Midprice hotel chains, in increasingly global construction efforts, are concentrating capital on improving amenities to be a more attractive alternative for travel buyers seeking pricing relief from upscale hotel chains.
Midprice properties on the whole, particularly without food and beverage, were among the strongest in the industry last year, according to data from PricewaterhouseCoopers. Increases in occupancy and revenue per available room for both tiers were above the overall industry average, and the midprice without food and beverage tier saw an annual 8.4 percent increase in average daily rates, above the industry average of 6.8 percent, the data indicated. With this strong performance, midprice chains have been able to upgrade amenities that blur the distinction between the two midprice tiers and even between midprice and upscale, said Bjorn Hanson, head of the hospitality practice at PwC.
"In a period of strong and increasing occupancies—2006 occupancy was the highest in 10 years—hotel companies generally do fine-tuning of their position," Hanson said. "The level of facilities improves, and it creates some inter-chain-scale competition."
Strong chainwide performance and high revenues make it easier to persuade individual properties to invest in such improvements, hoteliers said. "When times are good, that's the time to really work on tuning the engine," said Steven Mogck, Carlson Hotels Worldwide's executive vice president of select service hotels. "We know the market goes through cycles, so to stay on top, we're taking this time to work especially hard and not rest now."
Perhaps no amenity has made this clearer than food offerings at midprice without food and beverage properties. Although, per their description, such properties do not have a dedicated restaurant, hoteliers in the tier have put resources into their free food offerings.
SpringHill by Marriott, for example, enhanced its continental breakfast to alternate foods with the seasons, giving guests a variety of options throughout the year, said Marsha Scarbrough, SpringHill's vice president of brand strategy. Hampton Inn, a member of the Hilton Hotels Corp. family, rolled out a hot breakfast a few years ago as part of a brandwide reinvention, said Judy Christa-Cathey, the brand's vice president of marketing, and several other brands have done the same.
"Customers expect hot items, so we added breakfast meats and waffles to the program and also have increased the variety around pastries and cereals," said Kimberly Shells, senior director of brand strategy for Choice Hotels' Comfort Suites. "Who would have thought that breakfast in this category would be so competitive?"
Although breakfast is the meal business travelers are most likely to seek within a hotel, midprice without food and beverage properties also are making strides in providing other meals, PwC's Hanson said. In a recent surprising experience staying at one such hotel, he said, "In the lobby, there was a large seating area filled with people having dinner: hamburgers, cheeseburgers, tuna burgers and dessert. It was set up for a large number of guests, with a host offering to pour more wine. It's an interesting transformation."
Bedding and bath remains a focus for midprice hotels as well. Marriott brands, Hampton and Comfort Suites and sister brand Comfort Inn have introduced new bedding. While it's a common strategy, it has a heavy impact on customer satisfaction numbers, said SpringHill's Scarbrough.
SpringHill, in fact, launched a new design for its rooms earlier this year and expects to open hotels with elements of that design by the end of the year. By 2009, Marriott projects that 75 percent of the brand's hotels will have most of the new design features.
"The room is really designed to emphasize the spaciousness of the suite," Scarbrough said. "We've also made an emphasis on the whole bath area, with spa-like bathrooms."
Midprice hoteliers also have focused on their public space. SpringHill's new design set out to make the lobbies multifunctional, so that people could use them for work and socialization, and such touches as the music would change throughout the day, she said. Country Inns & Suites, part of Carlson Hotels Worldwide, has aimed to make its lobbies seem residential, with centralized staircases, fireplaces and bookcases with a "read it and return" policy, Mogck said.
Phil Cordell, senior vice president of brand management for Hampton Inn, said though inherent physical aspects always will separate the midprice and higher hotel tiers—the lack of a restaurant or dedicated meeting space, for example—it's not as difficult for midprice properties to encroach on the higher tiers' territory in most areas.
"When you step away from those differentiations, we're all selling the same thing: a room box with a comfortable bed, a nice bath and a television," Cordell said. "How everybody spins those core elements becomes the potential challenge for differentiation. To me, it's a degree of differences versus distinct differences."
The key, according to Comfort Inn senior director of brand strategy Rita Santelli, is for the tier to avoid the trap of merely adding amenities for the sake of adding amenities. Although a strong business cycle provides an impetus to do so, it's more important that any improvements are reactions to or anticipations of guests' needs, she said.
"All of these improvements are obviously a capital investment from the standpoint of our owners," Santelli said. "It's the right time to do it, but the bottom line is around our guests."
At the same time, midprice development continues to boom. Even with construction costs on the rise, causing the slowing of some development pipelines, midprice projects are affected less because they are cheaper to build and have lower operating costs than full-service properties
(BTN, April 3, 2006).Scarbrough said SpringHill, which is about seven years old, is Marriott's new power brand, with 155 hotels and 110 more in the pipeline. Country Inns & Suites opened its 400th hotel last year and is on its way to opening 40 new hotels, Mogck said.
"We've had tremendous growth and a tremendous amount of new builds," Mogck said. "It isn't that our product has fundamentally changed. It's just that people are discovering us and finding that they're liking us a lot."
Hampton, which already has more than 1,400 hotels, opened almost 100 in 2006 and could open as many as 140 this year, Cordell said. Urban markets are a primary growth area for Hampton, which has almost 10 locations in Manhattan alone, he said.
In addition, Hampton and the other Hilton select-service brands have new international opportunities now that Hilton International has integrated within Hilton Hotels Corp.
(BTN, May 15, 2006). As part of a move in that direction, Hilton recently exchanged contracts for the E833 million sale of its midprice Scandic brand to a private equity group, which could pave the way for more of its own brands in the area.
"We've identified about eight regions or countries, primarily in Western Europe and Asia," Cordell said. "There are some huge opportunities for us."