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.
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.
The majority of Lodgian's business comes from its hotel operations. Of the 46 hotels Lodgian operates, 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. 44 of Lodgian's properties operate under franchised brand names, while only 2 are independent unbranded properties. The company has only one reportable operating segment.
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.
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. 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. 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, Lodgian's inability to do the same puts it at a competitive disadvantage for the foreseeable future.
Lodgian competes with hotel operators and franchisers throughout North America, the only market in which it operates: