Comfort Inn 2011 Annual Report Download - page 43
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Table of Contents
rooms under construction, awaiting conversion or approved for development in its international system as of December 31, 2011 compared to 105 hotels and
9,105 rooms at December 31, 2010. While the Company’s hotel pipeline provides a strong platform for growth, a hotel in the pipeline does not always result
in an open and operating hotel due to various factors.
A summary of the domestic franchised hotels under construction, awaiting conversion or approved for development at December 31, 2011 and 2010 by
brand is as follows:
Comfort Inn
30
62
92
(1)
(3%)
(16)
(26%)
(17)
(18%)
Comfort Suites
1
122
123
—
— %
(32)
(26%)
(32)
(26%)
Sleep
—
75
75
1
NM
(26)
(35%)
(25)
(33%)
Quality
33
8
41
(4)
(12%)
(3)
(38%)
(7)
(17%)
Clarion
18
2
20
(4)
(22%)
(1)
(50%)
(5)
(25%)
Econo Lodge
35
2
37
(10)
(29%)
—
—%
(10)
(27%)
Rodeway
12
2
14
10
83%
(1)
(50%)
9
64%
MainStay
1
42
43
1
100%
(14)
(33%)
(13)
(30%)
Suburban
—
27
27
2
NM
(7)
(26%)
(5)
(19%)
Ascend Collection
6
4
10
—
—%
—
—%
—
—%
Cambria Suites
—
34
34
—
NM
(3)
(9%)
(3)
(9%)
136
380
516
(5)
(4%)
(103)
(27%)
(108)
(21%)
Domestic hotels open and operating increased by 8 hotels during the year ended December 31, 2011 compared to an increase of 87 domestic hotels open
and operating during the year ended December 31, 2010. Gross domestic franchise additions declined from 327 for the year ended December 31, 2010 to 256
for the same period in 2011. New construction hotels represented 29 of the gross domestic additions during year ended December 31, 2011 compared to 78
hotels in the same period of the prior year. Gross domestic additions for conversion hotels during the year ended December 31, 2011 declined by 22 from 249
hotels during the year ended December 31, 2010 to 227 hotels. The decline in hotel openings is primarily due to the limited availability of hotel construction
financing which has significantly impacted the number of new construction hotel franchise agreements executed as well as the ability of existing projects to
obtain financing and commence construction. In addition, a decline in the real estate market for hotel transactions and retention efforts implemented by other
hotel brand companies have negatively impacted the Company’s pipeline of new franchises. The Company expects the number of new franchise units that will
open during 2012 to decline from 256 in 2011 to approximately 237 hotels as openings will continue to be impacted by the lending environment and increased
competition for existing hotels seeking a new brand affiliation.
Net domestic franchise terminations increased by 8 units to 248 for the year ended December 31, 2011 from 240 for the same period of the prior year.
The Company has continued to execute its strategy to replace franchised hotels that do not meet our brand standards or are under-performing in their market.
As the competition gets stronger and more focused on limited service franchising, the Company will continue to focus on improving its system of hotels and
utilizing the domestic hotels under construction, awaiting conversion or approved for development as a strong platform for continued system growth.
International royalties increased $3.2 million or 13.6% from $23.8 million in the year ended December 31, 2010 to $27.0 million for the same period in
2011 primarily due to foreign currency fluctuations, a 2.7% increase in rooms open and operating, and improved international RevPAR performance.
During 2011, the Company received 600 applications for new franchise agreements (not including relicensing of existing agreements) compared to 657
in 2010. These applications resulted in 332 new domestic franchise agreements executed during 2011 representing 28,685 rooms compared to 357 agreements
representing 30,305 rooms executed in the same period in 2010. An application received does not always result in an executed franchise agreement during the
year received or at all due to various factors, such as financing and agreement on all contractual terms. During 2011, 55 of the executed agreements were for
new construction hotel franchises, representing 4,712 rooms, compared to 59 contracts, representing 4,679 rooms for 2010. Conversion hotel franchise
executed contracts totaled 277 representing 23,973 rooms for the year ended December 31, 2011 compared to 298 agreements representing 25,626 rooms for
the year ended December 31, 2010. Domestic initial fee revenue, included in the initial franchise and relicensing fees caption above, generated from executed
franchise agreements increased 55% to $9.5 million for 2011 from $6.2 million for 2010. Initial fee revenue increased despite executing fewer new franchise
agreements primarily due to the recognition of deferred revenue during 2011 related to franchise agreements containing
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