Top U.S. Hotel Chain Survey: Courtyard Takes Midprice With F&B; Country Inns Without
Top U.S. Hotel Chain Survey: Working more closely with corporate travel buyers to improve continuity in the room procurement process and upgrades in both rooms and public spaces highlighted a robust year for the midprice with and without food and beverage categories, especially in the latter tier where double-digit percentage growth in revenue per available room was reached. Industry analysts are predicting the tier will outpace most others in 2006.
Courtyard by Marriott retained its hold atop the midprice with food and beverage group, edging its main competition in the class, Hilton Garden Inn, by scoring high in its ability to arrange travel and a commission payment system that travel buyers contended was the best in the class.
Hilton Garden Inn received high marks for the physical appearance of its properties, its in-room business amenities and overall price-value relationship.
Best Western International made the most dramatic move in the category, moving up four slots in the survey from last year to third. Travel buyers noted its corporate rate program as a reason for its strong bump. InterContinental's Holiday Inn and Starwood's Four Points by Sheraton rounded out the top five.
Continued dwindling supply levels within the midprice with F&B sector—a decrease of 2.8 percent, year over year, according to Smith Travel Research—has resulted in an increased occupancy rate over 2004 as well as an 8 percent increase in revenue per available room. This has prompted excitement from analysts who have cited languid growth in the sector over recent years. "Very low supply growth in almost all the sectors and the economy continued to chug along," said Sean Hennessey, CEO of Lodging Investment Advisors. "Even the midprice with food and beverage sector has seen an improvement in demand—really for the first time in quite a while."
The growing number of midmarket travelers has forced midprice hoteliers to redevelop and reshape their existing products. The present-day norm consists of hoteliers implementing new bedding programs and room amenities that are similar throughout the brands. However, many hoteliers in the midprice tier are upgrading packages to make them less representative of a midprice stay.
"We introduced a bedding package to every hotel in our system worldwide," said Mike Jannini, Marriott executive vice president and general manager of brand management. "It was a dramatic upgrade from what was typical in that moderately priced segment to something much more luxurious. Customers really reacted to that." Courtyard also introduced new ergonomic chairs, workstations and track lighting. "It's very plush for the moderately priced brand," said Jannini.
Not to be outdone, Hilton Garden Inn also began implementing new bedding and upgraded amenities for its 245-plus properties. Mark Nogal, vice president of marketing for Hilton Garden Inn, said the brand has partnered with both Phillips and office furniture manufacture Herman Miller to create an even higher standard of in-room business amenities in a new room the brand is rolling out. Nogal is targeting an audience that uses midprice hotels, but still banks on the idea that it will receive top-notch facilities and service. "We get the middle-management types or road warriors—the ones who get most of the work done," he said. "They are perfect for our brand."
Hilton Garden Inn's attention is shifting squarely on the business traveler. This is readily apparent in what Nogal described as "owning the goodbye," whereby travelers are contacted by staff the evening before departure to garner feedback and ensure that their stay was pleasant.
"Our business traveler is our key constituency and we want to know that their stay was good," said Adrian Kurre, senior vice president of brand management for Hilton Garden Inn. Recognizing this has prompted Hilton Garden Inn to improve the structure of its corporate rate program to make the entire process as seamless as possible.
"One of the big things we did in 2005 was our best-rate guarantee that we extend to the travel professionals so there wouldn't be a third-party Internet company that would undercut us," said Kurre. Added Hilton's Nogal: "We are working with our business travel sales team to really get to the folks who are setting up the arrangements for the corporate traveler. We are bundling our services so that travelers don't need to worry about things like keeping receipts and recording things."
Courtyard also reconstituted its public spaces, which it said struck a chord with business travelers. The Courtyard name evokes an enclosed garden area—something Courtyard tried to build upon by what Marriott's Jannini called "activating the oasis."
"Courtyard has reinvented its model because it launched 23 years ago and business travel is different now than it was then," Jannini said. "We've opened up the great room concept, with an upscale sophisticated lobby. The courtyards were pretty, but latent. We have created a seamless indoor/outdoor oasis experience. Travelers will feel like they are in an oasis in the middle of a business trip."
Hotels in the tier also have begun to introduce new food items, especially for breakfast, as many business travelers insist on a certain diet. This usually consists of food selections high in protein. "That is a big deal for business travelers—most of them are Atkins or South Beach," said Jannini.
Sustaining an even higher degree of success than its sibling, the midprice without F&B tier is encountering perhaps the biggest resurgence of any tier in the hotel industry. The tier had the smallest declines in RevPAR of any other tier during the industry downturn of 2001 and—according to Smith Travel Research—had an 11.5 percent increase in RevPAR in 2005 over the year before. The one force dimming the tier's growth is emerging supply as the tier continues to absorb foundering midprice with F&B brands that convert to non-F&B. Lodging Econometrics, an industry authority on hotel real estate, detailed this growth: Pipeline project counts increased 36 percent year over year in 2005, the highest of any tier. Despite the supply growth, it's expected that the tier will continue to profit as the occupancy rate is expected to increase two percentage points in 2006, coupled with an average room rate anticipated to increase 5.5 percent to $80, according to Smith Travel Research.
Travel buyers selected Carlson's Country Inn and Suites as their top midprice without F&B selection, followed by La Quinta Hotels, Hilton's Hampton Inn, Wingate Inns International and SpringHill by Marriott. Country Inn and Suites carried six of 11 categories, excelling in its ability to arrange travel, the physical appearance of its hotels and staff friendliness. Similar to many of the brands in the midprice with F&B tier, hoteliers rolled out new bedding programs and services.
"In 2005, we looked to upgrade the standards of the brand," said Nancy Johnson, executive vice president of Country Inns and Suites. "We launched a new bedding program and modified our breakfast offering—what used to be a continental breakfast is now really an expanded light breakfast." The latter portrays how the line may slowly be blurring between what a midprice brand without F&B is and is not.
Country Inns and Suites also aimed to increase its rapport with travel buyers and increase fluidity in the room-booking process. "We want to make it easy for the business traveler to book a stay with us," Johnson said. "We have listened to the travel agents who say: 'Our customers are your customers.' So when they book you into the hotel, they want to make sure that we are delivering on the promise they made." Carlson Hotels is one of the only companies that maintains a loyalty program in which both travel buyers and agents receive loyalty award points.
Hampton Inn's strong RevPAR growth—it never has had a year of negative performance—validated the strength of the tier. Phil Cordell, senior vice president of Hampton brand management, said much of Hampton Inn's success is predicated on its "Make it Hampton" initiative of 127 changes and improvements that was rolled out in 2004 and still is in progress. The campaign includes such offerings as a grab-and-go breakfast, complimentary high-speed Internet access and a user-friendly alarm clock. Hampton Inn is in the second phase of its endeavor, which calls for upgrades in bedding that will be standard in every Hampton guest room by June. The duvet and cover are washed clean after every checkout. "These are small things that are collectively powerful to make customers feel welcomed," added Cordell.
The midprice categories continue to outshine many of the other tiers because, as Cordell points out, the tier is much less affected by downward economic trends. "The midscale category is much more resilient to changes and economic swings," he said, "and for that reason it is becoming a more dominant force in the industry. It appeals to the needs of many travelers today who are seeking value. They don't care as much about a restaurant or bar because they are going to go someplace else for that anyway. The midscale category has been and will continue to be a dominant segment in our industry."