Super 8 Motels, Inc

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Super 8 Motels, Inc.

1 Sylvan Way
Parsippany, New Jersey 07054-3887
U.S.A.
Telephone: (973) 428-9700>
Toll Free: (800) 800-8000
Fax: (973) 496-7307
Web site: http://www.super8.com

Wholly Owned Subsidiary of Wyndham Worldwide Corporation
Incorporated: 1973
Employees: 50
NAIC: 721110 Hotels (Except Casino Hotels) and Motels; 533110 Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works)

Super 8 Motels, Inc., is one of the largest franchisers of budget and economy motels in North America, with more than 2,000 locations offering more than 120,000 rooms throughout the United States and Canada. Although the amenities at a typical Super 8 are more modest than that offered by properties in the more premium segments of the hospitality industry, all Super 8 locations in North America offer free continental breakfast, free high-speed Internet access, and free local phone calls. Some Super 8s feature additional amenities, including fax and copy services, microwaves, suites, guest laundry, an exercise facility, cribs, rollaway beds, and a pool. Super 8 has also expanded into China, where more than 40 of its motels were operating only a couple years after the first one opened in 2004.

Founded in 1973 by Dennis Brown and Ron Rivett, Super 8 Motels was acquired by Hospitality Franchise Systems, Inc. (HFS) in 1993. HFS merged with CUC International Inc. in 1997, forming Cendant Corporation, which ranked as one of the world's largest franchisers in the fields of lodging, travel services, real estate, and car rental. In August 2006 Cendant spun off its hospitality group as Wyndham Worldwide Corporation. The lodging chains that operate alongside Super 8 within Wyndham Worldwide include Wyndham, Wingate Inns, Ramada, Days Inn, Howard Johnson, AmeriHost Inn, Baymont Inn & Suites, Travelodge, and Knights Inn. The chains are linked through the TripRewards frequent traveler program, which has more than 3.5 million members.

ORIGINS IN ABERDEEN, SOUTH
DAKOTA

The idea behind the Super 8 chain was hatched at a coffee shop in Aberdeen, South Dakota, one morning in the spring of 1973. Dennis Brown was among several acquaintances who had gotten together for coffee and commiseration. Brown was a lawyer who had spent some time working for the Internal Revenue Service on the West Coast where he had noted the booming business of the budget-priced Motel 6 chain. Business travelers were flocking to the Motel 6s, which offered a compelling alternative to the unpredictable quality of Mom and Pop motels and to the expensive prices of the higher-end hotels. Brown's first attempt at transplanting this idea to the Midwest came in 1972 when he signed up a few independently owned motels in North and South Dakota for a referral service that operated under the name Super 8. After running into difficulty getting the owners to pay their fees, Brown dissolved the service.

At the coffee shop, Brown's description of his travails and his idea for a midwestern economy motel chain caught the attention of Ron Rivett, a banker turned insurance and real estate salesman who, like Brown, was born in Aberdeen and had graduated from the town's Northern State University in 1963. Brown and Rivett continued to talk as they left the coffee shop. Standing outside, over a parking meter, Rivett suggested that Brown build his own motel. Brown asked Rivett if he wanted to help, and the latter readily agreed. That afternoon, the two met again, and Brown brought with him a stock certificate for a new company, Super 8 Motels, Inc., jointly owned by the two men.

After running into difficulty getting banks to lend them money, the founders asked a friend to help raise funds through small investors. By the spring of 1974 they had garnered sufficient funding to begin designing the motel. For the site, they chose the intersection of Roosevelt Street and State Highway 12 in Aberdeen. The location was just down the street from a Holiday Inn. Situating Super 8s near Holiday Inns was the typical site-location strategy during the chain's early years. It was also important that a restaurant or two and a highway interchange be nearby.

The first Super 8 was designed in a rather accidental manner, without the aid of an architect. The rooms themselves were modeled on those of the local Holiday Inn, while stucco was chosen for the exterior because Rivett's father-in-law was a stuccoer. To make the property stand out, cross-hatching was added to the outside, providing the faux Tudor look that was the chain's early signature. With the addition of the now-familiar yellow Super 8 highway sign, the 60-room motel was complete, and it opened in September 1974.

