New Wingate CEO builds critical mass in mid-market segment

Building a brand from scratch is never an easy proposition. It takes more resources, both financial and intellectual, than ever before. In mid-February this year, Wingate Inns International named John Paul Nichols its new president and CEO to replace the retiring Fred Mosser. Nichols oversees all brand operations including property openings, design and development, franchise services, quality assurance, training, development financing and marketing for the Wingate brand, a mid-market chain sponsored by Cendant Corp.

Recently we talked with Nichols after he'd settled in, about Wingate Inns and the prospects for his success in building the brand nationwide.

Q: How is Wingate positioned today within the strata of hotel products? Nichols: First of all we're an all-new construction brand. We accept no conversions. That within itself makes us a little different not only in relation to the Cendant family of brands but even to many other brands in the business. We are oriented towards the business traveler positioned consumer-wise right in between Hampton and Courtyard, probably $3 or $4 below Courtyard. In addition to the brand resources, we also have the broader resources of Cendant behind us.

Q: Are you relying on the Cendant message and backing to get the Wingate word out to your prospective owners? Nichols: I think the Cendant message is helpful from this perspective. There are about 180-something odd brands out there today. I personally believe that in about five or six years there will probably be about 40 to 50 odd brands out there. I think that the brands that will survive or that won't be purchased by others will be those that have staying power and staying power is usually defined as financial staying power because a brand needs to exist for the good times as well as for the bad times in this business. From that perspective I think the Cendant backing is critical for the long-term success of this brand and to any of the Cendant brands.

Q: How important is brand differentiation? Travelers have a lot of choices today. Nichols: You're absolutely right. I will say that bar none, our room is the significant point of difference in our product. I know when I travel that I need space to work. I need space to plug in my computer. I need easy access to proper lighting. I prefer somewhat of an oversize room so I don't feel cramped in that environment because I'm going to be working and sleeping in that environment. I need a little elbow room.

Those are all points of difference in a Wingate room in relation to product that's a little older that was not necessarily built for the technology traveler in mind.

The other significant point of difference is the business center downstairs. It is free. You can go down there at any time and work on the Internet, use the fax machine, use the copy machine. That is a significant benefit.

Last but not least, if you stay in most hotel rooms they usually put the phone in exactly the wrong place. If you are working by the bed the phone is usually by the desk. It's never in the bathroom. And so the cordless phone that we have in the rooms is a big competitive advantage and again a big convenience to me.

Q: Right now tourist travel and business travel are at their zenith. How deep is that market in the future? Nichols: That's like asking how big the stock market is going to get. First, new always outsells old. So the health of the market is a relative term because the new product going into the marketplace, as long as they market aggressively, is always going to perform well and that's been the case for the last 15 to 20 years in this business. And I certainly think that with the right brand and the right location, we will do well.

I do think that there is continued opportunity in the marketplace for the next three or four years. I don't think that it is going to go on forever. We still have a fairly good run but I think the market has some depth, at least long enough to allow us to develop critical mass which is really what we as a brand want to do if you're a new construction brand.

We are principally a business hotel. It's important for a hotel brand not to be all things to all people but to focus on where the strengths are. So typically we will do best in a corporate environment, a Las Colinas kind of marketplace in Dallas for example. I think those kinds of markets will do well regardless.

Q: How aggressive are your growth plans for Wingate? Nichols: We will have 65 properties open by the end of the year. and that's a real number in a sense that they have already broken ground at this stage of the game. We anticipate double that number, with a total between 130 and 150 by the end of 1999 and about 200 or so by the end of the year 2000. Obviously, the longer you go out the more it becomes guesswork. It's going to be driven by two factors - the properties opening now performing well, and that has been the case, and last but not least, that there continues to be available hotel financing well into the future.

At the end of this year we will have been effectively selling for about two years. At the end of two years, Courtyard had nine properties, we will have 65. At the end of two years Hampton had 36 properties, we will have 65. That puts it in relation to what like-kind of properties did historically. To compare us to extended-stay brands, where the cost of construction may be $2 million instead of $5.5 million, we are not growing as fast as they have, but we're a different product.

Q: Is there a certain size you feel you need for critical mass? Nichols: Critical mass is 150-plus properties. So that hasn't been an issue. One of the reasons we focused on the commercial market of the business market is if you're a growing brand it's the best kind of market because there is a high incidence of repeat business. So from our perspective we can develop critical mass very quickly regionally. For a brand that's focused more on the leisure customer, the transit customer that you need to market to nationally, that's a much bigger and tougher number to get to. So we're already developing critical mass in my mind in the Atlanta market and the Dallas markets where you already have five or six or seven properties surrounding them.

Q:How are you financing your properties today? Nichols: We've had a couple of national programs in place. In fact, most recently, one is with Lehman Brothers, and we still do have a national program in place through Lehman and we're financing some of our franchises with that. But more often than not, the franchisee gets financed locally. Hotels, certainly mid-market hotels, typically get financed through local banking relationships, regional at best, and not usually on a national basis. So we have a director of finance who assists our franchisees in getting financed at a local level. We will help them put loan packages together, we will direct them towards banks that are experienced specifically with lending to Wingate, we will attend loan meetings. Whatever they want us to do to be able to provide financing for the franchisee.

The banks are buying in pretty easily to the fact that you can finance Wingate. The fact is with the proliferation of the other brands that exist today banks are aware that there are a lot of brands that are not established in the marketplace that are doing very well, in fact in many cases, even better than some of the older established brands.

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