New Brands Attempt To Find Their All Suites Spots

<B>New Brands Attempt To Find Their All Suites Spots</B>

By Bruce Serlen

Established full-service brands, such as Embassy Suites and Doubletree Guest Suites, are making it hard for recent entrants to the all suites segment to carve out their own niches. Brands, such as TownePlace Suites and SpringHill Suites, both by Marriott, and Staybridge Suites by Holiday Inn, practically have to start building a brand identity at the same time they're putting the first construction shovel in the earth

Complicating matters for the newcomers are two developments. One is typified by another established brand, Comfort Suites, which earlier had marketed itself as a combination regular-room-plus-suite product--Comfort Inns & Suites--and now is trying to market the all suites units as a separate entity.

The second development is that established all suites brands, such as Homewood Suites, are trying to gain additional leverage in today's competitive market by adding sub-brands to their names. For Homewood, the sub-brand, "by Hilton," is the result of the acquisition of the former Promus brand by the Hilton Hotels Corp. late last year.

For travel buyers, more brands mean more choice in a given market, especially when the new brands are part of the portfolios of multi-brand hotel companies, such as Marriott and Hilton, because it creates more possibilities for negotiation at the national sales level.

At the same time, more brands potentially mean more confusion among travelers as to what the approved options really are in a certain location. And confusion doesn't help travel managers realize their ultimate goal: driving compliance to the approved suppliers.

Yet, the field is still far from overcrowded, particularly in light of the fast-growing extended stay segment.

"The all suites category may appear to be crowded overall, but it's not really, once you take into account different segments and price points in the market," said Erika Alexander, brand vice president for TownePlace Suites, which was launched in 1997. "When we were first developing the business plan, we addressed the question of whether there was a clearly identifiable segment that was deep enough for a midprice all suites concept to succeed."

That brand grew out of Marriott's experience with the Residence Inn brand, the extended stay segment pioneer, which it acquired in 1987 and grew from 96 to 325 properties. "With occupancies at Residence Inns of over 80 percent, we knew there were plenty of extended stay guests staying in traditional hotels," said Alexander. "Consequently, we designed TownePlace for the extended stay market, though at a somewhat lower price point."

Similarly, Bass Hotels & Resorts saw plenty of room for growth when it launched Staybridge Suites. "The bottom line is that only 3 percent to 4 percent of the total U.S. rooms inventory is extended stay, regardless of price point, so the marketplace seemed anything but crowded," said Jim Anhut, senior vice president of Staybridge, which also debuted in 1997. "The challenge we faced was trying to differentiate ourselves in a mature market. This meant determining which travelers we were targeting, the lodging options they had and how we communicated our offering."

Staybridge's decision was to target the full-service extended stay traveler, a segment where it competes with such brands as Residence Inn and Summerfield Suites. "Our research indicated that our potential customer was a savvy business traveler, who's looking to maintain his or her own lifestyle as much as possible while on an extended stay assignment," Anhut said. "In fact, these travelers told us the one thing they didn't want was to be over-serviced."

The typical extended stay guest stays five consecutive nights or longer. "The typical length of stay is three weeks, however, and the segment is growing as companies find they need to send employees on long-term assignments more often," Alexander said.

Because their guests tend to "move into" the hotel, extended stay properties take on a strong residential feel. "What we're selling is more of a service than simply bricks and mortar. Staff members, for example, are apt to be extremely friendly and try to make guests feel at home," Anhut said.

Alexander likened the atmosphere to a neighborhood: "Staff members tend to know guests by name. They deliver their mail and check up on them almost as though they were a surrogate family."

TownePlace presently has 71 properties open and expects to have 90 operating by year-end. "With extended stay, you tend to go where the demand generators are," said Alexander, regarding the new locations.

With only 14 properties open, Staybridge plans to have 30 units operating by year-end and 60 to 70 open a year later. "You need to have a certain number of properties open before you can reasonably start to build national visibility," said Anhut, who also is chairman of the American Hotel & Motel Association's Extended Stay Lodging Council.

Research confirms the continuing strength of this segment. According to Mark Skinner, a partner in the Atlanta-based Highland Group, more than 40,000 new extended stay rooms opened in the United States in 1999, a 21 percent gain in supply over the prior year. This followed an even more impressive 1998 when 49,000 new rooms were added, a 49 percent gain, and a 261 percent increase compared with 1995. Skinner predicted extended stay hotel rooms under construction will approach 26,000 this year, a still healthy 14 percent increase.

Meanwhile, demand will increase by more than 9.3 million room nights in 1999 over the previous year. "Demand growth in all extended stay segments was well above the U.S. hotel average for the year, indicating that these hotels have not reached saturation," Skinner said. "While absolute demand growth was slower in 1998 and 1997, however, the decrease in the supply growth caused occupancy to rise."

Yet, overall occupancies declined since 1996. "The gap between the supply and demand curves has noticeably widened since '96," said Stephen Hennis, director of research for HVS International. This coincided with many new brands starting to come online. According to HVS, occupancy for the extended stay sector was slightly above 80 percent in 1994. By 1999, the occupancy level for the sector was roughly 72 percent. Hennis attributed the 8 percent decrease primarily to new brands entering the market, particularly at the lower and mid-tier price points.

The extended stay segment has grown so large that analysts have begun breaking out the different brands based on price point, calculated as the weekly rate. Price points used by Skinner include upscale ($600+), midprice ($325-$600), economy ($225-$325) and budget (under $225). Midprice is the most populous with 12 brands included. Staybridge qualifies as upscale, while TownePlace is midprice.