Keeping with Brown's vision, the motel offered consistent, friendly service and clean rooms at the budget price of $8.88 for a single room (thus the chain's name), $10.88 for a double. The rooms included beds, a bath, direct-dial phones, and televison sets—just the basics that a business traveler needed—and the motel took credit cards. Although business was slow during the winter months, occupancy reached 80 percent in the spring of 1975 as the motel began to reap the benefits of repeat business from satisfied customers. Encouraged, Brown and Rivett moved ahead with expansion, opening new Super 8s in the South Dakota towns of Yankton, Mitchell, and Pierre in 1975. In October of that year, the company launched Superline, its centralized, toll-free reservation system.

FRANCHISE-LED GROWTH

Each of the first four Super 8s was owned by Brown and Rivett, but the founders knew they had to turn to franchising to build the large chain they had envisioned. In 1976 they reached agreements with the first Super 8 franchisees, covering Gillette, Wyoming; Dickinson, North Dakota; Brookings, South Dakota; and Sheridan, Wyoming. For an initial franchise fee that began at $10,000, as well as a monthly franchise fee, a franchisee was given a guaranteed area of protected territory and assistance in building, furnishing, and marketing the new Super 8s and in setting up accounting and other business systems. The franchisees also agreed to submit to quarterly quality inspections.

Neither Brown nor Rivett particularly relished the idea of selling franchises or running the administrative side of the business. They were also focused on particular endeavors: Rivett was traveling a great deal to supervise the construction of new motels (some of which he owned), while Brown wanted to move back to California to expand the Super 8 chain into that state. Thus, in August 1976, they hired Dennis Bale to serve as president. Bale, a banker who had worked with Rivett previously, focused principally on the sale of franchises. One month after Bale was hired, Brown moved to California and began planning the West Coast expansion. Bale in the meantime came up with the idea for Super 8's frequent traveler program, called the V.I.P. Club, which was launched in 1977. Guests who joined the club received a 10 percent discount on room rates, guaranteed reservations without a major credit card, and check cashing privileges. The program proved quite popular in part because the Super 8 chain was building a fiercely loyal customer base. Membership expanded from 1,000 at the end of the first year to 5,000 in 1978 and 45,000 in 1982.

COMPANY PERSPECTIVES

For the discriminating cost conscious traveler arriving by car and looking for a place to spend the night along the way, Super 8 is a national roadside lodging chain that provides convenient locations, clean rooms and friendly service at a reasonable price.

Super 8 gained further management help in 1977, when Loren Steele, another Aberdeen banker, was brought onboard as executive vice-president. By the end of 1977, as the franchisees began proliferating, there were 45 Super 8 motels operating in seven states, including Minnesota, Iowa, Montana, and Nebraska. The following year the chain gained a presence on both coasts as motels opened in the states of Washington and New York. In 1979, by which time the single room rate had increased to $14.88 per night, Brown opened his first Super 8 in California, a 118-room motel located near the airport in South San Francisco. By the end of the year, 71 Super 8 motels, with a total of 3,722 rooms, were in operation. Growth was also evident in the 57,000 reservations that were placed that year through the Superline system.

Although the soaring interest rates that prevailed during the economic recession of the early 1980s offered challenges for franchisees seeking loans for motel construction, the downturn also aided Super 8 as travelers turned to economy lodging to counter the high rate of inflation and rising gasoline prices. Expansion proceeded apace. By the end of 1982 the motel count reached 136, while the number of rooms jumped to 8,478. In these early growth years, many of the properties were located in small communities, markets that were underserved by Super 8's competitors. Two important changes to the chain's growth pattern emerged in 1981: Super 8 began accepting conversion properties, and the first Canadian Super 8 opened in North Battle-ford, Saskatchewan. During 1983 the rate of growth reached nearly one new motel per week as 48 new Super 8s opened for business, including the first location in Alaska. Also that year, Bale was named CEO, Steele was promoted to president, and Super 8 moved its headquarters into a new 20,000-square-foot building in Aberdeen. The company also completed a restructuring whereby several affiliate corporations were merged into Super 8 Motels, Inc. These operations included businesses that helped franchisees develop and construct properties and that supplied franchisees with linens, furniture, fixtures, and equipment, as well as Super 8 Management, Inc., which was responsible for the two dozen or so company-owned and -operated motels.

By the early 1980s the Superline system, which since its inauguration had been run manually using telephones and slips of paper, was beginning to be overwhelmed by the increasing volume of calls, more than 1,000 a day by 1983. Computerization of the system began in April 1984. Eventually, as computers with modems were rolled out to the various Super 8 properties, the system was able to instantly transmit reservation information to the motels. By 1987 Super-line was handling 1.3 million calls a year.

