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Continental Hotels Joins in Howard Johnson Venture

September 17, 1987|CHRIS KRAUL | San Diego County Business Editor

Continental Hotels of La Jolla and Howard Johnson Franchise Systems have signed an agreement that may be worth $135 million to jointly build a minimum of 15 Howard Johnson hotels in the western United States over the next five years.

In addition, seven existing Continental Hotels located in California, Arizona and New Mexico will be converted to Howard Johnson Plaza hotels over the next six weeks, sole Continental shareholder and Chief Executive Earl Gagosian said Wednesday.

Gagosian was founder of Royal Inns of America, a San Diego-based hotel chain that began in 1965 and had 69 hotels at its peak. It went bankrupt in 1976, three years after Gagosian stepped down from management. Gagosian, 59, also was formerly a vice president and director of the Travelodge hotel chain. He started Continental in 1984.

The agreement with Continental "gives us an instant foothold in a region of the United States where Howard Johnson has previously had little visibility," Howard Johnson President Curtis B. Bean said in a prepared statement.

A subsidiary of Fairfield, N.J.-based Prime Motor Inns, Howard Johnson is a network of 450 hotels located mostly east of the Mississippi River.

The first Continental-Howard Johnson joint venture, an $8.5-million, 163-unit hotel near the Phoenix airport, will begin construction next month. The Phoenix hotel will be a model for future projects, Gagosian said.

Howard Johnson will supply the financing for the Phoenix project and assume a 75% ownership position. Continental will construct and operate the hotels and take a 25% ownership position, Gagosian said.

He said the number of hotels he will develop jointly with Howard Johnson could easily exceed three per year, reaching perhaps as many as five in 1988.

Most of the joint venture's new hotel developments will be in California, he said.

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