Hotel Chains Add New Brands That Extend Coverage

<B>Hotel Chains Add New Brands That Extend Coverage</B>

By Bruce Serlen

One way multibrand hotel companies seek to grow market share in today's competitive marketplace is by increasing the amount of business they attract to their existing brands. When this fails, a second strategy is simply to add new brands to their portfolios. In this way, hotel companies increase the number of options they can present to a travel manager looking to put together a hotel program to provide the coverage needed in different destinations.

Both Carlson Hotels Worldwide and the hotel division of Cendant Corp. chose this second strategy in the past few months as the most expedient way to accelerate growth. At Carlson, it meant adding the Park Plaza and Park Inn brands to an existing portfolio that already includes Radisson Hotels & Resorts, Regent International and Country Inns & Suites by Carlson. Meanwhile, at Cendant, the new brands are AmeriHost Inn and AmeriHost Inns & Suites. They join an existing roster that includes eight other brands: Days Inn, Howard Johnson, Knights Inn, Ramada, Super 8, Travelodge, Villager Lodge and Wingate Inns International.

Specifically at Carlson, the company this spring entered into an agreement with the Olympus Hospitality Group to create an entity called Park Hospitality, which will franchise the Park Plaza and Park Inn brands. Similarly at Cendant, the company acquired the AmeriHost Inn and AmeriHost Inns & Suites brand names and franchising rights this summer from a company called AmeriHost Properties, which now will become the brands' largest franchisee.

Underlying these developments is the overall health of the lodging industry and prospects for its continued prosperity. This rosy outlook was evident in data released this month by the Hospitality Research Group, which is a division of PKF Consulting.

"We've been hearing pundits claim the hotel industry is over the hill, but as long as the economy remains strong, the industry will continue to ride the crest of the wave," said John Fox, PKF's senior vice president "The numbers we're seeing reflect a 3.6 percent increase in room rates for 2000 over 1999 and a 3.3 percent increase for 2001 over the current year. It's the kind of growth that's significantly ahead of inflation and very healthy for the industry."

National occupancy for major cities, meanwhile, is expected to hit 71.8 percent in 2001, up from 71.4 percent estimated for year-end 2000. Of the 46 cities surveyed by PKF, two-thirds are expected to experience increases in occupancy in 2001, while one-third are expected to remain flat or experience decreases.

For travel buyers looking to bolster the coverage they have in a given destination, even a secondary or tertiary destination, the option of picking up additional brands at an existing preferred supplier is welcome. After all, the relationship at the national sales level is already in place. And with that relationship comes a certain level of assurance that consistent standards of service will be in place. Plus, in return for the increased market share, hotel companies are more likely to negotiate even more favorable rates.

The corporate travel buyer--and subsequently the business traveler--is at the core of both Carlson and Cendant's growth strategies for the acquired brands. Indeed, depending on location, business travelers make up 65 percent to 70 percent of these chains' existing--and projected--clientele.

Carlson "didn't have in its portfolio alternative brands to Radisson and Country Inns & Suites," said Jetse Pottinga, executive vice president of Park Hospitality. "Given the radius clause provisions in the franchise agreements, there's been demand on Carlson from existing Carlson owners and potential owners who wanted to work with us. Having the Park Plaza and Park Inn brands in the portfolio will help fill the gap."

Similarly, franchisees who also own non-Carlson hotels and want to convert them to Carlson brands now will have greater flexibility to do so.

Park Plaza is a full service brand comparable to Radisson, while Park Inn includes both full service and limited service units and is more comparable to Country Inns & Suites. At present, there are three U.S. Park Plazas and 25 Park Inns. "Plans, however, call for opening 75 more units of the two brands in the U.S. within a year. These will be conversions," Pottinga said. Outside the United States, one franchisee has the right to build units of the brands in Europe, Asia and Latin America, while another franchisee has these rights for the South Pacific and Southeast Asia.

Most of the existing Park Plazas and Park Inns are about 110 to 115 rooms in size, with some a mix of single rooms and suites. "Considering that initially we're focusing on growth through conversions, we haven't yet developed a prototype for new builds," Pottinga said.

Right now, the hotels do basically transient business, though there is an element of extended stay travel as well. While it is too early to predict, Pottinga wouldn't rule out the possibility that one of the brands might one day evolve into an extended stay brand. Extended stay brands are enjoying especially strong growth today (BTN, Oct. 2). At present, Carlson has no extended stay brand in its portfolio.

While Carlson has a concentration of properties in such states as Wisconsin and Minnesota, Pottinga's intention is to build Park Plaza and Park Inn into what he termed a "national experience."

Despite having eight existing brands in its stable, Cendant has a very precise idea of where it sees the AmeriHost brand fitting in.

"Brands are driven by demand. There's a specific price point that isn't presently being met at Cendant between the midscale Wingate Inns International brand and Super 8, which we consider in the upper economy segment," said John Paul Nichols, executive vice president for sales and marketing for Cendant's hotel division. "AmeriHost is positioned to meet this need."

At present, there are 80 existing AmeriHosts, primarily AmeriHost Inns. "Future development will focus on the Inn product because there's demand, but also because development costs are lower than they are for the Suites product," Nichols said.

The typical AmeriHost Inn is a 64-room new build with a consistent look, but a look that allows for regional differences and possible adjustments due to zoning requirements. Some conversions might be possible, but Nichols doubted there would be many of them. "Aside from needing to have a compatible configuration, Cendant's policy is that buildings being converted from other brands can't be more than three years old," he said. Standard AmeriHost features include indoor swimming pools and breakfast bars.

Like Carlson's Park Plazas and Park Inns, AmeriHost is strong in the Midwest, particularly in the Chicago area where the brand originated. Also like Park Plaza and Park Inn, Nichols said AmeriHost intends to expand in the Northeast, Southeast and West. "To be a truly national brand, you need about 100 properties," he said. "However, a brand can have only 10 properties, but if they happen to be located in such locations as New York, Los Angeles, Chicago and Boston, you can still be a national brand." Nichols also said that "going national for the wrong reason isn't necessarily the right thing to do."

Unlike Carlson, which actively promotes its family of brands to travelers, Cendant's policy is to discourage any cross promotion. "We want the traveler to retain a relationship--and build loyalty--to the brand, not to Cendant," Nichols said. "At the same time, all the brands take advantage of economies of scale behind the scenes that come from being part of the same organization."

The one exception to this philosophy is in the approach to the travel buyer. "Our national sales teams sell all the brands and we're eager to be given preferred supplier status in corporate customers' hotel programs," he said.

As an example, Nichols cited the business traveler in an unmanaged program who called the AmeriHost 800 number for a reservation. If there was no Ameri-Host in that location or if the AmeriHost in that location was full, the traveler would not be directed to other Cendant brands in that location. By contrast, the business traveler in a managed program, booking online or through a corporate travel agent, would be directed to other Cendant brands in that location as well as other brands that were included in the hotel program.

For its part, Carlson wants travelers to know of Park Plaza's and Park Inn's connection to the parent company. "Consequently, our intention is that stays at Park Plaza and Park Inn will start earning points in Carlson Hospitality's frequency program, known as Gold Points Rewards, as soon as early 2001," Pottinga said.

"Not only does this help build repeat stays, but it encourages the traveler who already knows Radisson and Country Inns & Suites to try the new brands when they're in a location where the other choices aren't available.