REAL ESTATE : Developers Are Betting There’s Room for Extended-Stay Hotels, Apartments

A Memphis company will build four hotels in Orange County to cater to business people here on long stays.

While this market is generally considered to be overcrowded with hotels, Flautt Properties, the Tennessee company, says there is still room for a specialized hotel for guests staying two weeks or more.

The hotels are called Homewood Suites and are franchised by Holiday Corp., also of Memphis and franchiser of Holiday Inn hotels. Flautt will own and operate the hotels, its first on the West Coast.

Flautt plans a hotel each in Anaheim; the Orange, Costa Mesa and Santa Ana area; the Irvine and Newport Beach area, and the Laguna Beach and Dana Point area. It is also building two in San Diego County.

Flautt already owns and operates 16 hotels--most of them Holiday Inns--in the Southeast, said Chick Hill, president of Flautt.

The company will pay Holiday Corp. $300 per suite in fees, or about $45,000, to build the hotels, which may contain up to 150 suites. After that, Flautt will pay 7% of revenue to Holiday Corp. under the franchising agreement, about the usual percentage for such agreements.

Rooms in the extended-stay hotels--not to be confused with all-suites hotels--tend to be larger than the average suite or hotel room and have full kitchens. Many extended-stay hotels appear from the outside more like a typical suburban apartment complex than a hotel.

How well the new hotels do depends greatly on which sites Flautt can get, says Sandra Louvier, a hotel consultant at accountants Laventhol & Horwath’s Costa Mesa office. Some all-suite hotels have done better than others, depending on the neighborhood.

Flautt sees its biggest competition in the county as Marriott’s Residence Inns, which Holiday Corp. owned before a restructuring. Marriott operates four inns totaling 600 rooms in the county.