Extended-Stay Pioneer at Home With FranchisingHospitality ExecuStay acquisition opened door for Oakwood Worldwide. Monday, January 6, 2014
West L.A.’s Oakwood Worldwide is embracing a business model that once “spooked” its executives.
Its shift to a franchised model came as a result of the 54-year-old West L.A. company’s acquisition of rival ExecuStay, the extended-stay division of Bethesda, Md.’s Marriott International Inc. in 2012 for an unspecified amount. As part of that deal, Oakwood, a pioneer of the extended-stay and corporate-housing business, acquired nine ExecuStay franchisees that managed units in more than 700 buildings.
Working with the ExecuStay franchisees made Oakwood more comfortable with franchising its own concept, and it now plans to use the model to expand into Canada and Mexico.
In 1969, the company debuted the Oakwood Garden Apartment concept, aimed at traveling businessmen. It was among the first to cater to guests who needed a residence for more than 30 days but were not prepared to sign a lease for a year or more.
The company built its portfolio of owned properties over the next four decades, eventually selling 30 apartment buildings in 2005 to Englewood, Colo.’s Archstone for $1.4 billion. Among the properties were its flagship 1,151-unit Toluca Lake Hills facility and 597-unit Marina del Rey property. The company, which no longer owns property in Los Angeles, has long-term agreements to manage those two complexes.
Peter Anderson, a Santa Monica hospitality consultant and founder of Anderson & Associates, said that transaction not only helped Oakwood shift the costs associated with owning real estate to another party, it also gave the company the resources to increase its portfolio around the world, further solidifying its brand.
Oakwood, which would not disclose annual revenue, plans to start franchising its brand in Canada and Mexico in the next 12 to 18 months.
Ric Villarreal, Oakwood’s president, said the ExecuStay acquisition showed company leadership that franchising could assist it in fulfilling its goal of efficiently expanding into other secondary markets.
Villarreal said that by requiring franchisees to have experience in the hospitality field and be familiar with a targeted expansion area, Oakwood was able to more smoothly enter previously unexplored markets.
“We really need to outsource our concept to a franchisee that has feet on the ground in the market and is passionate and intimate about the business. A franchisee in the secondary market is an incredible fit,” he said.
Under the new arrangement, franchisees are assigned an entire market and run multiple locations. Oakwood gets a percentage of the revenue generated from that market as a part of a monthly fee. The Oakwood and ExecuStay brands are now in 32 markets spanning 28 states.
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