Riches from Royal Treatment

As the sun sinks slowly over the rim of the steering wheel, where is a vacationing family likely to put in for the night?

At the first "vacancy" sign they see, say the executives of Holiday Inns, the nation's most ubiquitous innkeeper. At the first cheap place they can find, contend the officers of Motel 6, a chain whose $6-a-person basic rate has inspired competitors across the nation to pare their prices. "At my place," answers Earl Gagosian, president of a California-based chain of just about the most expensive motels in the country.

Lately, more and more people have been staying at Earl's. In the first half of 1970, a relatively bad year for the motel industry, profits of Gagosian's 40 Royal Inns in eleven states have tripled, to $389,000. Room occupancy is down 7% nationwide, Royal Inns' is up 6.7% . This month Royal Inns will open four new motels, one a 15-story inn that will be the largest building in Anchorage, Alaska. Nine others are being built in California, Arizona, Georgia and Florida.

Log-Burning Fireplaces. The secret behind the five-year-old empire's paradoxical success is expensive, self-indulgent luxury. "We want to give the guest something more striking and exciting than he left behind," Gagosian explains. "The old motels that offer nothing much more than shelter are being wiped out."

At Royal Inns, they cannot avoid getting more. Gagosian places his newest motels in the middle of downtown areas --often miles from the main highways, but convenient to theaters and stores. Behind gold-and-white facades are elegantly designed rooms. In addition to free color TV and vibrating bed, Royal Inn rooms typically have white satin bedspreads, deep-pile carpeting, antique-white furniture and a full wall-size mural. Some rooms are equipped with bars, refrigerators and log-burning fireplaces. All Royal Inns have swimming pools, sauna baths and therapy pools at no extra charge. Some, like the year-old Royal Inn-at-the-Wharf in the company's headquarters town, San Diego, have a gymnasium. The Royal Inn planned for Anaheim, Calif., will have a movie theater with free admission for guests. Royal rooms do not come cheap: as much as $20 for a single, $30 for a double, and $250 for the "high roller" suite in Las Vegas.

Besides Gagosian's gimmicks, there are other reasons for the upsurge in luxury motels. In many suburbs the cocktail lounge of the local motel has become an after-hours social center. Vacationing patrons of the nation's 427,000 campsites often make periodic visits to a motel for a shower and a respite from the rigors of outdoor life. And increasing numbers of Americans, reluctant to fight traffic, spend their vacations or long weekends at a cushy motel right in their own town.

Poured Foundation. Gagosian, 46, was one of the first to recognize such trends. Son of an Armenian immigrant who was converted to Mormonism ("I'll bet I'm the only Armenian Mormon you ever met"), Gagosian literally helped pour the foundation of the nation's motel industry. In a 20-year career as a hardhat construction worker and later as vice president in charge of construction for TraveLodge Corp., he helped build more than 300 motels. He tired of duplicating TraveLodge's basic pattern, and in 1965 assembled three fellow employees and $50,000 to build his own motels. All four founders have since become wealthy, mostly through stock options. Counting splits and stock dividends, the shares of Royal Inns have multiplied 19 times since the company was founded. This week the shares will be traded for the first time on the American Stock Exchange.

Mindful of Gagosian's success, other innkeepers are moving away from the motel industry's tradition of standardized shelter. Holiday Inns, for example, is planning an elaborate motel-resort at Hialeah near Miami. But Gagosian, who well remembers his hard life on the construction crew, has built a margin of safety into his luxury empire. "If times should get really bad in the economy," he says, "there is not a room in our chain that we couldn't rent for $8--and pay our expenses at 70% occupancy."

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