Hotel Management October 20, 2014 : Page 1
■ ➔ MORE CHOICE .. pulse 7.0% 6.0% 4.6% 3.7% U.S. hotel markets with greatest change in supply forecast 2014 to 2015 The Leading Hospitality News Authority Since 1875 HotelManagement.net Vol. 229, No. 13 | October 20, 2014 A Questex Hospitality Group Publication New York Austin Pittsburgh Miami Source: Source: PKF Hospitality Research SEE PAGE 20 FOR MORE TRENDS & STATS Corporate and contract rates to jump up in 2015 By C. Elliott Mest ASSOCIATE EDITOR N EW Y ORK – e hotel industry is distancing itself from the bygone recession and hoteliers are looking for any way they can to match rates with rises in occupancy. While leisure rates have returned to many markets (and in some cases surpassed past peak levels), group business rates aren’t there yet. Bjorn Hanson, clinical professor for the Preston Robert Tisch Center for Hospitality and Tourism and the NYU School of Professional Studies, found in recent research that while meetings demand See Corporate rates | page 24 Some corporate travel departments allow travelers to select hotels that are not included in the portfolio of hotels with negotiated rates. This practice is popular with younger travelers. HILTON WORLDWIDE SEGMENTS Urban and dual-branded projects keep extended-stay going strong By Bruce Serlen CONTRIBUTING EDITOR MARRIOTT INTERNATIONAL N ATIONAL R EPORT – Along with other industry segments in this phase of the lodging cycle, the extended-stay category is showing healthy momen-tum heading into 2015. Analysts foresee revenue per available room growth this year increasing com-fortably above the rate of in ation with occupancy, average daily rate and construction of new rooms See Extended-stay | page 10 CHIUN-KAI SHIH ONE – on – ONE Hampshire Hotels’ ERIC DANZIGER High barriers to entry and high construction costs made dual-branding an ef cient way for Marriott International to bring its Residence Inn extended-stay brand to L.A. Live in Los Angeles. Former Wyndham Hotel Group’s head leads new brand evolution | See page 8 ■ ➔ TRENDS & STATS. inside this issue DESIGN. Spa-like bathrooms in vogue Today’s hotel bathroom experience has become much more spa-like— and that’s the intention. PAGE 22 OPERATIONS. Housekeeping work ow How housekeeping performs its job depends on the tools provided and the organizational environment. PAGE 26 Large and small markets shine By year-end 2015, the hotel industry will have smashed occupancy records and exceeded ADR levels. PAGE 20
Corporate and contract rates to jump up in 2015
C. Elliott Mest
Corporate and contract rates to jump up in 2015
By C. Elliott Mest
New York – The hotel industry is distancing itself from the bygone recession and hoteliers are looking for any way they can to match rates with rises in occupancy. While leisure rates have returned to many markets (and in some cases surpassed past peak levels), group business rates aren’t there yet. Bjorn Hanson, clinical professor for the Preston Robert Tisch Center for Hospitality and Tourism and the NYU School of Professional Studies, found in recent research that while meetings demand in the U.S. is still in a period of recovery, hoteliers should be able to capture higher rates for group business in 2015.
Patterns in Hanson’s research show that fewer attendees are attending meetings compared with periods before the financial crisis, and meetings are shorter. According to Hanson, there are more open evenings after meetings than ever before, a void left by unscheduled banquets.
“We even see this creeping into F&B, with meals being scheduled through the meeting with no breaks,” Hanson said. “The nature of how F&B services have been arranged in hotels these days is showing patterns, and that has had an effect on demand.”
But while the structure of meetings may be changing for some sectors, meetings volume is returning. Overall, group demand is definitely on the rise, according to STR data. As of August, group rooms demand was up .9 percent year over year, and the volume of group rooms sold was up 1.5 million in June alone over June 2013, according to STR.
While leisure demand still leads the industry’s overall demand growth, various reports have shown group business coming back. One of the drivers behind this may be the return of some government business following shutdowns and restricted travel over the past few years.
the rate effect
But how does this affect corporate rates for hotels? Corporate and contract rate negotiations in the hotel industry represent nearly 20 percent of all occupied room nights in the U.S. for as much as 30 percent of the U.S. lodging industry’s revenue. And while rates reached through negotiations are increasing every year, Hanson said hotels continue to try to accelerate this growth despite some resistance.
