Franchise Spotlight: IHG


July 31, 2013

By Bob Coleman
Editor, Coleman Report

Bob Coleman: We’re talking with Rich Carlson, Regional Director at InterContinental Hotels Group, IHG at The BoeFly Franchise Lending Spotlight Conference 2013 in Southern California. I think I got that all in.

Rich Carlson: I think you got it, thank you.

Bob Coleman: Rich, you’re the regional development officer for IHG, what does that mean?

Rich Carlson: That means I’m responsible for developing five brands in the states of Nevada and Southern California.

Bob Coleman: And the five brands are?

Rich Carlson: The five brands would be Holiday Inn, Holiday Inn Express, Holiday Inn Resorts, Staybridge Suites, our extended stay brand Staybridge Suites and Candlewood Suites.

Bob Coleman: I had the privilege of speaking at this conference and I mentioned Candlewood because Candlewood is on the list of top SBA loan performers, they haven’t had a default. What’s going on with Candlewood?

Rich Carlson: It is a great business model in the right market with the right owner. There’s a minimal staffing, so it’s a very streamlined operations model, so that revenue that comes in the top from extended stay guests are really self-reliant. They do a lot of things for themselves and they’ve been able just to flow through a lot of cash to the bottom.

Bob Coleman: Very nice. You and I had the privilege of speaking earlier and you were saying that in the hotel industry, what lenders need to understand – well, I’ll let you explain it. Talk to me about occupancy rates and supply and demand construction. Why is this a good niche for lenders to finance in?

Rich Carlson: Well, it’s a terrific time in the hotel business. For the last three years we’ve had minimal, almost no additions to supply. And now with some economic growth in the economy, what’s happening is is the demand is outpacing supply and in many, many, many of our submarkets we’re achieving very revenue and rev par, revenue per available room numbers. So the economy looks like if we continue growth that we’re going to have a nice long run of good growth in the hotel industry. And the reason for that is that the new development pipeline is coming to us with strong sponsors, 35, 40 percent equity in the deal.

Bob Coleman: Is that still – because I know lenders who are demanding that. Have you seen because of the competition for these type of loans, of lenders pulling back in that or
are they demanding that.

Rich Carlson: I haven’t seen them doing that in numbers. They might do it for an individual client, but a lot of these are banking relationships that are very much personal. So there might be individuals who are experiencing that.

Bob Coleman: The last question is this conference has been talking about financing. It’s been a rough couple of years for everyone. Do you see the spigot opening up a little bit? Tell me about your brands and your people. Is it getting easier?

Rich Carlson: It is. It is, we do. We see more developers coming forth and projects, we see developers coming forth with second, third, and fourth projects. New construction is back and –

Bob Coleman: Well, I’ve got to ask you the question because I’ve heard this. Yeah, if I’m a lender I want that second, third, fourth project. The first project’s still problematic?

Rich Carlson: It depends on the sponsor. If there’s a strong enough financial statement and they have a competent either internal or a third-party management company, when that team comes together and a hotel deal really is a team deal. There are a lot of people who come to the party, operators, investors, franchise companies, lenders. When that right team comes together and the experience is there then capital’s available.

Bob Coleman: You and I talk a year from now, how much are your niche – is going to be growing?

Rich Carlson: All of it.

Bob Coleman: All of it.

Rich Carlson: All of it. We’re tremendously excited about the next year.

Bob Coleman: Rich Carlson, thank you very much.

Rich Carlson: Thank you.

Watch the 4min Interview on YouTube here