Ramada Tops Economy, EconoLodge Leads Budget Sector

Ramada Limited beat out a tight field of six to be named the number-one economy chain, while EconoLodge prevailed in a field of three to capture the top spot in the budget category of the Top U.S. Hotel Chain Survey. Ramada Limited, which represents the low tier of Cendant Hotels Group's Ramada brand, earned the highest score for its helpful, courteous staff. Survey respondents singled out EconoLodge, which is part of Choice Hotels International, for its commission payment systems and its overall relation of price to value. In the price-value relationship, EconoLodge this year tied with the chain that placed second in the budget category, Microtel Inns, which is part of U.S. Franchise Systems.

According to PricewaterhouseCoopers, the economy and budget sectors in 2004 underperformed the U.S. lodging industry overall and are expected to perform similarly in 2005. Occupancy levels, average daily rate and revenue per available room are forecast to show modest year-over-year improvement, but not post gains as significant as the industry as a whole. ADR for economy and budget hotels in 2004, for example, is expected to rise 1.6 percent, compared with gains of 3.9 percent for U.S. hotels across all price points. In 2005 as well, projected economy and budget hotel ADR gains of 3 percent will be outpaced by gains of 4.3 percent for all U.S. hotels.

RevPAR numbers tell a similar story. While the U.S. lodging industry overall in 2004 scored RevPAR gains of 7.5 percent, gains in the economy and budget sectors were 4 percent. PwC forecasts that RevPAR gains in 2005 for the U.S. overall will level to 7.3 percent, with RevPar for the economy and budget tiers increasing only 5.3 percent.

Readers' selection of Ramada Limited as the top economy chain comes at a curious moment in the brand's history. Cendant, which controlled Ramada in North America, in 2004 added control of its international properties, acquiring these rights from Marriott International. Also during the year, Cendant announced it was going to reposition Ramada more clearly in the midprice segment. "This means we are going to stop franchising the Ramada Limited tier, while continuing to support properties already in operation," according to Ramada president Keith Pierce. Of the 815 U.S. Ramadas in operation at the end of 2004, approximately 300 are Ramada Limiteds.

Starting in 2005, Ramada expects to move ahead with growing the two remaining tiers, the more solidly midscale Ramada Inn and Ramada Plaza. To improve the quality of the brand overall, Pierce and his team in 2004 issued warnings to properties that have been in default on various standards. "We've notified owners and expect to see those who don't cure the defaults on schedule start to leave the system in 2005," Pierce said. Up to 16 percent of the inventory could be affected.

Ramada in 2004 also announced three new brand standards systemwide, designed to improve the brand's appeal to business travelers.

"The first mandates complimentary high-speed Internet access, which has become very popular," Pierce said. "As in other lodging categories, business travelers' expectations have risen regarding the service and amenities they receive, so we've also upgraded our complimentary breakfast buffet and the line of bathroom products we offer."

Budget chains such as EconoLodge, meanwhile, are subject to these same rising guest expectations. Consequently, EconoLodge last month introduced its own enhanced continental breakfast service, adding a greater selection of breakfast breads and juices.

Raising service standards, however, can create a dilemma for brands at this price point. "It's a balancing act," said Kevin Bradt, senior director of brand strategy for EconoLodge, which had 812 hotels in operation worldwide at the end of the third quarter. "You may want to add amenities, but not at the risk of breaking the brand's price-value equation. Extra amenities move the brand towards midscale, which could mean having to charge higher rates, which your customers may not be prepared to pay."