Hyatt Selling Microtel & Hawthorne Suites (aka USFS)

February 20, 2008 • Related • Filed Under

Wow – I’m patting myself on the back for this one. As I predicted, in my 2008 In The Hotel Industry posting, Global Hyatt is placing its US Franchise Systems (USFS) company which owns the MicroTel and Hawthorne Suites brands up for sale.

This doesn’t surprise me one bit and I think is better for Global Hyatt in the long term because those two brands really do not fit into the Hyatt umbrella. Microtel is very much a low end hotel brand, although their properties all seem to be fairly new, and Hawthorne Suites is a little too similar to Hyatt’s Summerfield Suite brand.

USFS was purchased in 2000 by Hyatt, back before they had AmeriSuites (aka, Hyatt Place) Summerfield Suites, and Andaz. I think its purchase was a failed attempt to grow Hyatt via other hotel brands, and then they realized that the brands they purchased weren’t the best – or at least they had a better opportunity elsewhere. Not only that, but Microtel and Hawthorne Suites are all beingdeveloped as franchises, not managed nor company owned – that leaves the franchises with alot more lee way in what they are able to do, and likewise leaves the franchise owner with less control over the properties.

That’s not to say that Hyatt has not put some money into USFS, they have done considerable upgrading to the rooms of Microtel, got rid of their extremely ugly logo and re-designed it into a modern, sleek look. I’ll admit it – I would seriously consider staying in a Microtel location simply because of the rebranding that Hyatt has made with the brand. That says a lot because it proves that branding or doing branding correctly can really make something much more desirable than before. As for Hawthorne Suites, Hyatt integrated it with their Gold Passport rewards program, but they did not do the same for MicroTel.

Now the question remains: who is going to purchase these brands? I can see them being purchased by a group of investors – similar to how the Budgetel brand was purchased last year, the way the firm is setup (at least, from what I can tell) it would be very easy to add additional brands under the USFS banner. Plus with the addition of new sales teams for USFS, it is clearly being positioned for longterm growth as a whole.

andrew@alconic-inc.com

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  1. Comment by Doug Easterly on April 6 2008:

    Andrew, that is a good question. I have stayed at many Microtels and a few Hawthorns in my day. Actually just styaed at a new Microtel (opened 3/4/08) in Port Charlotte, FL. I think it would be an interesting pickup for the entity was called Prime Hospitality out of Fairfield, NJ (what is its name now?)..Hyatt bought it because the industry was into multi-tiers at that point, trying to cover all bases and a Hyatt bigwig was a personal friend of USFS founder Mike Leven. At the time, USFS was struggling with its stock price and was ripe for a hostile takeover and Hyatt bought it 100% but kept the management team of Leven & company and let them run it as a separate group. Now finally kicking in, with over 300 open or under construction. Hawthorn has kind of always lumbered around 125-150 units but has a brand new one under construction set to open in summer in West Palm Beach, FL

  2. Comment by Andrew Calvo on April 6 2008:

    Doug – thanks for your insight into USFS. I never was aware of its history prior to being purchased by Hyatt. Prime HOspitality was purchased by the Blackstone Group – and was split up, Amerisuites going to Hyatt and the Wellesley Inns either being converted to La Quintas or taken out of the system, then the Prime Hotel & Resorts were converted into LXR Resorts additionally some other hotels were converted into Extended Stay Hotels – and that brand was recently sold to the Lightstone Group – so I do not think that there is really anything remaining from Prime Group’s sale to Blackstone – most everything has been sold or rebranded.

    But – in today’s market, I can see someone like Choice or Wyndham purchasing it – those are two companies that are more franchise owners than actual hotel owners/operators, and already have a great standing and understand of the economy segment.

  3. Comment by Doug Easterly on April 13 2008:

    Andrew, I would say Wyndham is a better purchaser because Choice has EVERY segment well covered! I forgot to mention that USFS Microtel brand REQUIRES all its hotels to be new construction. In 1998, in response to a chorus of owners who wanted to join Microtel (and specifically Mike Leven who is well known as a fair franchisor in the industry) but couldn’t because they had existing hotels, Mike Leven engineered the purchase of the Best Inns chain (now America’s Best Inn) which at that point had only about two dozen properties and used this platform as a “conversion” brand for other operators who wanted to switch to USFS in the economy segment. I believe it was last year that Hyatt sold that brand to Country Inn & Suites (parent company now called America’s Best Franchising) which runs it as a wholly owned subsidiary. Hawthorn accepts conversion properties if they meet the standards but most of the operators who wanted to reflag to join USFS fell into the economy segment, but couldn’t join as a Microtel becasue they werewn’t new build. Why doesn’t Microtel take the easy way out and accept rebrands? Well, a provision in the franchise agreement (since day one – great idea!) states that if Microtel EVER accepts a non new construct into the system, all the Microtels open before that date can retain their affiliation with Microtel BUT don’t have to pay any royalties going forward. A Louisville Slugger if you ask me!

  4. Comment by Doug Easterly on April 26 2008:

    EDIT TO ABOVE: Hyatt sold the chain to Country Hearth Inns (not Country Inns) – just neglected to type Hearth..Still, it is a wholly owned subsidiary of America’s Best Franchising which runs Country Hearth and America’s Best Inns as separate entities under the America’s Best Franchising company.

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