 and 55 new properties, and foresees meaningful growth in adjusted EBITDA. “We will achieve these results by continuing to focus on the fundamentals,” Goldberg said. “On the operations side, everyone needs to continue to focus on stronger recruitment, selection, and hiring, as well as technology.”
Bobby Bowers, SVP of operations for STR, looked at La Quinta’s performance data in relation to overall hotel industry fundamentals. The brand’s top performing states—Colorado, Georgia, Florida, California, and Texas—contain about half of its U.S. room supply. Those states are experiencing strong RevPAR growth ranging from 9 percent in Texas to more than 12 percent in Colorado.
By chain scale category, the middle part of the market will experience healthy RevPAR growth in 2015 and 2016 driven primarily by room rate. “That’s something to keep in mind,” Bowers said. “Think about that in terms of how you plan the business and how you run your hotels.” Over the past seven years, La Quinta’s RevPAR index has steadily gone upward, coming in at 97.2 in 2014.
The U.S. development pipeline stands at approximately 128,000 rooms under construction, Bowers said, which is about one-third higher than the same time last year. STR expects to see a gradual increase in room supply but not to levels seen prior to the downturn. With more development on the way—and select-service accounting for two-thirds of hotels under construction—Bowers said franchisees should be mindful of their product.
“Make sure you are competitive, laser focused on the guest, and everything at your hotel works properly and is spotless,” Bowers advised. “Things are always competitive, but because of where we are now in the cycle, it’s only going to get more competitive.”
