Two weeks ago, extended-stay hotel brand Value Place announced that it was changing its name to WoodSpring Suites, and developing a sub-brand with more enhanced offerings. Bruce Haase, Value Place-now-WoodSpring Suites CEO, said the company was motivated to make this change because, “We saw unprecedented demand from both consumers and developers for our product, and we see clear opportunities to do even better and build a long-term growth platform.” Today, the company released its earnings report for the first quarter of 2015, and the numbers are good, with first quarter revenue up 26.5 percent and system-wide comparable RevPAR up 9.9 percent year over year. Here’s what else he had to say when we caught up with him.
Why is now the right time to make this move? We certainly didn’t do it because we had to. The company had a record year last year in terms of development, but we sort of stepped back and looked at the competitive market and looked at the environment, and really realized we could do a lot more with what we have by changing the brand out.
We started out as something very different than what we are today. When we were a short-term residential apartment concept 10 years or so ago, the Value Place name made sense, and as we’ve evolved, we’ve become really the leader in the value segment of the extended-stay business. What the Value Place name communicated to consumers no longer made sense in terms of the product that we have and the consumers we’re trying to attract.
The name just doesn’t play as well in major metropolitan markets as it did in some of the early markets where the brand started out. There’s enough demand for developers to make change. We’re looking to get into some more difficult markets on the East Coast, on the West Coast, and the upper Midwest.
How does this re-branding help position the company better against the competition? While there are a lot of other extended-stay brands, we’re really the only one that’s substantially growing in our segment. We have a very active development community that we’re working with. And we’re developing through both franchise partners and development partners. So we think rebranding can help really fuel the growth in a few ways.
First of all, from the consumer point of view, the research we did really substantiated our intuition that there was a gap between the consumer’s perception of the brand and the realities of the product. There’s no one else in the industry that has all interior corridor properties in the value segment of extended stay that are maintained with the cleanliness and safety and the high standards that we have. It’s an extraordinarily good product and the Value Place name undersold it. The name spoke to one thing, which was price. When you compete on price, you’re really commoditizing a product, and we were commoditizing a product that shouldn’t be commoditized.
We needed a brand that gave us permission to speak to the consumers in new ways. With the new name, we can attract new consumer segments and even increase rate over time as we attract more aspirational customers. It also helps with municipalities and government officials that approve our projects, since a lot of communities just didn’t want something called the Value Place in their neighborhood, particularly more urban areas and more well-to-do areas. So there was a great pent up demand from development communities to do something with the name that gave them the ability to enter some of these markets.
Can you tell me more about the Signature sub-brand that was part of this announcement? The WoodSpring Suites Signature product is really targeted for very specific markets where there is a significant amount of higher price demand. Typically, those are higher land costs, higher barriers to entry markets. It will have a separate prototype, though we do anticipate that a small number of our existing Value Place properties will become Signatures, but there will have to be some more substantial changes to them to accommodate this change.
For example, they will need to add an exercise room. They’ll need to add more space in the lobby. It’s a larger capital project for them. Most of the existing portfolio will be WoodSpring Suites, and so most of the WoodSpring Suites Signatures going forward will be new construction. We’ll continue to drive new construction with both the suites product and the Signature product. It’s really just going to come down to market by market.
Can you identify characteristics of a market that might be appropriate for one versus the other? The markets that would fit the Signature product would be those that typically have higher land costs. We’re targeting high barrier to entry markets, so think the northeast and northwest where the entitlement process may be more difficult and the brand perception is critical to the approval of the product. In markets where there’s lower land costs, more traditional Value Place markets, the Suites is a great product and we’ll continue to develop those. Our franchisees will continue to develop those as well.
How does the name change impact things on the property level beyond the new sign out front? We’re very careful not to mess with our operating model, since it delivers returns that are the envy of the industry. So we’ll have a new look and feel but fundamentally the same operating model. We need to keep that sacrosanct. We’re developing two new prototypes—one for Signature and one for WoodSpring Suites—and I would anticipate that the plans will be available at the end of the year. And many of the elements from these new prototypes will be transitioned into our existing product. Potentially within the next couple of months, so it’s a question of how quickly we can adapt what we’ve already got underway.
And how does the new branding impact consumer perception of your hotels? If you look at the WoodSpring name and logo next to the Value Place name and logo, you realize that they couldn’t be any more different. That is by design. The WoodSpring name, together with the logo, conveys the attributes of the product we have today—new, fresh, clean. That’s what we’re really trying to get across, and that’s what the Value Place name and logo didn’t communicate. When we did our research, the intent to stay score went up dramatically for the new name—even for our existing Value Place guests. For our more aspirational customers that we’re trying to reach with this product, the intent to stay score more than doubled.
Considering how many hotel brands are now out there, it’s amazing that the WoodSpring Suites name was still available. Yeah, there’s not much left out there.