Technology was applied to the V.I.P. Club as well. In 1983 Super 8 began replacing the club's paper cards with plastic ones incorporating magnetic-strip technology. Clerks at the motels could swipe the cards to retrieve customer information quickly upon check-in. By 1986 the number of V.I.P. Club members grew to 207,000.

By 1984 Super 8 Motels had grown into a chain of 260 motels in 39 states and Canada, with the price of a single room averaging $28 per night. The company that year earned $800,000 on revenues of $22 million, a mammoth increase in sales of more than 2,230 percent over a five-year span. In 1985, 63 more Super 8s opened for business, bringing the room count to 19,785.

KEY DATES

1973:: Dennis Brown and Ron Rivett form Super 8 Motels, Inc.
1974:: Founders open the first Super 8 motel in Aberdeen, South Dakota.
1975:: Superline, Super 8's centralized, toll-free reservation system, is launched.
1976:: Franchising begins.
1977:: V.I.P. Club frequent traveler program is introduced.
1981:: Super 8 expands into Canada.
1991:: Super 8 launches its first national television advertising campaign.
1993:: Hospitality Franchise Systems, Inc. (HFS) acquires Super 8 Motels for $125 million; the 1,000th Super 8 opens.
1997:: HFS merges with CUC International Inc. to form Cendant Corporation.
2001:: The 2,000th Super 8 opens.
2003:: V.I.P. Club is replaced by Cendant's TripRewards program.
2004:: First Super 8 opens in China.
2006:: Cendant spins off its hospitality holdings as Wyndham Worldwide Corporation, new parent of Super 8 Motels.

By the mid-1980s, Brown and Rivett remained the main owners of Super 8 Motels, Inc., while Bale and Steele had each exercised options giving them 15 percent ownership of the firm. In 1985 the four principals began exploring the possibility of cashing in on the company's success by taking it public. The four men, however, were involved in a substantial amount of "self-dealing" with the company through their participation in partnerships that owned Super 8 motel properties and through sole ownerships of certain Super 8s. Merrill Lynch & Co., Inc., the company chosen as the lead underwriter of the proposed initial public offering (IPO), concluded that these ownership interests had to be divested before Super 8 could be taken public. The company and the four principals spent months on the arduous process of resolving these self-dealing issues. Rivett eventually balked at some of the solutions. A sharp drop in hospitality stocks on the over-the-counter market made the IPO less financially appealing, and the principals voted in September 1986 to pull the plug on the offering.

Shortly thereafter, Rivett bought most of Brown's stock. Brown had been battling cancer for some time, and he died in February 1988. Bale also sold his shares to Rivett and retired from the company in October 1988. Steele was promoted to CEO, while Harvey Jewett, the firm's corporate counsel since 1978, was named president and chief operating officer. By the end of the 1980s, the Super 8 chain extended to 672 properties, including a record 105 that opened in 1989 alone. Its geographic reach in the United States extended to 48 states, all but Rhode Island and Hawaii. Revenues amounted to approximately $100 million.

In November 1990 a Hong Kong-based investor group agreed to purchase Super 8 Motels for an undisclosed price. Rivett canceled the sale the following May, however, when the deal became bogged down in certain unrevealed details. After opening a record 121 motels in 1990, the corporation stepped up its marketing support by launching the chain's first national advertising campaign. A prime goal of the $4 million effort was to differentiate Super 8 from its arch rival, Motel 6. By the end of 1992, the number of Super 8 properties had soared to 942, including the first one in Hawaii. The average price of a room stood at $37 a night.

1993–2006: THE HFS/CENDANT
ERA

In the spring of 1992 Super 8's owners again made plans to take the company public, and again abandoned those plans. Rivett began seeking a buyer for the company, and after considering several offers accepted a $125 million bid from Hospitality Franchise Systems, Inc. (HFS) in February 1993. Based in Parsippany, New Jersey, HFS was a lodging franchiser that controlled the rights to the Days Inn, Ramada, and Howard Johnson chains. The 49 motels that had been owned by Super 8 Motels were not included in the deal and were reorganized into a new company, the Rivett Group, that remained based in Aberdeen.

