With CEO Gerry Lopez at the helm, Extended Stay America (ESA) is poised for growth. The Charlotte, N.C.-based company plans to spend $1.4 billion over the next five years building new hotels and renovating existing ones, and will retire $500 million in debt while returning $1.9 billion to shareholders. As part of its ambitious five-year plan, ESA also will start franchising hotels for the first time. The company, which currently owns and operates 629 hotels, anticipates about 25 percent of its locations will be franchises by the end of 2021. Lopez, the former CEO of AMC Entertainment, reflects on the company’s past and what he sees ahead for the evolving extended-stay hotel chain.
When you joined ESA, you were tasked with a strategic repositioning of the company. What inspired you to accept the challenge? This company had been through a lifetime’s worth of drama by the time it was 20. What caught my attention was the complexity of the challenge and how different it was from some of the other opportunities I have tackled before. Over the course of my career, I have discovered that I’m good at and have done more fixing things in different companies and industries than being a maintenance guy.
In addition to AMC Entertainment, you’ve held positions with Starbucks, Frito Lay, and Pepsi Co. Do you see any parallels between those roles and your current one? Throughout my career, there has been a common link: In all of those positions, we have ultimately been focused on the guest or the consumer. It’s about understanding their needs and shaping your operations to better match those needs. You also have to ensure it’s worth both their while and the company’s while. When you figure that out, it’s pretty rewarding.
What did you discover as you mapped out the five-year plan? As we looked at the broad range of strategic alternatives available to the company, it became pretty clear that one of the keys to our future was to return to unit growth. It’s very difficult to be in an industry where all of your competitors are out there building new hotels, and you’re kind of static.
What are the benefits of introducing a franchising component? We thought using our own capital side by side with some partners’ capital would be the best and the quickest way to get to market. We think the market is going to be large, but our own resources, as robust as they are, would only get us to certain cities first, and other cities would have to wait. By franchising, we can get to more cities quicker. The notion of using franchisees to accelerate our unit growth across more markets, and having partners in the business who can be just as creative, capable, and nimble as you are, holds a lot of appeal. Not all of the good ideas are invented at headquarters—some of the best ideas come from franchisees.
What opportunities do you see in the extended-stay segment? By operating in the extended-stay segment, we live in a slightly off center, different niche. The average length of stay in the hotel industry is somewhere between two or three nights, and ours is in the mid-20s. We have a very specific set of guests, and we are better positioned than anyone else to serve their needs. That’s why whatever we do as we reposition the company, as we get to that next level of development growth, we’re going to swim in our lane.
ESA also serves guests’ needs through Hotel Keys of Hope, a room donation program for cancer patients. Why is it important to give back to the communities in which you operate? Chemotherapy treatment is brutal and physically exhausting, so there is a need not simply for a place to sleep, but a place that can be a little bit of home away from home. Being in a position to uniquely help made this program a no-brainer for us. And it’s not just the impact it has on the people we help, it’s the impact it has on our associates when we put them in a position to help, and they do just that. That impact is lasting.
