How to Sell Your Econo Lodge Business: A Comprehensive Guide for Hotel Owners

If you’re considering selling your Econo Lodge business, you’re not alone. The hospitality industry, especially the economy hotel segment, has seen significant activity in recent years. Econo Lodge, as part of the Choice Hotels International brand family, is a well-known and trusted name in budget accommodations. Whether you own a single Econo Lodge property or a portfolio of locations, understanding the unique factors that drive value and facilitate a successful sale is crucial. This detailed guide will walk you through the process, from valuation to closing, with a focus on the specific nuances of selling an Econo Lodge franchise.

Understanding the Econo Lodge Business Model

Econo Lodge hotels cater to budget-conscious travelers, offering essential amenities, clean accommodations, and convenient locations. As a franchisee, you benefit from national marketing, reservation systems, and operational support from Choice Hotels. However, the value of your individual property depends on local market conditions, property performance, and your ability to maintain brand standards.

Valuing Your Econo Lodge Hotel

The value of an Econo Lodge business is primarily determined by its profitability, location, property condition, and franchise agreement terms. Here’s how to approach valuation:

• Adjusted Net Operating Income (NOI): Start by calculating your hotel’s NOI, which is your revenue minus operating expenses (excluding interest, taxes, depreciation, and amortization). Add back any owner-specific expenses or non-recurring costs to arrive at an adjusted figure.
• Industry Multiples: Economy hotels like Econo Lodge typically sell for 3-6x their adjusted NOI, depending on factors such as occupancy rates, RevPAR (Revenue per Available Room), and market trends.
• Property Condition: Recently renovated hotels with modern amenities and compliance with Econo Lodge’s brand standards command higher multiples.
• Franchise Terms: The length and transferability of your franchise agreement, as well as any upcoming PIP (Property Improvement Plan) requirements, can impact value.

The Owner’s Role in Operations

Buyers will closely examine your involvement in daily operations. Are you an absentee owner with a strong management team, or do you handle day-to-day tasks? Hotels with experienced, stable staff and minimal owner dependence are more attractive to buyers and can fetch higher prices. If you’re heavily involved, consider delegating responsibilities and documenting processes to ease the transition for a new owner.

Guest Base and Reputation

A loyal guest base and strong online reputation are critical assets. Econo Lodge properties with high guest satisfaction scores, positive online reviews, and repeat business are more valuable. Ensure your property maintains high cleanliness standards, responsive customer service, and consistent quality to maximize its appeal.

Physical Assets and Upgrades

The condition of your hotel’s physical assets—rooms, common areas, parking, and amenities—directly affects its marketability. Buyers prefer properties with:

• Recent renovations and up-to-date furnishings
• Modern security and technology systems
• Compliance with ADA and local regulations
• Well-maintained HVAC, plumbing, and electrical systems

If your property requires significant upgrades, be prepared for buyers to negotiate the price or request credits for anticipated capital expenditures.

Location and Lease Considerations

Location is a key driver of value in the hotel industry. Econo Lodge properties near highways, airports, business districts, or tourist attractions tend to perform better. If you lease the property, ensure the lease is transferable and has a favorable term remaining (ideally 5+ years). If you own the real estate, clarify whether the sale includes the property or if you’ll offer a long-term lease to the buyer.

Preparing for a Confidential Sale

Confidentiality is essential when selling a hotel. News of a sale can unsettle staff, guests, and competitors. Work with a professional hotel broker who can:

• Pre-qualify buyers and require non-disclosure agreements (NDAs)
• Market your property discreetly to a targeted pool of investors
• Coordinate property tours and due diligence without disrupting operations

Steps to Sell Your Econo Lodge Business

1. Organize Financial Records: Prepare at least three years of financial statements, tax returns, and occupancy reports. Clear, accurate records build buyer confidence.
2. Review Franchise Agreement: Understand transfer fees, approval processes, and any required upgrades. Contact Choice Hotels for guidance on the transfer process.
3. Address Deferred Maintenance: Complete minor repairs and cosmetic improvements to enhance curb appeal and guest experience.
4. Engage a Hotel Broker: Choose a broker with experience in franchised economy hotels. They can help you price the property, market it confidentially, and negotiate terms.
5. Qualify Buyers: Ensure buyers have the financial capacity and hospitality experience required by Choice Hotels.
6. Negotiate and Close: Work with your broker, attorney, and accountant to finalize the purchase agreement, transfer the franchise, and close the sale.

Maximizing Your Econo Lodge’s Sale Value

To achieve a premium price, focus on:

• Maintaining high occupancy and RevPAR
• Keeping expenses in check to maximize NOI
• Ensuring staff are trained and likely to stay post-sale
• Staying current with brand standards and PIP requirements
• Building a strong online reputation and guest loyalty

Conclusion

Selling your Econo Lodge business is a significant decision that requires careful planning and industry expertise. By understanding the unique factors that drive value in the economy hotel sector, preparing your property and records, and working with experienced professionals, you can maximize your sale price and ensure a smooth transition. Whether you’re ready to retire, reinvest, or pursue new opportunities, following these steps will help you sell your Econo Lodge business with confidence.