At the time of the deal's completion, in April 1993, Super 8 was in a strong position. It had a stable group of largely satisfied franchisees, its occupancy rate of 66 percent was well above the industry average of about 60 percent, and it was expanding at a rate of 100 motels per year—about 60 percent new construction and 40 percent conversions of existing properties. The chain enjoyed a high degree of customer loyalty, evidenced in part by the more than two million members of the V.I.P. Club. Immediate changes were thus quite minimal. Late in 1993 Bob Weller was hired to lead Super 8 as its president. Weller was the former head of a competing chain, Econo Lodges of America.

Under Weller and with the backing of HFS, which had deep pockets and a great deal of franchising experience, Super 8's rate of expansion increased. Several milestones were reached: the 1,000th Super 8 motel in 1993, the 1,500th in June 1997, and the 100,000th room in 1998. Many of the new properties were located in the smaller towns that the chain had specialized in since its founding—though the chain opened its first downtown location in August 1995 in San Francisco—while geographically the company was seeking to make inroads in the fast-growing Sunbelt region where its penetration had been far below that of its core area of the Midwest. Super 8's marketing efforts supported this push into the South. In 1996 the company entered the world of NASCAR racing, becoming one of the sponsors of driver Bill Elliott, who was also featured in Super 8 television ads. During this period, the chain also launched a series of design updates aimed at modernizing the curb appeal of its properties, particularly the ones built in the 1970s and 1980s; opened a new institution for training motel managers, the University of the Pineapple, so named because of the pineapple's tradition as a symbol of hospitality and friendliness; moved its headquarters to Parsippany, although a core staff remained in Aberdeen; and began accepting reservations online at its new web site, www.super8.com. In the meantime, HFS merged with CUC International Inc. in December 1997, forming Cendant Corporation.

During the late 1990s, Super 8 stood as the world's fastest growing economy lodging chain. Early in 2000 this growth propelled Super 8 past the 1,900-unit mark, making it the world's largest economy lodging chain, passing Days Inn, its sister chain. The Days Inn chain, however, encompassed more rooms than Super 8. In July 2001 the 2,000th Super 8 opened for business, but the chain brought its growth to a near standstill in the early 2000s, particularly following the August 2002 appointment of John Valletta to succeed Weller as president of Super 8 Motels. Valletta was a 30-plus-year veteran of the hospitality industry who was simultaneously serving as head of Cendant's Travelodge chain. With Valletta in charge, the company tightened its quality assurance standards and removed numerous underperforming properties from the Super 8 system. Between November 2002 through December 2004, 146 properties left the brand, with more than 100 more doing so during 2005. Thus by the end of 2005 there were approximately 2,050 Super 8s operating in the United States and Canada, about the same number as four years earlier. By 2005 the average room rate had surpassed $50 per night.

In a significant change for Super 8, the V.I.P. Club was replaced during 2003 with Super 8's participation in Cendant's new TripRewards frequent traveler program. TripRewards was a points-based rewards program that encompassed the full lineup of Cendant lodging brands. A new overseas push was also on the agenda. Over the years, Super 8 had made abortive moves into new markets, including Mexico, Australia, and Singapore, none of which lasted. In April 2004 Super 8 signed Tian Rui Hotel Corporation to a master license agreement committing the Hong Kong-based private company to develop more than 55 Super 8 hotels in China. The properties were positioned at the budget level, tapping demand from the country's burgeoning middle class. The first Super 8 opened in Beijing in June 2004; within two years more than 40 were operating in 23 Chinese cities. Back in North America, Super 8 in March 2005 began rolling out its new SuperStart breakfast program, which provided all guests a free continental breakfast. The North American properties were also busy installing free high-speed Internet access on their premises.

FROM AUGUST 2006, SUBSIDIARY OF
WYNDHAM WORLDWIDE

In October 2005 Cendant, which had acquired several additional lodging chains since purchasing Super 8, including AmeriHost Inns in 2000 and Wyndham in 2005, announced that it planned to break itself up into several separate companies, one of which would encompass the hospitality operations. Super 8 thus became a wholly owned subsidiary of the newly named Wyndham Worldwide Corporation upon its spinoff from Cendant in August 2006. Wyndham's portfolio also included Baymont Inn & Suites, which had been acquired in early 2006. From its position as one of the strongest and largest players in the economy lodging sector, Super 8 Motels looked forward to its future as a key subsidiary of one of the largest hospitality firms in the world.

David E. Salamie