Top U.S. Hotel Chain Survey: Loews Holds Upper Upscale Title, As Tier Reinvests

Brands among the upper upscale tier enjoyed hearty returns in 2005, allowing them to reinvest much of their earnings back into their properties for facility upgrades while steadfastly adhering to the refrain that excellent service is what keeps guests coming back.

Loews Hotels retained its hold atop the upper upscale category in the U.S. Hotel Chain Survey, staving off JW Marriott in second and Starwood's W Hotels and Westin brands, which tied for third.

The momentum gained in the hotel industry in 2004 that spilled into 2005 was in no small way predicated on the performance of the upper upscale tier. According to Smith Travel Research, the upper upscale occupancy rate checked in at 70.8 percent for 2005, highest among all the tiers. This, combined with an average daily rate of $140—a 6.7 percent increase over 2004—led to a 9.4 percent increase in revenue per available room.

The steady rise in demand within the upper upscale tier, intersecting with escalating average daily rates, has produced even more capital for hoteliers who aren't hesitant to reinvest their profits to better their brand. "With the kind of growth in room rates leading to higher profits, hotels will put more money into upgrading their facilities," said Sean Hennessey, CEO of Lodging Investment Advisors, a firm that offers counseling services to investors and other key players in the hotel industry. "It should flow through to the business travelers of the world, who will see a substantial improvement in the value that they get," he said, adding that meetings business specifically would improve as a result.

Loews continued to thrive as a single-brand hotelier, despite its multi-brand competition. "There have been a number of hotels that have gone through renovations in 2005, including Loews Annapolis, Loews Ventana Canyon Resort in Tucson, Ariz., and Loews Coronado Bay Resort in San Diego," said Loews Hotels president Jack Adler. "In addition, we continue to reinvest the appropriate amount of capital in the balance of our hotels."

Loews' victory is its second consecutive in the category, while Westin and JW Marriott finished second and third last year, respectively. Making a surprising move was W Hotels, which finished at the bottom of last year's survey. Omni Hotels and InterContinental rounded out the category.

Buyers rated the brands on 13 criteria. Loews carried nearly every category, notching its highest marks in ability to arrange individual travel and the physical appearance of its hotels. Loews also shined in the quality of its in-room and business amenities, as well as the helpful and courteous staff category. Adler has looked to cultivate the latter. "We've done a lot of research into what is important to the business traveler," he said. "We're really training our line employees in something we call genuine personal engagement: to be able to read the business traveler and understand the framework in which that traveler has arrived into our place of business."

JW Marriott and Westin performed well in the meetings facilities categories. JW Marriott slightly bested Loews in its facilities for non-resort meetings, the only category in which Loews did not finish first. Meanwhile, Westin nearly drew even with Loews in the facilities for resort meetings category. W Hotels was especially competitive in the categories of arranging individual travel and corporate rate programs.

Unlike some upper upscale brands that can exude a highbrow feeling in their models, Mike Jannini, executive vice president and general manager of brand management for Marriott, commended the JW Marriott brand for delivering top-quality amenities and service without the attitude. "Because it has the Marriott name on it and built to a five-star standard, it's got the upgraded experience but doesn't have the pretense, which younger people especially like. There's a market for people who want five-star luxury without the elitism," he said. He added that business travelers love the brand for the consistency that Marriott offers, combined with top-notch amenities.

Along with efforts to enhance existing properties, hoteliers still were concerned with giving their customers the greatest experience possible. W Hotels eagerly espouses its "whatever/whenever" mantra, which includes 24-hour business centers with high-speed Internet, laundry services—even dog-walking services. It's a policy that W Hotels' president Ross Klein said leaves an indelible mark on guests and is a formula that is indoctrinated on W employees. "2005 began from a guest point of view with the reevaluation and reeducation of our whatever/whenever service as an opportunity to make a guest memory," he said, "and when we say that we are full service and make dreams come true, we have to do both the sublime and also the most basic." JW Marriott also ranked high in the category of staff courtesy, something Jannini credited to its hiring practices. "We look at the character of a person, not necessarily the technical skills. We hire for friendliness, responsibility and the ability to self-motivate, then we train the technical aspect."



Reinvesting In Upgrades

While hoteliers in 2005 realized tremendous profits, they did not rest on their laurels. Hoteliers were in a prime position to upgrade and improve their existing properties. "Businesses are spending more money on hotel stays and group business," Loews' Adler said. "At the same time, we began to really focus even more on creating a great guest experience." Loews Hotels now features an Emeril Lagasse restaurant at its Miami Beach location and nightly performances by Michael Feinstein at its Regency hotel in New York.

Heightening demand within the upper upscale tier also has spurred a new type of business traveler. Many travelers are not satisfied with a standard single room and are bent on enjoying the best amenities possible. "In the upper upscale tier, a lot of the demand has been focused on shifting to getting the features a guest wants in a room," said LIA's Hennessey. "Many hoteliers have indicated that most corporate travelers want an upgrade, not a standard room." Limited items have become increasingly standard and upgrades in bedding, bathroom amenities and entertainment have been the norm.

Concurrent with the return of the business traveler, hoteliers are looking to capitalize by building on a supply growth that only increased 1.5 percent from 2004 to 2005, according to Smith Travel Research. "The business demand and leisure demand is extremely strong, we're looking to grow our company in key cities across the country," said Adler.

Furthermore, many hoteliers are becoming increasingly attracted to converting hotels over to mixed-use developments, as witnessed in the transformation of New York's Plaza Hotel. W Hotels offers its W Residences in Dallas, which Klein said is one of the cornerstones of W Hotels' entire growth plan. However, W Hotels also is eyeing international expansion of the brand. "The biggest difference between 2005 and what you'll see in the long-term future for W is the global footprint," Klein said. "We had Mexico City, Seoul and Montreal this year and half of the pipeline for the next three years is not in the United States."