With industry data pointing to a growing number of travel buyers trading down to add more midprice properties to their hotel programs, Business Travel News research indicates that while cost control, not surprisingly, is a key driver of that trend, new amenities and inclusive pricing also are big draws for midprice hotels.
For such buyers as Tracey Wilt, manager of global travel, meetings and conference solutions for Xerox Corp., the midprice tier long has been a component of cost-saving hotel program strategies. For a number of years, Xerox's policy has recommended travelers, in any market where there is no preferred hotel, find a midprice hotel, she said. In Xerox's program, the properties are widely used.
"Probably about 50 or more percent are what we'd qualify as moderate or midscale properties," Wilt said. "It's been pretty consistent. Our strategy still is to look for moderately priced hotels in our key markets."
A variety of industry sources indicate that more buyers are adopting similar trading-down strategies. PricewaterhouseCoopers' 2007 U.S. Lodging Industry Report and Forecast indicated that demand growth this year would be highest in the midprice without food and beverage tier, estimated to grow by 3.6 percent, more than double the 1.5 percent growth rate estimated for the overall U.S. lodging industry (BTNonline, Feb. 4).
Interest in the midprice tier also shines through in data limited to travel buyers. A recent National Business Travel Association/Best Western survey of 104 travel buyers reported that 70 percent had employed a trading-down strategy to cut costs, about one in five of those doing so for the first time in this year's hotel program. Additionally, Runzheimer International's 2007 Hotel Negotiation Survey reported that although upper-tier properties still were most frequently used, use of lower-tier properties had increased 31 percent during the past four years. Nearly three in four travel buyers have travelers who frequently use hotels in the category.
Bob Brindley, vice president of BCD Travel's Advito consulting division, also said his clients increasingly were looking at midprice options, particularly for short stays.
In BTN's most recent original research, 80 percent of the travel buyers who indicated that they would use more lower-tier properties in 2008, compared with 2007, said that cost control was a key factor in the decision. Nearly half of that same set, however, also said they were attracted to midprice hotels' tendency to be all-inclusive in pricing, encompassing such amenities as breakfast, parking and Internet services in the rate.
"They're some of the criteria points that we look at," Xerox's Wilt said. "We look at free breakfast and what's included. Internet is one of our key decision points."
That desire also was reflected in the NBTA/Best Western survey. Complimentary high-speed Internet was ranked as the most important amenity in choosing a hotel, and the second-biggest complaint, behind poor customer service, was hotel fees for Internet, parking, local calls and other services.
In addition, slightly more than 40 percent of buyers in BTN's research said they were adding more midprice properties because relatively new properties in the tier offered competitive amenities.
"There isn't the significant difference between hotel types there once was," Phyllis Schumann, product manager of travel management services at Runzheimer, said in a statement. "Since nearly all hotel types offer free high-speed Internet connection and continental breakfasts as the norm, companies are saving money by putting travelers in lower-cost hotels, without sacrificing service and traveler satisfaction."
Other popular reasons for trading down in hotel tier use included the availability of attractive negotiated rates and, as Advito's Brindley had indicated, their sufficiency for short stays. Some buyers also cited reasons unique to their travel programs. One buyer indicated that the company was increasing travel out of India and needed more properties for long-term, inexpensive stays in the United States.
Relatively few buyers said senior management was directing them to add more lower-tier properties, or that their use was in conjunction with a policy to promote ground instead of air transportation.
More than 40 percent of 106 buyers in BTN's research said they also are crafting policies that encourage the use of lower-tier properties, particularly for short stays, and most said that they would rather add more midprice hotels to their program than subtract upscale properties or the limit the overall number of hotels.
Xerox's Wilt said her company more recently has created a two-tiered hotel program that includes a best-value hotel, with a more strategically negotiated rate and amenities, and a secondary preferred hotel. Xerox's policy states that travelers must stay at those properties, and Wilt said compliance is high.
One of the major challenges to enacting a trading-down policy still is availability, especially in key high-occupancy markets, according to Advito's Brindley.
"With the limited service options, there's not as much capacity there," he said. "If there's a greater demand for those types of properties, those are the ones that fill up first."