Hoteliers Saturating Key Cities - 2001-01-15

<B>Hoteliers Saturating Key Cities</B>

By Bruce Serlen

When W Hotels opened in New York's Union Square last week, it was the latest chapter in the growth of this new brand from Starwood Hotels & Resorts Worldwide. In terms of the thriving New York hotel market, however, the opening is significant because the 270-room property is the fourth W in a 32-block stretch of Manhattan's East Side.

As it happens, W is far from alone in attempting to achieve this kind of geographical saturation in a desirable business travel market. If not quite to the same degree, Hilton International, for example, operates nine upscale hotels in London and has two more in development. Marriott International, meanwhile, has 16 Marriott Hotels, 15 Courtyards and 10 Residence Inns in the Greater Washington, D.C., area. In fact, given Marriott's intense approach to brand segmentation, it actually has 60 different hotels, amounting to 16,834 rooms, in the Washington area.

For buyers, this trend toward saturation in high demand markets is a positive development because it provides them with the coverage they need. When the hotel company they've negotiated with has this kind of depth of inventory, buyers are much more likely to get midweek reservations.

Yet, not all hotel locations in a large city are equally desirable, given where travelers' business appointments actually take them. In the Marriott example, travelers who have business in downtown Washington would be at a disadvantage being housed at certain locations in Virginia or Maryland. Likewise, travelers used to staying at a certain hotel in a destination come to expect particular amenities and may be dissatisfied at another hotel, even if it carries the same flag. When booking--either online or through an agent--there's also the chance there'll be confusion in the traveler's mind as to which property in a saturated market is being booked. This, in turn, puts an added burden on the agent--and the buyer--to ensure this information is being communicated clearly.

"In a market like New York, there's enough demand to support a number of Ws," said Lisa Zandee, director of sales and marketing at W New York. "But, while the four are in close physical proximity, each has its own profile and character. The sizes differ and the neighborhoods differ. What they all share, of course, is the same special ambience and attitude toward the guest, which is at the core of the W identity."

Zandee used the newest W as a case in point. "It's a historic, Beaux Arts building, which is a first for the Ws in New York," she said. "It's also the first hotel in Union Square Park, which is becoming a cutting-edge neighborhood with a definite downtown feel."

Rudi Jagersbacher, Hilton International vice president of London, agreed that such markets must be assessed by their different submarkets. "There are business travelers, for example, who will want to be at the property on Park Lane, which is in one submarket, while other travelers will prefer the much larger Metropole, which is near Paddington, another part of town entirely," he said.

Jagersbacher said saturating a market with one brand's hotels provides critical mass. "Having a major presence in such a gateway city as London helps build the reputation of the brand name. It provides visibility, which can be helpful when you want to expand into other, not quite so prominent destinations."

In another regard, having a large number of hotels in a high demand market can prove beneficial when properties sell out, particularly midweek. At Marriott, travelers whose first choice of, say, a Courtyard are directed to the nearest Courtyard should the first one be unavailable. "Travelers may feel comfortable with that particular brand and like the level of service they receive," said Bob Deeley, regional vice president of lodging development for Marriott. "At the same time, location may be the traveler's prime consideration. In that case, he or she will be directed to the Marriott-branded hotel closest to the one that was full."

Meanwhile, a fifth New York W is already in the final development stage, though it will be across town from the existing portfolio. "It's in Times Square and, therefore, has its own distinct profile," Zandee said.

Hoteliers disagree as to just how many cities can support this high level of saturation. According to David Michels, CEO of Hilton Group Plc (BTN, Oct. 30, 2000), "There are only three cities in the world where having a large number of hotels has historically paid off: London, New York and Paris. You can always have more hotels in these cities because there are lots of business people and lots of tourists.