ORLANDO - As the only lodging stock to show a gain in 1998, Red Roof Inns (NYSE:RRI) is a company to watch. Managers and franchisees of the Columbus, Ohio-based economy chain met in Orlando last month to tout their successes and outline strategies for the year ahead.

"We are the most profitable chain in [the economy lodging] segment," Red Roof chairman, president and CEO Butch Cash told attendees, pointing outthat, while hotel occupancy in general dropped in 1998, Red Roof occupancy was u p 2.6%. In addition, he said that Red Roof's RevPAR has been about 33% above its competitors since 1995 and its profit margins for 1998 were about 7% higher than its competitors'. Furthermore, Cash noted, "We spend, on average, more money per room on sales and marketing than the competition."

Red Roof's decision in 1996 to begin franchising is paying off: The goal for 1998 was to open 20 franchised properties, but 34 actually opened. In 1999, according to Alan Tallis, executive vice president for development, the goal is to open at least 50 more franchised properties.

To avoid competing with its franchisees for sites and to avoid overbuilding among the economy segment by choosing locations with barriers to entry, Red Roof - which traditionally has located most of its properties in the suburbs and near interstates - has adopted the strategy of targeting downtown and airport locations for corporate-owned hotels. In keeping with this strategy, two significant projects are due to open this spring: A flagship Red Roof is opening in downtown Columbus in a converted 87-year-old warehouse. Also, the 300th Inn - a franchised property - is opening at the Denver airport.