Comfort Inn 2011 Annual Report Download - page 50
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Table of Contents
opening of 327 franchised units during the year ended December 31, 2010 coupled with a 3% decline in the execution of new franchise agreements due to the
difficult credit environment. The Company had an additional 105 franchised hotels with 9,105 rooms under construction, awaiting conversion or approved
for development in its international system as of December 31, 2010 compared to 116 hotels and 9,445 rooms at December 31, 2009. 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, 2010 and 2009 by
brand is as follows:
Comfort Inn
43
91
134
(13)
(30)%
(29)
(32)%
(42)
(31)%
Comfort Suites
—
181
181
1
NM
(59)
(33)%
(58)
(32)%
Sleep
1
122
123
(1)
(100)%
(47)
(39)%
(48)
(39)%
Quality
48
15
63
(15)
(31)%
(7)
(47)%
(22)
(35)%
Clarion
19
6
25
(1)
(5)%
(4)
(67)%
(5)
(20)%
Econo Lodge
43
4
47
(8)
(19)%
(2)
(50)%
(10)
(21)%
Rodeway
36
2
38
(24)
(67)%
—
— %
(24)
(63)%
MainStay
—
37
37
1
NM
5
14 %
6
16 %
Suburban
2
30
32
(2)
(100)%
(3)
(10)%
(5)
(16)%
Ascend Collection
2
4
6
4
200 %
—
— %
4
67 %
Cambria Suites
—
41
41
—
NM
(7)
(17)%
(7)
(17)%
194
533
727
(58)
(30)%
(153)
(29)%
(211)
(29)%
There were 87 net domestic franchise additions during the year ended December 31, 2010 compared to 190 net domestic franchise additions during the
year ended December 31, 2009. Gross domestic franchise additions decreased from 442 for the year ended December 31, 2009 to 327 for the same period in
2010. New construction hotels represented 78 of the gross domestic additions during year ended December 31, 2010 compared to 144 hotels in the same period
of the prior year. Gross domestic additions for conversion hotels during the year ended December 31, 2010 declined by 49 from 298 hotels during the year
ended December 31, 2009 to 249 hotels. The decline in hotel openings is primarily due to a 47% decline in new executed franchise agreements in 2009 followed
by a 3% decline in 2010 as the lack of new hotel construction financing, 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.
Net domestic franchise terminations declined by 12 units to 240 for the year ended December 31, 2010 from 252 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 underperforming in their market.
As the competition gets stronger and more focused on limited service franchising, the Company continues 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 $2.8 million or 13% from $21.0 million in the year ended December 31, 2009 to $23.8 million for the same period in
2010 primarily due to foreign currency fluctuations, 3% increase in rooms open and operating, improved international RevPAR performance and the
acquisition of CHN.
During 2010, the Company received 657 applications for new franchise agreements (not including relicensing of existing agreements) compared to 738
in 2009. These applications resulted in 357 new domestic franchise agreements executed during 2010 representing 30,305 rooms compared to 369 agreements
representing 30,156 rooms executed in the same period in 2009. 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 2010, 59 of the executed agreements were for
new construction hotel franchises, representing 4,679 rooms, compared to 56 contracts, representing 4,197 rooms for 2009. Conversion hotel franchise
executed contracts totaled 298 representing 25,626 rooms for the year ended December 31, 2010 compared to 313 agreements representing 25,959 rooms for
the year ended December 31, 2009. Domestic initial fee revenue, included in the initial franchise and relicensing fees caption above, generated from executed
franchise agreements decreased 26% to $6.2 million for 2010 from $8.4 million for 2009. The decline in revenues primarily reflects a 3% decline in the
number of executed agreements compared to the prior year as well as an increase in deferred initial fee revenue due to an increase the number of franchise
agreements executed containing developer incentives compared to the prior year.
49