BIRMINGHAM, Alabama—Five months after introducing new hotel brand Centerstone, hotel veteran Steve Belmonte has added a second and potentially third brand and developed what he is calling a “multi-brand franchising company.”
Belmonte has partnered with the 24-year franchisors of the Key West Inn brand and launched Vimana Franchise Systems, a company that will offer licenses for both the Centerstone and Key West brands. Belmonte said he is in negotiations to potentially acquire a third brand.
Belmonte’s two new partners, Neal and Cory Jackson, are the owners of Jackson Hospitality and the Key West Inn franchise. All three will have an equal stake in Vimana.
“Everything we do with this new company launch—with Centerstone as well as newly-relaunched Key West—stems from a combined belief that there is a better way to do business; a better way to franchise hotels,” Belmonte said. “We will never go public. We have a desire for steady growth of quality properties but more importantly to show the industry that fair franchising can exist.”
Belmonte said both brands feature a “franchise-friendly” model, meaning there will be few brand mandates and comparatively low franchising fees. Royalty and marketing fees combined will be 3%, compared to an industry average fee structure of 14% combined, Belmonte said, citing HVS’ franchise-fee survey. Vimana’s application fee will be US$2,000; there will be an initial fee of US$12,000 and an annual conference fee of US$499.
“When you’re paying your franchisor 14% of gross room revenue, that equates to 40% of your hotel’s net profit,” Belmonte said. “We think that’s obscene.”
Belmonte said Vimana will not be “Wyndham profitable” or “Choice profitable” but still will make money.
“We don’t think that obscene 14% fee structure is necessary,” he said, “not in this day and age when the Internet has leveled the playing field and we can do just as well and be just as effective.”
He suggested hotel owners use the franchise-fee savings they would incur with Vimana to hire a full-time sales person or reinvest in keeping the properties competitive.
There are 22 Key West Inns open and 14 agreements executed for the Centerstone brand. The first Centerstone is under construction in West Chester, Pennsylvania.
Belmonte said seven potential franchisees for the Key West brand will be participating in a webcast Thursday. “Yes, we would love hotels in major gateway cities to promote the brand nationally,” he said, “but we can’t target that effectively.”
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Belmonte won’t promise a certain number of hotels will open in a certain time frame.
“I can’t stand these guys that start these brands and say, ‘We’ll do 50 hotels in the first year.’ A lot of new brands that made ridiculous projections of growth when they kicked off are now sucking wind,” he said. “I’ll be happy with one nice Centerstone deal a month and six Key West properties a year. We’re happy with that.”
Key West relaunch
As part of the partnership, Belmonte and Neal Jackson said the Key West brand will undergo a transformation. Each of the 22 Key West owners will be required to make at least a small investment.
“Key West has been relaunched as a unique, fun-themed brand that gives owners the competitive edge they so desperately seek,” Belmonte said. “Key West brands will have a multitude of unique programs that create its DNA.”
First, the brand will be split into three tiers: Key West Inn (two-diamond, typically 75 to 85 rooms without a food-and-beverage component); Key West Hotels (three-diamond, 140-plus rooms with interior corridors and offering full service); and Key West Resorts (three-diamond or better in true resort destinations).
The hotels will be “themed” to emulate a tropical resort, and Vimana has partnered with Benjamin Brothers Purchasing and Braeside Design Group to create three theme packages for purchase. A minimum theme will cost owners approximately US$50,000 and will include exterior colors, a themed lobby and a “host of theming items in the guestroom,” such as a coconut-shaped ice bucket. More extensive theme packages will cost US$100,000 and up.
Belmonte said Key West owners who don’t want to invest in the themes will be able to negotiate an extension on an individual basis but will ultimately need to commit. Another alternative would be to rebrand to Centerstone.
“This brand we admit is not for everyone,” he said. “It’s a fun-themed leisure brand. It’s not only conducive for beach destinations but conducive for any location that is leisure marketed. That could be Orlando (Florida) or Wisconsin or along Lake Michigan.”
Neal Jackson, president of Jackson Hospitality and co-owner of Vimana, said, “It’s a very exciting day for us. We’ve always wanted Key West to be a fun, creative experience.”
Jackson explained many of the logistics behind Vimana. The company will use InnLink for reservations systems and distribution. It won’t mandate a certain property-management systems vendor but has negotiated a US$208 monthly rate with MSI.
The company will launch a loyalty program called Premier Perks that will not be points-based but will offer members 15% off hotel stays upfront. Members will receive late checkout options and upgrades when applicable.
Guests also will receive complimentary “breakfast in bed,” which consists of a branded bag that is hung on the outside of the guestroom door no later than 6 a.m. and features brand-named, pre-wrapped sweet rolls, yogurt, fruit, etc.
Everything Vimana does will be run past an owner’s advisory council, Belmonte said, which he expects to have in place by the end of the first quarter 2012.
“We will be intimately involved with the hotel owners on everything we do as a brand,” he said. “We believe that’s a key to good relationships. I know from my past experience that people support what they help create.”