SpringHill Suites chose to sidestep the extended stay positioning altogether in favor of a more traditional midprice game plan. In 1997, Marriott had created Fairfield Inn Suites as an outgrowth of the Fairfield Inn brand. A year later, however, it realized it had the germ of a self-sufficient brand on its hands. Consequently, over a nine-month period, Marriott converted all 15 of the Fairfield Inn Suites that already had opened into the first SpringHills. Twelve more were under construction at the time and they were reborn as SpringHills as well.

"New exterior facades were added and the public spaces were enhanced," said Kathy Townshend, brand vice president. "In addition, we added amenities like voicemail and two-line telephones to the suites to make them more appealing to business travelers."

As with every all suites product, SpringHill's basic appeal is to the traveler who wants more space. "Our suites are about 25 percent larger than regular guest rooms," she said. "Why stay in a traditional hotel room when you can get all this extra space?"

There are presently 45 SpringHill Suites and Townshend expects to have 63 open by year-end. When seeking potential locations, she "looks for high visibility sites, whether urban, suburban or airport." She refers to these locations as "billboard sites" because they have the added value of helping build name recognition. "There may be higher barriers to entry in some of these markets, but the increased visibility you get often makes the extra effort and time worthwhile," she said.

Because hotels with vacant rooms loathe to turn away guests, whatever their expected length of stay, all suites extended stay properties inevitably compete with regular midprice all suites properties. "There is also competitive overlap with full-service all suites hotels as well as corporate apartments," said HVS International's Hennis.

At a company like Marriott, it's entirely possible that one brand will find itself located in close proximity to another. Alexander and Townshend see that as an opportunity.

"Sure, there are markets where we have multiple brands within an arm's reach of one another, but each has its own identity, which means we're not truly competitors," Alexander said.

In fact, brands frequently want to be across the street from each other, Townshend said. "We look to have the right mix of brands as a way of maximizing share in a particular market," she said. "For the new entry into a market, you can learn a lot about that market from the experience other brands have had in that market. Plus, there are all kinds of cross-selling possibilities you can take advantage of with travel buyers."

As in any product category in or out of the lodging industry, considerable thought goes into choosing the right name. "In our case, we considered 30 to 40 names, trying to find just the right one that would suggest a sense of warmth and home," Alexander said. "The concept of 'town' was always part of our thinking and because of our two-building design, which resembles a main street, we arrived at 'town place.' "

At Staybridge, the naming process was equally analytical. "The root word 'bridge' is meant to imply 'bridging a gap' because we provide support for the traveler who's on the road for an extended stay," said Bill Linehan, brand director, sales and marketing. "'Stay, meanwhile, suggests that we make it possible for travelers to stay connected to their lives back home."

The one word Staybridge sought to avoid was "home." "Our research indicated that there's no fooling the extended stay traveler. A hotel is not home, so don't call it home," Linehan said.

"Certainly, you'd want to choose a name that creates the proper image, that connotes warmth, caring, nurturing and family," said Jim Johnson, chairman of Enterprise IG, a global naming firm based in New York. "As a result, it's no surprise that half the names seem to have 'home' in them."


<B>Screening Mechanism</B>

Since these brands are looking to make inroads into the corporate travel market, however, there's a screening mechanism built in to the process: the travel manager. "Travel managers are what we call the intelligent intermediary, cutting through the clutter of all the brand names out there and presenting the traveler with the short list of choices on the approved list," he said. "Given that the list is short, it's not critical that the names be especially differentiated as long as each name makes the point that we meet your needs."

Established brands, by definition, bypass the whole issue of building name recognition for a new brand from the ground up. But the all suites category has proven so popular lately that brands, such as the Comfort chain, that never had marketed their all suites properties as separate entities previously are sitting up and taking notice. "Comfort Inns and Comfort Suites had always been two separate entities, though they were never advertised or promoted separately before," said Dan Shoen, vice president of Comfort Suites, a unit of Choice Hotels International. "Basically, the change is a reflection of the increased interest today in all suites brands, which in turn is a reflection of the appeal of the suite's additional space."

Business travelers are traveling more in today's strong economy and this also factors into that appeal. "Travelers often feel entitled to the extra space because they're asked to spend so much time on the road," Shoen said.

Behind the decision to market the suites brand separately is the matter of distribution. "We're now at 235 properties, which gives us a certain critical mass in the business travel marketplace," said Shoen. "In fact, 1999 was the first year that we actually opened more Comfort Suites than Comfort Inns."

As a result of the Hilton acquisition of Promus at the end of last year--and the subsequent renaming of Homewood Suites as Homewood Suites by Hilton--the all suites extended stay brand is undergoing an extensive repositioning. "We've announced a new prototype, which has a more efficient, home-like interior," said Holthouser. "What we've done is combine ideas from the Hilton Residential Suites brand that has now been discontinued. It didn't make sense in the aftermath of the merger to operate two competing brands."

Homewood currently has 90 properties open across the country and 12 more under construction. Properties with the new prototype should be operating by year-end. Holthouser said the Hilton sub-brand will give Homewood increased visibility and customer loyalty. "Travelers recognize the Hilton name and feel reassured they will find the same level of quality and consistency they get at other Hilton brands."

Sub-branding is a benefit as well because of the growing popularity--and marketing muscle--of hotel frequency programs. "When they see the parent company included in the brand's name, it reminds travelers that they can use their membership in that company's frequent guest program to acquire additional points," said HVS International's Hennis. "As a motivator, this can be a powerful tool."

That may prove to be even more the case at extended stay properties, where travelers can acquire a significant number of points because of the longer stay.