Additionally, meetings sales have been placed on the backburner for some time, according to Hanson. Hotels are now seeing a growing momentum in occupied room nights and are recognizing that momentum as a signal to re-prioritize the meetings side of their business. Hanson is expecting corporate contract rates to go up by the largest margin since NYU began its forecast, with the national average rising 5.5 percent to 6.5 percent in 2015. In 2014, average negotiated rates increased approximately 4.5 percent, while the overall average daily rate for U.S. hotels rose 4.0 percent.
Hanson said meeting planners are also looking at new selling strategies for 2015 and are viewing the meetings business not as filler, but as a floor from which they can base their other business around.
“A 300-room hotel that is booking 100 rooms for meetings can now have a better rate strategy for its remaining 200 rooms because occupancy is high,” Hanson said. “This was less of a viable strategy before. Hotels fill from the bottom of their rate structure up. This is putting pressure on corporate rates, because with higher occupancy, now is the time for hotels to be aggressive.”
booking windows change
This is causing a change in psychology that became prevalent over the last four to five years, where travelers would wait to book a hotel stay until the week or even the day before their arrival in search for lower rates. Now that hotels are no longer hurting for occupancy, the opposite method would be more effective. As larger meetings come back, it’s the nature of the business to have longer booking windows for corporations, and travelers who shop ahead of time can use social media or travel agencies to be notified of changes in rates. Therefore, waiting for rates to go down is not an advisable strategy.
To take advantage of high occupancy, hotels are reversing the trend of including charges for select services and amenities within the negotiated room rates.
Hotels also began charging again for amenities that used to be included free of charge in corporate and contract rates.
In response to these decisions, more buyers are signing deals with upscale select-service and limited-service properties as opposed to upper-upscale and full-service hotels as they search for deals similar to what they were paying in the downturn.
According to Hanson, they have the wrong idea. “From 2009 to 2011, corporate rates didn’t change much, so now the sales side needs to catch up,” he said. “Hotels are now exceeding 2007 occupancy numbers, so even with these increases, buyers need to realize the deal is still really good for them.” ■HM
See Corporate rates | page 24
See Corporate rates | page 34
Rate growth over the past 5 years
2011 Corporate Negotiated Rates: +4.5 percent
2012 Corporate Negotiated Rates: +5.0 percent
2013 Corporate Negotiated Rates: +5.0 percent
2014 Corporate Negotiated Rates: +4.5 percent
2015 (forecasted) Corporate Negotiated Rates: +5.5-6.0 percent
Source: NYU School of
Some corporate travel departments allow travelers to select hotels that are not included in the portfolio of hotels with negotiated rates. This practice is popular with younger travelers.
Hotels were previously using meetings bookings to pad properties with low occupancy, but now they are using these bookings as a floor from which to base off future rates.
BOTH PHOTOS COURTESY Hyatt Hotels and Resorts
Urban and dual-branded projects keep extended-stay going strong
By Bruce Serlen
National Report – Along with other industry segments in this phase of the lodging cycle, the extended-stay category is showing healthy momentum heading into 2015. Analysts foresee revenue per available room growth this year increasing comfortably above the rate of inflation with occupancy, average daily rate and construction of new rooms up as well through 2016-2017 and quite possibly beyond.
Much of the good news is attributable to two trends, which are also benefitting other industry segments at similar price points. First is the move into urban markets from extended-stay’s traditional suburban and highway areas of strength. A discernible trend for the past few years, the level of development activity has been accelerating.
Second has been the growing popularity of dual-brand projects, where more times than not, one of the two brands involved is extended-stay, drawn by the segment’s efficient operating model.
Meanwhile, a number of new, small players continue to flourish besides such industry stalwarts in the category as Marriott International’s Residence Inn and TownePlace Suites, Hilton Worldwide’s Homewood Suites and Home2 Suites and IHG’s Staybridge Suites and Candlewood Suites.
RevPAR growth for the U.S. extended-stay segment is expected to increase more than the annual rate of inflation, which for the 12 months ending in August stood at 1.7 percent, according to consulting firm The Highland Group, which specializes in tracking extended-stay performance.
Occupancy in the second quarter of the year reached 80.3 percent, up 2.7 percent over the same period a year ago. Supply growth is always a concern. But with a relatively healthy 30,000 new extended-stay rooms estimated to come on line in the next two years, Highland Group partner Mark Skinner sees little cause for concern, given that demand growth is also increasing.
