Comfort Inn 2013 Annual Report Download - page 46
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Table of Contents
amount of deferred revenue recognized in 2013 related to franchise agreements containing developer incentives that were executed in prior years. Revenues
associated with agreements including incentives are deferred and recognized when the incentive criteria are met or the agreement is terminated, whichever comes
first. At December 31, 2013, the Company had approximately $4.5 million and $2.3 million of deferred initial franchise fees and sales commissions,
respectively, outstanding related to domestic franchise agreements executed with developer incentives.
During 2013, the Company received 756 applications for new franchise agreements (not including relicensing of existing agreements) compared to 750
in 2012. These applications resulted in 530 new domestic franchise agreements executed during 2013 representing 41,390 rooms compared to 473 agreements
representing 36,105 rooms executed in the same period of 2012. 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 2013, 89 of the executed agreements were for
new construction hotel franchises, representing 6,330 rooms, compared to 86 contracts, representing 6,414 rooms for 2012. The increase in new construction
franchise agreements primarily reflects a gradual improvement of the lending environment for hotel construction and improving lodging fundamentals
including an increasing RevPAR environment and low industry supply growth which are typically a catalyst for increased construction of new hotels.
Conversion hotel franchise executed contracts totaled 441 representing 35,060 rooms for the year ended December 31, 2013 compared to 387 agreements
representing 29,691 rooms for the year ended December 31, 2012. Conversion hotel franchise agreements included large multi-unit transactions in both 2012
and 2013. During the year ended December 31, 2013, the Company executed 24 Ascend Hotel Collection franchise agreements in conjunction with a strategic
alliance entered into with BlueGreen Vacation Resorts. Conversion franchise results for the year ended December 31, 2012 included 46 hotels previously
operated under the Jameson brand which were converted to the Company's Comfort (2 hotels), Quality Inn (42 hotels) and Econo Lodge (2 hotels) brands.
Excluding these multi-unit transactions, conversion franchise sales increased by 76 contracts or 22% primarily due to increased franchise sales for the
Company's Comfort, Econo Lodge and Ascend Hotel Collection brands.
The number of franchise applications received and the number of franchise agreements executed are dependent on the availability of hotel financing, cost
of capital and the presence of an active real estate market. Improvements in these areas should serve as a positive catalyst in the number of franchise
applications received and ultimately the number of franchise agreements executed.
A summary of executed domestic franchise agreements by brand for the years ended December 31, 2013 and 2012 is as follows:
Comfort Inn
23
36
59
(22)%
50 %
22 %
Comfort Suites
12
5
17
33 %
80 %
47 %
Sleep
25
2
27
(20)%
150 %
(7)%
Quality
—
170
170
NM
(19)%
(19)%
Clarion
—
22
22
NM
(5)%
— %
Econo Lodge
—
59
59
NM
47 %
51 %
Rodeway
—
71
71
NM
(1)%
— %
MainStay
12
1
13
(8)%
100 %
— %
Suburban
3
4
7
200 %
25 %
100 %
Ascend Hotel Collection
4
17
21
25 %
200 %
167 %
Cambria Suites
7
—
7
(29)%
NM
(29)%
86
387
473
3 %
14 %
12 %
Relicensing fees include fees charged to the new owners of a franchised property whenever an ownership change occurs and the property remains in the
franchise system as well as fees required to renew expiring franchise contracts. Domestic relicensing contracts increased 19% from 216 during 2012 to 258
for the year ended December 31, 2013. Renewals of expired contracts increased 48% from 21 for the year ended December 31, 2012 to 31 during the current
year. As a result of the 22% increase in relicensing and renewal contracts and an increase in average fees per deal, domestic relicensing and renewal revenues
increased 29% from $5.0 million in 2012 to $6.4 million for 2013.
As of December 31, 2013, the Company had 422 franchised hotels with 31,786 rooms under construction, awaiting conversion or approved for
development in its domestic system as compared to 394 hotels and 31,118 rooms at December 31,
46