Motor-inn chain caters to the business traveler
Sam Barshop's idea for a motel chain seems so simple to him, he wonders why other people didn't think of it first. Sometimes, in fact, he acts like he's surprised hem thought of it. When he talks about La Quinta Motor Inns Inc., he smiles, scratches his head, and says, "There's really magic to it."
But people who have watched Mr. Barshop do not buy the tow-in-the-sand modesty. In a little over a decade, he has increased the size of his chain more than 20 times and given it perhaps the highest occupancy rate in the nation.
Mr. Barshop is chairman and president of LA Quinta, a firm he and his brother started in 1968, with five motor inns -- a term her prefers to "motel" -- to help handle the influx of visitors to San Antonio's Hemisfair. Those first five La Quintas came complete with reestaurants, pools, meeting rooms, and all the other features of a "full service" motor inn. But they did not do as well as they could. The problem was, Mr. Barshop, says, "I don't know how to run a restaurant."
Also he discovered some things about his business that went against what had become almost inviolate rules in the motel-boom days of the 1960s.
"People come for the rooms," he says. This means, he explains, they don't come for the restaurants, the banquet rooms, the pools, and meeting rooms.By eliminating or letting someone else provide these things, the Spanish-motif La Quintas are able to offer accommodations priced between luxurious, full-service establishments such as Holiday Inn and so-called budget motels, like Motel 6.
The nkind of guest mr. Barshop is interested in attracting to a Quinta has a lot to do with the setup, he says. Throughout the lodging industry, about 50 percent of the guests are business people; at La Quinta, this figure is 75 percent. "Family visitors are not our market," he explained. "We don't turn them down, but you have to segment your market."
The business traveler is not that hard to please, Mr. Barshop contends.
"People want a comfortable bed, a clean-bathroom, a color TV and radio, and a good location," he believes. e is especially interested in a good location. Thus, La Quintas are typically located near airports, on interstate highways leading into major cities, near universities, office complexes, and medical facilities.
"Sam's found the formula that works very well for him and stuck to it," says Earl Sasser, a Harvard Business School professor who has been working on a study of the lodging industry and has done some consulting for Mr. Barshop. "He has identified his market niche -- the business traveler -- and developed a strategy around that person."
The strategy of identifying and serving a distinct market, Professor Sasser believes, will be the trend in the industry in coming years. Lodging chains such as Holiday inn, that attempt to serve both business travelers and vacationers are "vulnerable" to uncertainties of fuel supply and the overall economy, he contends.
A spokesman for Holiday Inns -- the largest chain of its kind in the world -- says the firm got to be the largest by appealing to "all kinds of travelers" and expects the firm to continue growing for that reason. Also, with more than 1, 500 inns in the US, even gas-conscious people who take short trips will find a Holiday Inn nearby.
La Quinta's targeted locations and reduced-frills policies, Mr. Barshop claims, have given it the highest occupancy rate of any such chain in the US, "in excess of 84 percent."
And how many of these well-occupied motor inns are there? The president of the company that owns them isn't sure. "Gee, we're opening 'em so dadgum fast, I'm not sure." There were about 97 of them in 24 states in early September, with at least 14 more under development, he figured.
The high occupancy rate can also be attributed to the fact that there are fewer rooms at a La Quinta motor Inn to occupy, Mr. Barshop says his inns have from 100 to 125 rooms. many of his competitors have over 200 rooms.
The company maintains complete control of all of its inns, Mr. Barshop explained; they are not franchised. Most of them are operated by older married couples who are La Quinta employees and who are given living accommodations and a salary. "We've taken the old 'mom and pop' concept and brought it into modern times," he said.
Mr. Barshop's lack of knowledge about how to run a restaurant does not mean there's no place to eat at a La Quinta. He builds a restaurant next door to one of his inns and lets another firm run it for him, while he collects the rent. Like La Quinta, the restaurants are usually run by a chain. Several of the La Quintas have a Denny's restaurant next door.
While Mr. Barshop is generally quite optimistic about La Quinta's growth, one possible hinderance is the tight market for funds to build more of his inns. "It's pretty difficult to get real estate financing these days," he says. To get around this problem, he has obtained mortgage commitments from several insurance companies. In the past two years, he has gotten mortgages from eight of the top 10 insurers.
In addition he has entered into several joint ventures with private financiers. In these arrangements, the financial partner provides mortgage and equity funds; La Quinta develops and operates the property for manangement fees. he has not had much trouble finding partners for this idea, Mr. Bishop says, because they see it as a good hedge against inflation.
When he obtains the financing for a new inn, Mr. Barshop probably builds it faster that most of his competitors. using precast masonry walls and modular construction, he can complete a La Quinta in about nine months, compared with over a year at a similar establishment. "Fifty-four percent of the buildings are built off the site," he says. he even uses modular bathrooms that come complete with all fixtures and can be installed in about four minutes.
Mr. Barshop's expansion plans include one strict rule: Any new inn must be built within 300 miles of an existing facility. This "concentric circle" scheme , he argues, insures name identification in an area before a new inn is introduced.
While he eventually wants La Quintas nationwide, Mr. Barshop says one area receiving much of his attention these days is a section of the country he calls "the energy belt," which includes parts of Colorado, Wyoming, Montana, and utah.
"This will be the new 'Sunbelt,'" he says. "We believe this area will experience the greatest growth -- both for us and for a lot of other industries."