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WIKI ANALYSIS
Lodgian (AMEX:LGN) is franchise hotel company with 46 hotels in the U.S. and Canada. As a franchise operator, Lodgian does not own a hotel "brand" - a name like Hilton or Holiday Inn - Instead, the company pays the owners of hotel brands such as Hilton, Holiday Inn, and Marriott royalty payments in exchange for the right to operate hotels under their name.[1]
Business Overview
Business and Financial Metrics[2]
In 2009, LGN incurred a net loss of $52.4 million on total revenues of $188.5 million. This represents a 349.8% increase in net loss on a 17.4% decrease in revenues from 2008, when the company lost $12.0 million on $228.2 million in revenues.
Business Segments
The majority of Lodgian's business comes from its hotel operations. Of the 46 hotels Lodgian operates,[3] the majority operate under brand names that franchised their properties to Lodgian. Franchising is the business practice in which one company (such as Marriott International (MAR)) allows another (Lodgian in this case) to use its trademarks or business philosophies.[4] 44 of Lodgian's properties operate under franchised brand names, while only 2 are independent unbranded properties.[5] The company has only one reportable operating segment.[6]
Key Trends and Forces
Lodgian's North American emphasis makes it vulnerable to the fluctuating conditions of the U.S. Economy
Lodgian's emphasis on the U.S. market makes it more vulnerable to the declining conditions of the United States economy. The increasing oil prices and struggling U.S. housing market helped contribute to an overall harsh economy, which hurts Lodgian's growth.[7]
Lodgian's inability to take advantage of the booming hotel industry in China is detrimental to its business
Lodgian operates entirely in the North American market. The hotel market in China is shifting strongly towards branded hotels, as is its tourism industry, with China expected to become the world's number one travel destination within the next 10-15 years.[8] China's budget hotel ($50 or less/night) industry is growing substantially, with the number of budget hotel rooms growing from nearly zero to over 100,000 since 2000. During this boom, over 100 brands have been competing for a piece of this rapidly expanding tourist market, but Lodgian has as of yet been unable to put its foot in the door of the Chinese hotel industry.[9] With several of LGN's primary competitors, such as Intercontinental Hotels Group (IHG), Marriott International (MAR), and Starwood Hotels & Resorts Worldwide (HOT) entering the Chinese tourist market,[10] Lodgian's inability to do the same puts it at a competitive disadvantage for the foreseeable future.
Competition
Lodgian competes with hotel operators and franchisers throughout North America, the only market in which it operates:
- Intercontinental Hotels Group (IHG) is the largest hotel company in the world by number of rooms, with 590,361 rooms in over 100 countries worldwide. IHG makes most of its money through the franchising of popular hotel chains such as Intercontinental Hotels and Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn, and Holiday Inn Express.[8]
- Marriott International (MAR) is a worldwide operator and franchiser of hotels and related lodging facilities. Although Lodgian is a franchiser of Marriott hotels, its non-LGN owned properties compete with Lodgian for business. The company's revenue is divided into five segments, all of which compete with Lodgian, except the International Lodging segment.[11]
- Choice Hotels International (CHH), the company behind the nation's first hotel chain, is a franchiser of hotels around the world. Choice Hotels franchises over 5,400 hotels under brands such as Comfort Inn, Cambria Suites, Sleep Inn, Quality Inn, and EconoLodge in the US and more than 40 countries and territories.[12]
- Wyndham Worldwide (WYN), another company whose properties are partially franchised by Lodgian, it is the largest hotel franchiser, vacation exchange network, and vacation ownership company in the world, owning properties in four continents.[13]
References
- ↑ Google Finance: LGN
- ↑ LGN 2009 10-K pg. 26
- ↑ LGN 2006 10-K, Item 1: Business, page 1
- ↑ Wikipedia: Franchising
- ↑ Lodgian: About Lodgian
- ↑ LGN 2009 10-K pg. F-12
- ↑ LGN 2007 10-K, Item 1A: Risk Factors, page 19
- ↑ 8.0 8.1 Wikinvest: IHG
- ↑ International Herald Tribune: China's budget hotel industry is booming as tourism grows
- ↑ AllBusiness: Starwood, Marriott, Hilton Enter Or Expand In Asia
- ↑ Google Finance: LVS
- ↑ Wikinvest: CHH
- ↑ Wikinvest: WYN
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