Hotel Chain Not Resting as It Seeks to Broaden Its Appeal

When La Quinta opened its doors to overnight guests attending the 1968 HemisFair in San Antonio, the motel’s name was unique. Exotic even.

But it soon became the subject of a joke told and retold countless times over the years:

What does La Quinta mean? Next to Denny’s.

President and CEO Gary Mead listens to the quip with a strained smile. He’s heard it before.

Still, while the San Antonio-based hotel chain says its name actually translates as “getaway,” Mead acknowledges that the jokes are right--a lot of the mid-priced hotels are located next to family-style restaurants. On purpose.

“Historically, when this company was started, hotels without restaurants didn’t exist. The founder decided to fit a need and he had a personal friend who was head of Denny’s, so they checked with one another,” Mead said.

So La Quinta was able to open hotels that didn’t have their own restaurants.

Whether or not travelers know what La Quinta’s distinctive name means, they’ve responded well to it.

And, while competitors like Marriott use different names for different kinds of hotels, the company plans to stick with “La Quinta” while expanding into new types of properties.

“I think that La Quinta can probably do what it’s trying to do quite well,” said analyst Lewis Alton of L.H. Alton & Co.

La Quinta, whose approximately 240 hotels are located primarily in the southern half of the United States, will add 36 inns by the end of 1997, moving away from its current emphasis on traditional rooms and offering extended-stay rooms and suites.

La Quinta is “trying to make all of our hotels appeal to a broader range of guests,” said Steve Hickey, senior vice president of marketing.

La Quinta is going after the mid-priced business traveler with a two-pronged strategy: refurbishing all 30,000 rooms in its existing hotels, as well as new construction.

It is enjoying a measure of peace after a rough period in the early ‘90s, when stock prices sagged under founder Sam Barshop’s direction. A group of dissident shareholders, led by investors Sid R. Bass, Lee M. Bass and Thomas M. Taylor, bought nearly 15% of La Quinta’s common stock and pressured management to raise the stock price, then worth just a few dollars a share.

The group installed five new members on the 11-member board, bought all the La Quintas held in a publicly traded limited partnership and in joint ventures, and recruited Mead from Motel 6, where he had been president of finance.

Mead says the chain, which markets heavily to the traveling salesman, had already started down its new road when he arrived in March 1992.

In 1994, the $100-million refurbishing started. About 20 to 30 guest rooms at a time are getting make-overs, including new furniture, 25-inch TVs, computer-compatible telephones and new bathrooms. Most markets will be completed by spring of 1997.

“We’re spending far more dollars much more aggressively than any other hotel I’ve ever heard of,” said Mead. “A lot of changes have occurred.”

Its stock price has grown as the company revamped, reaching a high of nearly $24 a share in June. But the stock dipped to its current price of about $21 a share after second-quarter results failed to meet analysts’ expectations.

The board then announced La Quinta would raise its stock buyback plan to $18 million from $8 million.

Mead says once the renovations and building are finished, occupancy rates and earnings will rebound.

But one thing hasn’t changed.

“The only real thing you don’t find in La Quinta today is a restaurant,” said Hickey.