All-Suite Chains Grow, Face Identity Issues

<B>All-Suite Chains Grow, Face Identity Issues</B>

By Bruce Serlen

The all-suite segment has been enjoying a significant growth spurt, but it hasn't been without growing pains. A by-product of all the ongoing expansions and acquisitions for both upscale and midprice properties has been a deepening identity crisis.

"When you talk about the many all-suite chains that have sprung up in recent years--as well as other chains that are adding suites to their regular guest room mix--you find yourself asking the fundamental question, 'What is a suite?' " said Mark Snyder, senior vice president of brand management for upscale Embassy Suites.

The traditional answer to that question is that a suite consists of two distinct rooms separated by a door that fully closes. Later arrivals to the segment, such as AmeriSuites and Hampton and Fairfield Inns, maintain that the wall and door only get in the way of the suite space.

Embassy Suites, which pioneered the all-suite concept in 1984, next month is opening its largest property to date, located in the heart of downtown New York City's thriving Wall Street financial district.

"With 463 two-room suites, ranging in size from 450 to 800 square feet, this property quickly will become a flagship for the brand," said Mark Snyder, senior vice president of brand management. By contrast, Embassy Suites has two traditional prototypes comprising 150 and 240 two-room suites, respectively, so the New York project is considerably larger.

"It's also part of a mixed-use development that includes a 16-screen multiplex and extensive retail, so the building will have quite high visibility," said Snyder. "But what really distinguishes it for the chain is that it's a validation of the all-suite, two-room concept."

In the midprice sector, Prime Hospitality Corp. announced that its all-suite AmeriSuites brand will grow significantly when it acquires the leases to 27 Sumner Suites properties from Sholodge. The acquired hotels are located in 12 states in the Southeast, Midwest and Southwest. As part of the deal, Prime Hospitality also will acquire land from Sholodge in Virginia and New Jersey on which to build two more AmeriSuites.

"The transaction is unusual for us because AmeriSuites is basically a new construction product," said Doug Vicari, senior vice president and CFO at Prime Hospitality. "But the Sholodge properties happen to be built on a model very similar to AmeriSuites, so it's an excellent match for us." As a result of the deal, AmeriSuites will grow by 30 percent.

AmeriSuites' definition of a suite has each unit including living and bedroom areas, though they aren't fully separate rooms. A third part of the unit is a kitchen area. "The living area can also double as a work space," said Vicari. "Actually, there's been more growth in this segment recently in terms of new property development because construction costs are lower."

The price/value relation is what appeals to AmeriSuites travelers, according to Vicari. "They get a bigger room, approximately 425 square feet, for a lower cost than the competition," he said.

Given the confusion around the all-suite concept, travel buyers who include these properties in their preferred hotel programs must be sure of the kind of suites these properties offer. "There's no way for any company to take over the trade name 'suite,' it's a generic," said Jack Corgel, Ph.D., managing director of applied research in the hospitality research group at PKF Consulting. "The all-suites category has seen a lot of growth in the recent past. This growth has hardly tapped out, but it may be reaching a plateau. What will be developed in the next round is presently up for grabs. This may explain the current competitive environment."

And, added Snyder, "Anyone can call a hotel room anything. Witness the single large room now dubbed the 'studio suite' by many chains. As customers experience the different variations, they will come to realize what a true suite is. They then will decide if a particular variation fits their needs or not."

Costs ultimately may be the deciding factor. "In the end, pricing may well sort out the different configurations," said Corgel. "For one company to distinguish itself in this kind of crowded marketplace, it may have to disparage the competition."

At Embassy Suites, the separate two-room strategy always has been part of the concept. "Privacy is a part of that concept, with the guest able to close the door to the bedroom, leaving the parlor free to entertain guests or hold meetings," he said. "But space is also a key component of our value proposition, with our average unit measuring 480 square feet."

For Snyder, space is the ultimate compromise the business traveler is asked to make today. "Space is at an all time premium. Just look at the attention certain airlines are receiving for removing rows of seats to allow more leg room in coach," he said. "So why wouldn't business travelers want the space in a suite that's fully two rooms?"

For travel buyers, knowing the requirements of their travelers while on the road--the priority they place on having a private bedroom, for example--will help determine the suitability of different all-suite products they may be considering for the preferred list.

"Similarly, if more than one all-suite property is on the approved list in a given market, buyers may need to communicate to travelers how they differ," said PKF's Corgel.

