New Orleans / June 1999 -  Motel 6 Operating LP may not have a frequent - guest program, but it just launched an extended - stay one.

At the company's annual meeting last month in New Orleans, Motel 6 executives outlined their new multibrand strategy. After 37 years, Motel 6 has added a second feather in its 10-gallon hat - Studio 6, a new midpriced budget extended-stay lodging brand.

"Today, we are welcoming another child into the Motel 6 family," said Carol Kirby, the Dallas-based company's executive vice president of marketing who helped create the Studio 6 concept.

The Studio 6 launch may seem to come a little late in the cycle, but Motel 6 had a plan all along, according to Georges le Mener, president and c.e.o.

Motel 6 spent the past six years - and about $100 million annually - to renovate its entire system, now totaling 85,000-plus guestrooms.

The company also entered the franchising fray in 1996 in an effort to grow brand awareness, particularly in secondary markets in the Eastern United States - an area that the brand typically ceded to other chains. Just three years later, Motel 6 has more than 150 franchised properties open or in development and has turned down more than 1,600 clear indications of interest, primarily for quality reasons, said David O' Shaughnessy, executive vice president of quality and franchising.

"We've been looking hard at extended-stay for three years, but we've had our hands full," Le Mener said.

Offense is best defense

About 22 percent of Motel 6's business comes from customers who stay five nights or longer, Kirby said.

Le Mener and other company officials acknowledged that the emergence of extended - stay properties with reduced staffs, weekly housekeeping and attractive rates and amenities was eating away at many budget - brand properties.

The Studio 6 launch allows Motel 6 to stave off those stealing some of its core customers, and at the same time cash in on its enormous brand recognition and tap new markets and traveler types by entering extended-stay, Le Mener and Kirby said.

Kirby said there will be some overlap in Motel 6 and Studio 6 customers, but this will be minimized as Studio 6 / Motel 6 impact issues will be considered property-by-property, just as proposed neighboring Motel 6 properties currently are. O'Shaughnessy said Studio 6 gives Motel 6 and its franchisees another powerful product and brand with which to go to market.

The two officials said a few of the half -dozen company-owned Studio 6's opened earlier this year (converted from Motel 6's) were near Motel 6's, and little impact to date has been reported.

R.C. Patel, c.e.o. of Diplomat Hotel Corp. in Atlanta, said he and several others are excited about the launch. Patel, chairman of Motel 6's franchisee advisory committee, said some franchisees are somewhat concerned that Studio 6 may take some business away from Motel 6, but that most agree the net will be a plus. Patel, whose company franchises two Motel 6 properties, said he's trying to see if Studio 6's numbers - $33,000 - a - key, 80 rooms per property  -work for him and his company.

"It's a great concept," Patel said. "For the price point they're going after, that extended-stay market is wide open. There's no one in the midpriced budget range with a national brand like Motel 6."
 

Parent: Motel 6 Operating LP  Targeted Market: Midpriced budget extended-stay Construction Costs: $33,000 per room  Minimum Property Size: 80 rooms Strategy: Mix of company owned and franchised properties, but primarily new build Franchise Fees: $25,000 for application, 5-percent annual royalty, and 2-percent annual reservations and marketing fee

Kirby agreed, saying studies have shown that Motel 6 holds the highest consumer awareness of any budget brand, and in lodging is second only to Holiday Inn.

Just the facts
A brand is only worth what a consumer believes it's worth, and in today's market, consistency is the key to avoiding customer confusion, O'Shaughnessy said.

Motel 6 prides itself in knowing what it is and what it isn't, and Studio 6 will be no different, O'Shaughnessy said. The brand has turned away franchise agreements simply because the prospective property owner wanted to be a little different, add a continental breakfast or bathroom amenities.

From its roots in Santa Barbara, Calif., Motel 6 was built around a core no - frills pricing strategy: "clean, comfortable room at the best price of any national chain." Hence, the brand identity's big red six, which in 1962 indicated the daily rate and today still drives home the chain's value.

Each Studio 6 franchise agreement will have a $25,000 application fee and will have annual fees of 5 percent of gross sales for royalty and 2 percent for reservations and marketing. The properties will have larger rooms of 280 square feet to 290 square feet and will feature fully-equipped kitchens complete with refrigerator, microwave, dishes, utensils and cookware. 

Other amenities and services will include voice mail, phones with data ports, free local phone calls, remote-control televisions with cable, free HBO and ESPN.

Motel 6 plans to build 10 to 15 company - owned Studio 6 properties a year and a similar or higher number of Studio 6 franchised properties, Le Mener said. The new brand will be primarily new build, with the exception of some near-new, high-quality extended-stay conversions - possibly including the company's eventual acquisition of individual extended - stay properties, one or more regional chains or a national chain, he said.

"Studio 6 is filling a niche in the extended - stay segment that has not really been adequately served until now," Le Mener said. "As Motel 6 has left the light on for its millions of travelers across the country, so will Studio 6 for its longer-term guests."