Comfort Inn 2013 Annual Report Download - page 47
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Table of Contents
2012. The number of new construction franchised hotels in the Company’s domestic pipeline declined 2% to 235 at December 31, 2013 from 240 at
December 31, 2012. The growth in the number of new construction hotels in the domestic pipeline continues to be negatively impacted by the limited
availability of hotel construction financing. As a result, the ability of new and existing projects to obtain financing and commence construction has been
significantly impacted and has resulted in the execution of fewer franchise agreements for new construction hotels than historically achieved. The number of
conversion franchised hotels in the Company’s domestic pipeline increased by 33 units or 21% from December 31, 2012 to 187 hotels at December 31, 2013
primarily due to the 14% increase in conversion franchise agreements achieved in 2012 compared to 2013 and the timing of hotel openings.
A summary of the domestic franchised hotels under construction, awaiting conversion or approved for development at December 31, 2013 and 2012 by
brand is as follows:
Comfort Inn
33
49
82
11
33%
4
8%
15
18%
Comfort Suites
1
72
73
3
300 %
(25)
(35%)
(22)
(30%)
Sleep
1
43
44
—
— %
6
14%
6
14%
Quality
36
3
39
12
33%
—
—%
12
31%
Clarion
12
1
13
(4)
(33%)
1
100%
(3)
(23%)
Econo Lodge
24
—
24
2
8%
2
NM
4
17%
Rodeway
35
—
35
3
9%
1
NM
4
11%
MainStay
—
25
25
2
NM
6
24%
8
32%
Suburban
1
15
16
5
500%
1
7%
6
38%
Ascend Hotel
Collection
11
7
18
(1)
(9%)
3
43%
2
11%
Cambria Suites
—
25
25
—
NM
(4)
(16%)
(4)
(16%)
154
240
394
33
21%
(5)
(2%)
28
7%
The Company had an additional 81 franchised hotels with 7,171 rooms under construction, awaiting conversion or approved for development in its
international system as of December 31, 2013 compared to 88 hotels and 7,851 rooms at December 31, 2012. 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.
Procurement Services: Revenues increased $2.7 million or 15% from $18.0 million for the year ended December 31, 2012 to $20.7 million for the year
ended December 31, 2013. The increase in procurement services revenue primarily reflects the implementation of new brand programs as well as an increased
volume of business transacted with existing and new qualified vendors and strategic alliance partners.
Selling, General and Administrative Expenses: The cost to operate the franchising business is reflected in SG&A on the consolidated statements of
income. SG&A expenses were $113.6 million for 2013, an increase of $11.7 million from the 2012 total of $101.9 million.
SG&A expenses for the year end December 31, 2013 and 2012 include approximately $11.5 million and $3.4 million, respectively related to the
Company's new division, SkyTouch. SkyTouch is a division of the Company that develops and markets cloud-based technology products to hoteliers not
under franchise agreements with the Company. The new division was announced to the public in March 2013 and the increase in expenses primarily relate to
business development, sales and marketing and continued software development.
Excluding the SG&A expenses for the SkyTouch division, SG&A for the year end December 31, 2013 increased $3.6 million or 4% from $98.5
million in the prior year to $102.1 million in the current year. The fluctuations in SG&A include a $1.3 million increase in occupancy costs related to the
relocation of the Company's corporate headquarters and a $2.1 million increase in variable franchise sales compensation and procurement services expenses
which increased due to a 26% and 15% increase in initial franchise and procurement services revenues, respectively. In addition, compensation expense
recognized on deferred compensation arrangements increased $1.3 million. The increase in compensation expense reflects the increase in the fair value of
investments held in the Company's Non-Qualified and Executive Deferred Compensation Plan ("EDCP") retirement and savings plans. The increase in
deferred compensation expenses are partially offset by investment gains recorded
47