Comfort Inn 2013 Annual Report Download - page 53

Table of Contents
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.
Domestic initial fee revenue, included in the initial franchise and relicensing fees caption above, generated from executed franchise agreements decreased
8% to $8.7 million for 2012 from $9.5 million for 2011. Initial franchise fee revenue declined despite a 42% increase in the number of new executed franchise
agreements primarily due to the recognition of deferred revenue during 2011 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. In addition, due to the increased use of developer incentives in 2012, a greater percentage of the initial franchise fee revenue
has been deferred to future periods than the amount of revenue deferred in 2011.
A summary of executed domestic franchise agreements by brand for the years ended December 31, 2012 and 2011 is as follows:















Comfort Inn 


12
46
58
92 %
(22)%
2 %
Comfort Suites 


12
4
16
— %
25 %
6 %
Sleep 


9
2
11
178 %
— %
145 %
Quality 


—
80
80
NM
113 %
113 %
Clarion 


—
19
19
NM
16 %
16 %
Econo Lodge 


1
56
57
(100)%
5 %
4 %
Rodeway 


—
49
49
NM
45 %
45 %
MainStay 


6
3
9
100 %
(67)%
44 %
Suburban 


5
4
9
(40)%
— %
(22)%
Ascend Hotel Collection 


2
14
16
100 %
21 %
31 %
Cambria Suites 


8
—
8
(13)%
NM
(13)%
 


55
277
332
56 %
40 %
42 %
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 45% from 149 during 2011 to 216
for the year ended December 31, 2012. Renewals of expired contracts increased from 13 for the year ended December 31, 2011 to 21 for the year ended
December 31, 2012. Although the Company increased the total number of contracts by 46%, domestic relicensing and renewal revenues increased only 24%
from $4.0 million in 2011 to $5.0 million for 2012, primarily due to lower average fees charged per property.
As of December 31, 2012, the Company had 394 franchised hotels with 31,118 rooms under construction, awaiting conversion or approved for
development in its domestic system as compared to 408 hotels and 32,586 rooms at December 31, 2011. The number of new construction franchised hotels in
the Company’s domestic pipeline declined 13% to 240 at December 31, 2012 from 277 at December 31, 2011. The number of conversion franchised hotels in
the Company’s domestic pipeline increased by 23 units or 18% from December 31, 2011 to 154 hotels at December 31, 2012 primarily due to higher franchise
sales for the Company's Quality brand resulting from the increased use of incentives to stimulate demand and increased sales of Rodeway hotels. The total
domestic system hotels under construction, awaiting conversion or approved for development declined 3% from the prior year due to the decline in the number
of new construction hotels which were negatively impacted by the limited availability of hotel construction financing. As a result, the ability of existing projects
to obtain financing and commence construction was significantly impacted and resulted in the termination of franchise agreements related to hotels that had not
yet opened. While the Company’s domestic 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.
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