Of the 153 properties presently in the Embassy Suites portfolio, the vast majority are based on the 240-suite prototype. The 150-suite version was introduced in 1998 and is intended to give the brand visibility in secondary and tertiary destinations. Six have been built to date.

"Expansion plans are fairly modest for 2000 and 2001, with six new properties scheduled to come on line each year," said Snyder. "But we expect to increase the pace of development from 2002 to 2005."

The brand was acquired along with the rest of the Promus Hotel Corp. at the end of 1999 by the Hilton Hotels Corp. "Hilton is very development oriented, which is why we'll be seeing the increased activity," he said.

In addition to the new New York property, Snyder is targeting major gateway cities for this development, specifically San Francisco, Chicago and Boston. International development is another priority.

"While Embassy Suites is not a strong brand outside the United States, the Hilton name is very well known," said Snyder, "so we may try to marry the two in some way." At present, the chain does have properties in Toronto and Bogota, Colombia.

At AmeriSuites, the chain is getting a positive response to its special room product targeted to business travelers. Known as "Taking Care of Business Suites," they feature an expanded desk, a second telephone line with dataport and basic office supplies. The number of these special suites at a property ranges from 20 percent to 35 percent. Guests are charged a daily premium of $10 to $15 for them.

"We're enjoying solid demand for the product. As more business travelers bring work on the road, these suites allow them to be more productive," said John Leavitt, senior vice president of sales and marketing at Prime Hospitality.

Further complicating the all-suites identity crisis, such established midprice brands as Hampton Inn and Fairfield Inn by Marriott are eager to reinvent themselves to incorporate suites into their name.

In fact, both chains introduced new prototypes earlier this year that raise the visibility of suites in the room mix. At the newly named Hampton Inn & Suites product, for example, a 375-sq.-ft. "studio suite" is being introduced that eliminates the wall separating the bedroom and living areas and offers more space. Like Embassy Suites, Hampton Inn & Suites became part of the Hilton Hotels Corp. as a result of the Promus acquisition.

According to Phil Cordell, senior vice president of brand management, "this studio design allows guests the same comfort and amenities of a hotel suite, yet with a more open feel."

Comparing the new studio suite to the traditional one-bedroom suite that Hampton Inn had featured, Cordell said, "Through our guest research, we discovered we had been over-delivering." Echoing Doug Vicari's point regarding construction costs at AmeriSuites, Cordell noted that the new Hampton Inn suite design also provides a lower cost-per-key product for hotel developers.

Similarly, Fairfield Inn has become Fairfield Inn & Suites by Marriott, featuring both traditional guest rooms and suites. The change is scheduled to affect both existing and future locations with the first of the reformatted properties debuting in 3Q00.

Said Nick Kellock, Fairfield's brand vice president, "A number of guest rooms in the existing prototype contained oversized bays, which lent themselves to being retrofitted."

As at Hampton Inn, guest feedback is cited as the reason for the change. "Business travelers told us they wanted the suite option," he said.

Though here too, the brand is acting with franchisees in mind. Prototype properties will cost only $3,000 more per room to develop. Approximately 15 percent to 40 percent of a typical Fairfield Inn & Suites will be suites versus regular rooms.

Cost, space and privacy aside, all-suite chains compete as well in terms of value-added amenities for the traveler. A focus since the early days of the category has been food. Upscale Embassy Suites set the standard with its complimentary, full, cooked-to-order breakfast. In addition, a manager's reception is held each evening.

"These have always been part of the brand's value proposition," said Mark Snyder. At AmeriSuites, by contrast, it's a "bountiful" buffet breakfast, said John Leavitt.

For marketing experts who specialize in branding issues, the questions revolving around the all-suite category are troubling. "Problems arise when there's not a lot of differentiation separating the different products. A certain sameness can set in," said Jack Trout, president of Trout & Partners, a marketing strategy firm.

The brand may assume it's clear to the customer what the brand's points of differentiation are, when in fact it's not clear at all. "The challenge becomes how to separate yourself from the competition in a meaningful way," he said. Some of the same issues exist in the extended-stay segment.

A related issue is that one hotel company can have a number of suite brands under its umbrella, though at different price points in the marketplace. "It can become a giant, sorting-out problem. After all, you have to support them all," said Trout who is the author of the recent book, Differentiate or Die. "In some ways, it might just make more sense to pick one brand and build that into the category leader."

"It's fair to say the customer is confused to some degree," said David Redfern, vice president of sales and marketing of Candlewood Suites, another suite brand. "As marketers, it's critical to determine what your chain excels at and then to stress those attributes to the user.