BETHESDA, Maryland – Choice Hotels International announced this week that it has awarded its first contract for its SOAR program, which is designed to give underrepresented entrepreneurs the opportunity to own hotels.
The first recipient, Damon Healey, managing partner of Washington, DC-based Eternal Companies, entered into an agreement on May 30 to convert two Georgia properties into Choice’s extended-stay Suburban Studios brand: the 92-room Suburban Studios Columbus Bradley Park in Columbia, Georgia, and the 73-room Suburban Studios Macon North in Macon, Georgia.
Unlike many owners in the program, Healey has experience in the hospitality industry (he was vice president and head of real estate at Brookwood Hotels, a portfolio company of Brookfield Asset Management).
“Choice has, if not the best, one of the best franchise models, especially in the extended stay space, so I’m thrilled that our hard work and dedication have paid off with the help of SOAR and our investors, including partners from the African American community,” Healey said in a press release. “The support we received from Choice every step of the way in navigating hotel ownership has been on a whole new level. I hope my journey will inspire others to become hotel owners.”
Hotel Investment Today spoke with John Lancaster, vice president of franchise development and strategic programs at Choice Hotels, about the SOAR program and how Healey’s deal came about.
Lancaster said Choice launched its Emerging Markets program (now SOAR – Supporting Ownership Access and Representation) more than 20 years ago. The program has awarded and funded more than 370 franchises for underrepresented minority and veteran business owners during that time, including 28 in 2023 (including nine contracts with African-American owners and 17 with female owners through the company’s HERtels by Choice program).
Suburban Studios Columbus Bradley Park
While Lancaster doesn’t have any specific projections, he wants to grow the SOAR program as much as possible and is excited that Choice has closed 12 deals under the program as of June, ahead of its 2023 deadline.
He said most of the owners in the program have no experience in the hospitality industry, which makes the educational aspect all the more important.
“The majority of these hotel owners have never had the opportunity to own a hotel before,” Lancaster said. “These deals can take anywhere from one to two years because we educate them and guide them. In some cases, we might teach them what RevPAR or ADR is and take them step by step.”
Lancaster said Healey attended Choice’s annual conference in 2023, including a meeting of the Choice Hotel Owners African American Alliance (CHOAAA), and learned about the opportunity. It was at that year’s conference that Healey signed the contract. He said Healey’s experience was also atypical because he was able to complete the required PIPs to convert to Choice so quickly.
“When we take over a hotel and remodel it usually takes three to four months… but with his determination and focus in creating this PIP and getting it done in about 30 days, we were able to open (so much faster).”
Lancaster said Choice plans to allocate about $25 million to women and underrepresented minorities through 2025 through the SOAR program (he said key money was used for Healey’s deal, for example).
This involves connecting the owner with the appropriate capital investments, the appropriate economic development boards, the appropriate TIFs and other lenders so that the owner can access and preserve his equity.
John Lancaster
Due to current market trends, extended stays are a popular choice among program members, but Lancaster said Choice’s soft-brand Ascend collection is also a popular choice, citing hotel conversions in South Boston, Virginia, and Lafayette, Louisiana.
Overall, Lancaster said, about 60 to 70 percent of the deals done in the program last year were conversions. He said many of the program owners have experience with multifamily properties, but not as franchisees.
“You may know someone who is good at franchising but doesn’t understand the real estate aspect,” Lancaster said. “The most important thing to do is let them know that this is a partnership for 20 years. It’s almost like you’re married.”
Raising capital for new owners
The biggest obstacle for owners, Lancaster said, is the infusion of capital required to own the property. He gave the example of a $10 million hotel with an LTV of 60 to 70 percent. Finding the $3 to $4 million in equity to close the deal can often be a challenge. Then there’s the challenge of finding the capital, and that’s where the team at Choice can help, according to Lancaster.
“It’s about getting the capital to know about this hotel asset… A lot of hotels get their loans through regional banks, so it’s about getting the capital to know those regional banks,” he said. “Those regional banks are well-rooted in the area… So they want it to be successful.”
The program also teaches owners how to work with municipalities and the government to obtain funding for tax incentives, for example.
“It’s about connecting the owner with these special capital investments, these special economic development boards, these TIFs and other types of lenders so they can access and preserve their equity,” Lancaster added.
That includes working with lenders who are familiar with Choice and its franchises, Lancaster said (he mentioned that Healey’s deal was financed by Arriba Capital, based in Scottsdale, Arizona).
