The Wichita, Kan.-based Value Place is an extended-stay hotel concept that features temporary lodging with rates as low as $169-a-week. The average stay at a Value Place is 30 days. The chain, founded in 2002, has 136 locations in 25 states. Photo courtesy of Value Place

GREAT FALLS, Va. – Vijay Malladi has already found success in the franchise industry and now he has set his sights on the hotel industry. However, in doing so, he has taken the plunge with a hotel-apartment hybrid that looks to capitalize on extended stay guests.

The 38-year-old Malladi is set to begin construction on his first property, a Value Place in Chantilly, Va.

The Wichita, Kan.-based Value Place was founded in 2002 by entrepreneur Jack DeBoer as an extended-stay hotel that features temporary lodging with rates as low as $169-a-week, depending on location. Value Place was designed for small business traveler and consultant, who are footing their own bill for lodging and other travel expenses, or are traveling on a strict per diem budget, as well as families who are relocating to a new community, but want to avoid locking into an apartment lease before getting into their new home. The average stay is 30 days.

The chain has 136 locations open in 25 states. All current Value Place hotels are four stories tall. There are two primary building models: one with 105 rooms, one with 121 rooms. There are three room plans: a studio, studio sleeper and a studio double. Services included in the weekly rate are: all utilities, expanded cable network and premium movie channel, bi-weekly studio cleaning, a fully furnished studio with full kitchen, towels and linens. Properties also offer additional services for a nominal fee: local and long distance calling, high-speed Internet access, on-site laundry and vending, and dishes and other kitchen supplies.

Value Place brand was developed by the same management team that created and developed lodging brands such as Residence Inn, Summerfield Suites and Candlewood Suites.

Malladi first came across Value Place while attending a hotel exposition in 2005. He said he was immediately struck by the extended stay concept. “Instantly I like the way they were doing it and I said, ‘This is something I should be doing,’” he said.

According to him, he liked that Value Place was not just really competing with hotels, but also with apartments. He felt as the economy continued to spiral such an extended stay option would become increasingly popular.

In recent months, as he prepares to open his first Value Place, he feels his foresight has really played out. He said he has done a lot of research in the region and found that with the cheapest apartments running approximately $900-a-month and most at least $1,200-a-month, his weekly rate of $309 can really compete with a single-room apartment.

“With the economy down, you need this type of offering,” Malladi said. “Products like Value Place are in the right position … It is a no-brainer.”

Malladi’s Value Place is going to be the first one in the Washington D.C. metro region and he has a strong belief that the concept is particularly suited to the local industry, which features a lot of contract, consulting, construction and military work – all segments that have workers looking for short term housing of weeks to months versus permanent residence.

He also feels that Value Place’s emphasis on cleanliness and quality despite the per-night-room-cost, will really hit home with guests. “With this kind of concept, more and more people are looking for a quality product,” he said.

Though Malladi’s first Value Place is yet to open or begin construction he has already put up a sign touting the property and showing the price, which has garnered a welcome response. “I get so many calls – at one point I got 10 calls a day,” he said. “They say, ‘We are really looking forward to this hotel. We really need this place.’”

Malladi expects his first Value Place to open this year and he has plans for three more. The properties will be built under his Nova Hospitality Group, which includes partners Mannem Reddy, Kishore Kohda and Prashant Reddy, as well as seven additional investors.

Nova Hospitality also has its hand in the franchise business with three Dunkin’ Donuts and Baskin-Robbins locations. Additional holdings include sports bar Chics n Wings and several Indian grocery stores and restaurants.

A native of Hyderabad, Malladi came to the United States in 1992 after graduating from B.M.S. College of Engineering in Bangalore. He attended Long Island University and graduated with a master’s degree in computer science in 1993. For the next decade, he held numerous IT and consulting positions with companies such as AIG, AT& T Corp., Philip Morris USA Inc. and The Black & Decker Corp.

All of his IT consulting work kept him on the move and he eventually looked to settle down. “I was very dissatisfied because I was constantly traveling,” he said. “And I always wanted to work for myself.”

Settled in Northern Virginia, he signed a deal with Dunkin’ Donuts in 2004 and opened stores in 2005.

The expansion into the hotel industry is a natural one for him, he admits, because he has family in India in both real estate and hotels. “I told myself, ‘Hotels are the way to go,’” he said.

In addition, he said he really wanted to expand the assets of the Nova Hospitality portfolio and with its franchises, restaurants and stores all in leased properties, hotels provided the ability to put equity into real estate and see value appreciation through the properties, regardless of the business’ financial performance.

According to Gina-Lynne Scharoun, president of Value Place franchise services, the brand sees much of its interest from entrepreneurs, such as Malladi, who come from segments other than the hotel industry. “That is something that actually surprised us as a franchisor [when we started] and it is indicative of about 95 percent of our franchise system,” she said.

Scharoun believes that the extended stay, apartment style of Value Place is not “intuitive to the hotel business” and thus originally kept veteran hoteliers away. In addition, in order to keep the costs down, Value Place really cuts back on services in order to keep employees down. Typical Value Place properties only employ between 4-5 full-time employees. She said hoteliers who take a look at the concept and the size of the property believed you would need approximately 20 employees.

However, all of Value Place’s work in designing the concept was focused on reducing the number of small tasks needed, such as providing coffee or even needing room service to pack up irons and ironing boards when cleaning rooms, to eliminate the biggest costs of labor.

“We started trying to figure out how to run a property almost the opposite of how you would run a hotel,” said Scharoun. “We were extremely disciplined to say, ‘OK, what do people need versus what they want?’”

When you cut back all the little stuff that is what takes you from 20 employees to just four or five people, she added.

Still, figuring out how to really cut back is a challenge and takes continual effort – and Scharoun believes the franchisees who grasp this are the ones who will really succeed. “Simple may be simple, but simple is not easy. If we were easy, everybody would be doing it,” she said.

According to Scharoun, Malladi immediately showed an understanding of the concept and what it requires to run a simple, yet successful business.

“You are not supposed to have favorite franchisees but it you could pick a handful he would be in it,” she said. “He just has so much business experience that he brings to the table.”

Scharoun also has high hopes for the Washington D.C. metro region that Malladi is trailblazing as the first franchisee. “The supply and demand factor really works in your favor,” she said. “It is a high risk, high reward area of the country.”

The Value Place chain has doubled its size every year for the past three years, according to Scharoun. She expects that growth to slow this year, but still expects the chain to increase by about 40 percent to approximately 175 locations.

Another strong measuring stick for the chain, after over half-a-decade of business, is that hoteliers are starting to take notice and inquire about the brand. “Now people have a track record to look at and Value Place is also really benefiting from the economy today,” said Scharoun.