Hotels Develop Prototypes, Distribution Plans

Starwood Hotels & Resorts Worldwide this month introduced smaller prototypes for its Sheraton and Westin brands intended for secondary and tertiary U.S. markets.

The decision follows similar moves by two of its multi-brand competitors, Hilton Hotels Corp. and Six Continents Hotels, to develop smaller prototypes of their existing brands. Directed at these same secondary and tertiary markets, the first compact units of Hilton's Hampton Inn are scheduled to open early in 2003 in Cedar City, Utah, and Springfield, Tenn.

At Holiday Inn, Six Continents' strategy is less about expanding into untapped secondary and tertiary markets than it is about being able to construct a hotel on a smaller piece of land, thereby opening up more development possibilities. The first of the new Holiday Inns will be located in Gwinnett County, Ga., outside of Atlanta. Construction began this month and is expected to open in a year.

Where such a midprice brand as Hampton doesn't offer food and beverage, Holiday Inn is a midprice brand with food and beverage. Unlike Hampton, which already is an established name in suburban locations, Sheraton and Westin are upscale and upper upscale brands that up to now have been found mostly in primary downtown locations.

For buyers, the wider distribution of these brands means more negotiating options. Buyers who already are customers of the multi-brand companies can deliver more volume in more locations, thereby strengthening their overall bargaining position.

"These days, especially when we're trying hard to lower our costs, working with fewer providers gives you more leverage," said Erin Wilson, vice president of global travel for Credit Suisse First Boston in New York.

"Knowing they can count on the greater volume, hotels generally are much more disposed toward working with you," noted Yasuo Sonoda, travel manager at Macromedia in San Francisco.

For travelers, it can be reassuring to stay at brands whose standards they know and trust. Assuming they are members of the brand's frequency program, travelers also are able to get their points and miles.

Conversely, the move into secondary and tertiary markets puts pressure on the existing hotel operators, most of which tend to be independently owned and managed.

On the one hand, they may need to raise their standards, and, on the other hand, negotiate more aggressively to get buyers' business. Buyers, therefore, may be the beneficiaries of this new competition and come away with better deals as a result.

The Westin prototype calls for 207 rooms, including six junior suites. According to Ted Darnall, president of the Starwood Real Estate Group, all of Westin's recent guest room upgrades, including the Heavenly Bed and Heavenly Shower, are incorporated into the new version. Depending on how much business travel the particular market can support, the Sheraton prototype can be built in either 150- to 250-room or 250- to 300-room versions. Both Westin and Sheraton plan for executive club floor rooms to be booked at a premium rate.

Included as well are fitness centers with indoor swimming pools and whirlpools, "upscale amenities typically not found in hotels in smaller markets," Darnall said.

Destinations that Starwood will target qualify as what Darnall called, "the new suburbia. They're among the fastest growing markets in the country," he said.

At Hampton, the new design calls for 52 to 58 rooms, but provides the same services, look and feel of a regular Hampton Inn. "Traditionally, the minimum number of rooms for building a quality-branded midprice hotel had been 65 rooms, so this is a departure," said Phil Cordell, senior vice president of brand management. "Our intention was hardly to step away from the regular prototype, however. In fact, the Hampton Inn & Suites product, where the room count can go as high as 130 rooms, continues to see strong growth around the country. Instead, the idea was to make it possible for travelers to stay in a Hampton in communities where there might not be a nationally known brand. And if they're regular Hilton customers, they'll want to get their Hilton HHonors points."

For such brands as Hampton, the competition remains highly intense. "You don't want to risk losing travelers to the other guy," Cordell said. "In the same way you want them to be able to find the brand when they're in a downtown location, you want them to be able to stay with you in secondary and tertiary destinations."

The Holiday Inn prototype is a departure from the existing model, which includes more meeting space and, hence, more guest rooms. The new version has 100 to 150 rooms. "We were missing a lot of development opportunities because we didn't have a smaller, more cost-efficient alternative," said John Merkin, director of hotel innovations. Like Hampton, the new model is hardly meant to replace the existing version, but to supplement it. "There'll always be a role for the larger meetings hotels, but the new prototype just lets us compete for sites as small as 2.5 acres."

Rather than a franchise, the Gwinnett County property will be owned and operated by Six Continents. To generate interest among developers, Six Continents last year agreed to build 25 of the new Holiday Inns around the country that it would own. This is the first of these projects to go into construction.