A new extended stay hotel chain has its sights set on the Richmond area, starting with a new property in Colonial Heights.
That business should be open in the next few weeks.
The Wichita-based chain, Value Place, was launched in 2003 by Jack DeBoer, the hotelier who created the Residence Inn and Candlewood Suites brands.
The local franchise is owned by Carter Rise, who is also owner of Sandpiper LLC — an apartment company with properties in Harrisonburg.
“With Fort Lee and all the growth in Colonial Heights, we saw a need for an affordable extended stay alternative,” said Rise, who lives in Richmond.
The new hotel is located at 255 Jennick Drive, near the Temple Avenue exit on I-95.
Rise hopes to draw military contractors who need temporary housing, as well as people moving to the area in need of a place to live while they look for permanent housing.
The Colonial Heights location is the second one for Rise. He opened his first Value Place in Chesapeake at the end of September.
That location is doing well, he said, and is attracting a mix of military contractors, business travelers and people in between homes.
Rise said the chain is growing in a down economy because of the price point. Rates at his new location will be $229 per week, with a one-week minimum stay. The hotel’s rates are between $159 and $359 nationwide. The average length of stay is 90 days, according to the company.
“It is a high-level value at an attractive price point,” said Rise. “And you’ve got a kitchen in the room, so there is further savings in that.”
The business model of Value Place allows it to keep prices low by cutting out amenities. There is no free breakfast, and daily linen service costs extra. It also operates on a lean staff; Rise plans to hire between six and 10 employees to run the 124-unit hotel.
Rise plans to open additional locations in the area, most likely in the West End, Midlothian and near the I-95 corridor north of Richmond, but it won’t be until credit loosens up, he said.
“Until we see clarity on the financing front, we can’t commit to buying land and singing construction contracts,” said Rise. “The quality of the product and your track record doesn’t matter to lenders right now.”
Rise said he got an SBA-backed loan for the Chesapeake location and capped out the limit. He said he was able to get traditional financing for the Colonial Heights location last fall.
“Lucky we got it when we did,” said Rise.
According to information provided by Value Place, entrepreneurs need between $3.5 million and $7.3 million to get a new location up and running, which includes a $49,500 license fee. Franchisees must pay 5 percent of room revenue per month as a royalty to the franchisor.
Gina McKee, vice president of franchise development, said the start up cost is relatively low as far as hotel properties go.
“For a $5 million or less total investment, this is something a lot of people can do as an owner,” McKee said. It doesn’t hurt that the chain is SBA-approved, she said.
“With an SBA loan in place, this is a much more doable product for people in the industry.”
McKee said nationwide the chain is doing better than the overall hotel industry, operating at 80 percent occupancy, compared to under 60 percent nationwide.
The hotel line has 159 locations and plans to add more than a dozen more properties by the end of the year. The chain has commitments from franchisees to build 500 properties over the next five years.
In addition to Rise’s four planned locations, McKee said the company is looking for additional franchisees to develop two more locations in the area.
Al Harris covers commercial real estate for BizSense. Please send news tips to [email protected]