Something Brewing at Extended Stay Hotels

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Extended Stay Hotels has flown under the radar as a hotel company the past five years, only making news when the Lightstone Group bought the 683-property company for $8 billion in 2007, and the ensuing aftermath with the not-so-surprising bankruptcy two years later. The price of the hedge fund's leveraged buyout, even at the peak of the market, caught many industry observers by surprise.

Centerbridge Partners, Paulson & Co. and Blackstone Group (the company that sold Extended Stay to Lightstone in the first place) bought the company at a bankruptcy auction in 2010 for almost $4 billion.

Through it all, veteran Gary DeLapp has led the company as CEO, until news broke yesterday evening that former Starbucks CEO Jim Donald was immediately replacing DeLapp as CEO.

Board chairman Doug Geoga, formerly of Hyatt, thanked DeLapp for his service in a statement and said the board was “delighted” to welcome Donald to the company as “we focus on successfully implementing our strategic initiatives and taking advantage of the market opportunities ahead.”

Donald steps into the spot with plenty of experience leading various types of companies, but none anywhere near the hotel industry. He started with Starbucks in 2002 and served as a president and CEO, and most recently was president and CEO of Haggen, Inc., an independent grocer in the Pacific Northwest. Prior to Starbucks, he helped lead Wal-Mart into the grocery business with its SuperCenters, and before that he spent 15 years with grocer Albertson.

Certainly Donald has plenty of experience leading some big-name companies, to say the least, but how that translates to the hotel industry remains to be seen. It seems unlikely this move was made if Extended Stay Hotels was going to remain under the radar, so expect to hear some news sooner rather than later about the brand getting back into growth mode. On its website, the company still says it owns and operates “nearly 700 hotels across the U.S. and Canada” across brands Extended Stay Deluxe, Extended Stay America, Homestead Studio Suites, Crossland Economy Studios and Studio Plus Deluxe Studios.

The Wall St. Journal suggests the company could consolidate its five brands and debut a new name and logo later this year. Bringing in a big-name leader from outside the industry makes sense if that is the plan. Cleaning up the current stable of brands and properties has to be the first step before growth can happen.

I'd guess shifting to a franchise model like most if its lodging competition isn't likely anytime soon, otherwise why hire the former leader of one of the biggest companies known for not franchising?

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