New Building, Conversions Place Midpriced Leaders

<B> New Building, Conversions Place Midpriced Leaders</B>

By Maria P. Vallejo

The midpriced with food and beverage category proved again the industry law of "newer is better," yet three brands using using conversions or renovations made it into the ranks of the top five hotel chains in this category without using new construction to reach their target guests.

While Sheraton Four Points, Holiday Inn Select and Red Lion bucked the conventional wisdom, Hilton Garden Inns and Courtyard by Marriott actively expanded their products with new construction. Hilton and Marriott helped propel mass development in the midpriced market by offering business travelers a novel alternative to the majority of renovated or converted properties in this price segment.

"Newer is better and that tends to be true the further down you get in the pricing strategy," said Ted Mandigo, president of Chicago-based T.R. Mandigo & Co. "I think that having new properties and a good program sells better than just having a good program."

<B>New Digs Draw Guests</B>

These two hotels followed analysts' theory of newer products receiving higher praise from guests. Hotels utilizing modern designs created specifically for today's travelers are expected to overshadow other brands using older models. "The ones that are coming on top of the line are the ones designed in the last couple of years of what the market is now," said Scott Brush, president of Miami-based Brush & Co.

As in last year's survey, Hilton Garden Inns kept its momentum by blanketing its coverage area with twice as many hotels in 1997. Hilton launched the midpriced brand in 1996 and closed last year with 10 hotels in locations including Valencia, Calif., greater Chicago and the suburbs of Dallas. More than 100 new hotels were under development last year with an additional 40 to 50 hotels slated for opening by the end of this year. The company expects to exceed its goal of adding more than 200 properties in North America by the end of 2000. Previously, Hilton Inns won the category for four consecutive years.

"The first development activity was in the economy and budget areas, now it's moved into the midpriced," said Robert Mandelbaum, New York-based PKF Consulting's director of research.

The franchised products are all new constructions, supporting analysts theories about particular companies topping survey charts. "New beats old," said James Abrahamson, Hilton's senior vice president of franchising. "That's a great advantage of our product. We're only doing new constructions, not conversions."

New facilities were not the only advantages Hilton Garden Inns held. Hilton Hotels & Resorts and Hilton Garden Inns are equipped with identical Hilton Honors and corporate rate programs. The sharing of marketing projects and services allows seamless interaction between business travelers and any Hilton property. This universal marketing strategy helped Garden Inns sweep eight categories, including corporate rate programs, frequent traveler programs and timely commission payments.

Courtyard by Marriott moved up two positions to third place, receiving the highest usage by travel managers polled and winning the ease in arranging individual travel category. Courtyard by Marriott was credited with starting the trend of midpriced brands, Brush said.

The newly segmented midpriced category, seperated into full and limited service, provided room for upward mobility for some of last year's exempted and lower ranked companies. Many of these companies owe their new placements to their expansion efforts.

The Sheraton Four Points brand, which became an area of interest for Starwood Hotels & Resorts during its bid of ITT Corp., proved itself a worthy competitor in the survey. At the close of last year, Four Points had 93 properties with 17,917 rooms open. Company officials have no plans of slowing its expansion, with 500 hotels expected by 2000.

"We have faster growth in markets and increased products to buy," said Sam Winterbottom, ITT Sheraton's interim president of the franchise division. "We're opening in key gateway markets."

The brand, a resurrection of Sheraton Inns, claimed second place against some difficult competition. Four Points, with a propensity for hotel conversions, was matched against new construction-focused hotel companies.

Four Points' tendency to convert existing hotels offers a less consistent look, leaving more room for critical opinion, Mandelbaum said. Often these prototype hotels hold the advantage in the lower priced markets because expectations easily can be met.

Regardless of any steadfast way to assure consistency and perhaps fulfill expectation, Four Points climbed up seven places, beating some new construction-oriented hotel companies.

Fourth place winner, Holiday Inns Select, also used renovations as a platform for remaining in one of the top five positions. Although it slipped one position, analysts noted Holiday Inn Select was competing against new construction hotel companies. Franchisers invested about $1.2 billion in renovating their properties. "We want to continue to modernize on a regular basis, so we don't find ourselves in the same situation as the late '80s and early '90s," said spokesman Craig Smith.

Newcomer Red Lion Hotels grabbed the last position in the top five hotel chain list based on greater market share. Historically, the chain concentrated its development in the West and Midwest, limiting its impact on a national scale.

Media coverage of Doubletree's acquisition of the chain last year also helped bolster its exposure in the corporate market, analysts said. Doubletree acquired Red Lion in November for $1.2 billion.