Midprice, Economy Hotels Making Metropolitan Moves
<B>Midprice, Economy Hotels Making Metropolitan Moves</B>
By Bruce Serlen
In an effort to build market share, midprice and economy hotel companies are stepping up the development of more urban, downtown sites, especially in the wake of a slowing economy. Though urban settings are a distinct departure from the suburban, highway or office park locations these properties traditionally have been known for, urban locations offer the potential for greater brand visibility and increased revenues, according to those in the industry.
"In a softening economy, business travelers are more concerned with getting good value for their money, including when they travel to downtown locations," said Carol Kirby, group executive vice president for Accor Lodging North America. One of Accor's brands, Red Roof Inn, recently opened its first property in midtown Manhattan.
The brands want to build on the name recognition they've already managed to achieve. "You establish name recognition in suburban markets and then want your core travelers to be able to find you when their business takes them to the city," said Tim Sheldon, senior vice president for extended stay lodging at Marriott International. Residence Inn, Marriott's upscale extended stay product, recently opened in the Cambridge section of Boston and in conversions of historic buildings in downtown Hartford and New Orleans.
Similarly, city locations bring new users to the brand. "The signage possibilities on a central downtown location are an opportunity in themselves, given the sheer number of people who will become aware of your name," said Ernie Taddei, vice president of sales and marketing for AmeriSuites, which in December broke ground for its first property in Washington, D.C.--within walking distance of the White House.
What the brands fear losing most is customer loyalty. "Our frequent guests like the experience of staying with us in the suburbs, so when we open in a city, we transfer as much of the guest experience to the new setting as we can," said David Redfern, vice president of sales and marketing for Candlewood Suites, which is scheduled to open a property in Jersey City, N.J., this month.
For travel buyers, this customer loyalty is a plus if it drives compliance to brands that are among those with which they've negotiated special rates. Compliance also helps buyers meet the volume commitments they may have made to the large, multi-brand hotel companies as part of their overall hotel program. Then too, in cities where available hotel rooms can be hard to come by midweek, these midprice and economy properties can provide buyers with the additional coverage they need--and at less than full-service prices.
Yet, the rates in the city are likely to be higher than what travelers who stay at the same brands in the suburbs are used to paying.
"Invariably, the barriers to entry will be higher downtown, which translates into higher development costs," said Jim Holthauser, senior vice president of Homewood Suites by Hilton. "Operating costs also are likely to be considerably higher. In fact from a service standpoint, downtown locations tend to offer more the equivalent of a full-service property. In other words, you're not going to find a room for $89 a night. Rates will be higher, but so will guest expectations." A Homewood Suites property in downtown New Orleans is presently under construction and due to open in mid-2002.
As the developer/owner of one of these hotels--in this case, the Red Roof Inn in midtown Manhattan--the challenge is to include enough of the brand standards, so as to be recognizable to the loyal customer, but at the same time to create a product with service levels suited to an urban setting.
"In choosing Red Roof Inn, a chain with 350 to 400 hotels nationwide, we knew there would be that valuable name recognition, plus a technologically sophisticated reservations system to back it up," said Vijay Dandapani, COO of Apple Core Hotels, which operates the Manhattan property as a franchise.
The 171-room, 17-story hotel is a conversion from a former office building. In its essentials, therefore, it's a departure from the Red Roof Inn suburban prototype--vertical, rather than horizontal, where travelers aren't driving so extensive parking isn't an issue.
Given cheaper land costs in the suburbs, guest rooms tend to be larger at those properties than their urban counterparts. "Our rooms are roughly 200 square feet, compared to the 300 to 350 square feet you might find in a suburban location," Dandapani said. "But this compares favorably to the 150-sq.-ft. room you find in many shoebox boutique hotels."
As for amenities, certain touches such as a large desk were required as part of Apple Core's franchise agreement with Red Roof Inn.
"We chose to add other amenities, which weren't part of the brand standard, such as complimentary continental breakfast, in-room coffee service, ironing boards and hair dryers," said Rafeeq Mohamed, the property's general manager. "Business travelers to New York expect these kinds of things, so if the expectation is there, we want to fulfill it. They're basically more Apple Core than Red Roof.