Corporate travelers are getting more luxury-level options in secondary and even tertiary cities, as deluxe hoteliers extend beyond their commerce-capital and vacation-paradise bread and butter.
Such deluxe-tier bands as Four Seasons Hotels and Resorts, Ritz-Carlton and Fairmont Hotels & Resorts have entered several secondary and tertiary cities, some of which have no existing properties in the deluxe tier, through recent openings and have more coming on their development pipeline, alongside international gateway cities and tropical resorts. In addition, some independent luxury properties are penetrating the markets.
"We're in relatively flush times for the hotel industry," said John Fox, senior vice president for PKF Consulting in New York. "I think the hotel chains see opportunities in these markets where they haven't been before."
The luxury tier in particular is, by many criteria, the strongest in the hotel industry. It had the highest increase in average daily rates in 2006, up 9 percent compared with an increase of 6.8 percent in the industry overall, according to PricewaterhouseCoopers' 2006 U.S. Lodging Industry Briefing, released in December.
Its increase in revenue per available room also was the highest, up 11.1 percent compared with an 8 percent average increase in the industry, and PricewaterhouseCoopers forecasts the tier to stay on top of those metrics for at least the next two years.
In February, Fairmont Hotels & Resorts announced it would open a 185-room hotel in downtown Pittsburgh, with 12,000 square feet of meeting space. The hotel will be incorporated as part of a larger office complex under construction in the city.
Such markets have long been a strategy for Toronto-based Fairmont, according to Matthew Sparks, senior vice president of development in the Americas for Fairmont Raffles Hotels International. The brand also is looking at such markets as Indianapolis, Milwaukee, San Antonio and Birmingham, Ala., he said.
"We have always looked at secondary markets that are really fertile and appropriate for a Fairmont product," Sparks said. "We can come in with the right-sized product, and we'll own the top end of the market."
Finding that proper size is the key, Sparks said, as the properties must be scaled to fit within their proper markets.
After the sale of its Olympic Hotel in Seattle a few years ago, Four Seasons is returning to the city this year and has a project in Baltimore further down its pipeline.
Ritz-Carlton, which already has established properties in such markets as Cleveland, will open a hotel in Denver this year and in Charlotte, N.C., next year. Not too far away, in the Raleigh-Durham area, the Umstead Hotel and Spa opened its doors at the beginning of this year. Umstead's marketing and sales director Richard Brooks said it was the first deluxe property to open in the state of North Carolina.
"In this area, you do have a high amount of software and pharmaceutical companies, and it's also the state capital, so you have the government sector," according to Brooks. "We have been preselling for close to a year, so a lot of companies are finding this as a place to send executives as well as clients."
Although not being part of an established luxury brand like Four Seasons was a barrier, the 150-room Umstead Hotel demonstrated eagerness from local corporate travelers and meeting planners for such a product in the region, according to Brooks. Most business-oriented hotels there are limited service, he said.
"It's difficult to define a luxury product without a flag," he said. "Now that we're open, people are coming in and understanding the luxury side of meeting space."
Part of the growth of deluxe properties in secondary markets comes from hotelier familiarity with the changing marketplaces, in which cities that had been considered tertiary in the past suddenly become secondary.
For example, Baltimore and St. Louis recently have become strong, attractive markets, despite the fact that they had been discounted by deluxe hoteliers a decade or so ago, according to Four Seasons president Wolf Hengst
(BTN, Oct. 23, 2006).