“New supply is coming beyond the 30,000, but it’s taking a long time to get here,” Skinner said. He sees a strong possibility the current lodging industry cycle will last beyond 2016.
The Homewood Suites that Hilton Worldwide opened in New York this summer is a recent example of the industry’s push to create a presence for extended-stay properties in prime downtown locations. It’s the first Homewood in Manhattan.
The 25-year-old brand has already opened downtown locations in Dallas, Denver and Nashville since 2013. Next up are properties in downtown Miami and Chicago.
“New York is still a milestone for us, given the high barriers to entry here and the high cost of land and construction,” said Bill Duncan, the brand’s global head.
“But we knew there was a lot of untapped demand for upscale extended-stay lodging in the city. Plus—this being New York—it’s a billboard hotel that will be good for showing off what we can do,” Duncan said.
Located on West 37th St. in the Times Square neighborhood, the 22-story hotel has 293 suites, making it the largest of the 300-plus Homewoods in the system. However, a large percentage of the suites are studio suites, compared to one-bedroom suites, reflecting the high land cost. The studio suite may be larger than a regular guestroom in the market, but still not have the square footage of a suite with a separate bedroom.
Some of the same market realities were behind Marriott International’s decision to move forward with a dual-brand 174-room Courtyard and 219-suite Residence Inn in the L.A. Live complex in downtown Los Angeles also this summer.
“Considering the high barriers to entrance and high construction costs, it made sense to put the two brands in one building and be able to target two types of travelers, each with its own needs in one building—the transient traveler at the Courtyard and the extended-stay traveler at the Residence Inn,” said Diane Mayer, Residence Inn VP and global brand manager.
As dual-brand projects have grown in popularity across the country, an extended-stay option is typically included for this reason, according to Skinner. “With the full kitchen, complimentary breakfast and evening reception—all extended-stay brand standards—not to mention their residential feel, the model tends to appeal to travelers who are booked for a stay that can last weeks or even months,” he said.
“In recent years, the Residence Inns we’ve opened have been much more sophisticated with more extensive facilities, including meeting space, than earlier generations of the almost 40-year-old brand. And this is especially true in our urban properties,” Mayer said.
As an example, she cited the RI Lounge in the new Los Angeles hotel. It incorporates the breakfast area, but includes seating areas where guests can relax, work or hold informal meetings with colleagues or visitors.
In addition, the hotel has a boardroom and ballroom divisible by three for more formal group functions, spaces available for use by Courtyard guests as well. Residence Inn presently has more than 650 hotels open worldwide.
By comparison, My Place Hotels of America and Extend a Suites Hotels are modest in distribution, but they still fill a critical niche in the extended-stay universe. Founded in 2011, My Place operates nine hotels in four Western states, while Extend a Suites, established in 2010, operates 11 properties in nine states, ranging from Ohio to Texas.
Unlike upscale brands such as Homewood and Residence Inn, My Place and Extend a Suites are economy brands that base their appeal, in large part, on their value proposition. The target market is families on driving vacations, independent business travelers and construction crews. Like economy lodging brands generally, both include assurances of safety and cleanliness in their brand promise.
Considering the optimistic growth projections for the extended-stay segment going forward, it’s not surprising that new brands—or new brand extensions—continue to be introduced.
Best Western International, for example, has been developing a new extended-stay prototype. While details, including the name, haven’t yet been disclosed, three deals have been signed with the first hotel scheduled to open in Alberta, Canada, late next year. ■HM
See Extended-stay | page 10
See Extended-stay | page 12
High barriers to entry and high construction costs made dual-branding an efficient way for Marriott International to bring its Residence Inn extended-stay brand to L.A. Live in Los Angeles.
Hilton Worldwide’s Homewood Suites opened its first Manhattan property this summer. Brand leaders say the Times Square extended-stay hotel will serve as a good billboard for the brand’s potential in other urban markets.
ALL PHOTOS COURTESY hilton worldwide
The RI Lounge at the Residence Inn at L.A. Live showcases the updates extended-stay brands are offering guests, from more social and public space to more space for meetings.
ALL PHOTOS COURTESY marriott international
Read the full article at http://www.hotelmanagementdigital.com/article/Segments/1835923/228669/article.html.