For the past five to seven years segmentation has become the buzzword of the hotel industry. How long has segmentation been around and is it truly anything new?

I first noticed all-suite hotels in 1979 and 1980 in Houston when I saw my first Guest Quarters. Then I saw my first Granada Royale Hometel shortly after that. These concepts seemed logical to me based on what they were: a limited-service hotel with each guest receiving a parlor and complimentary breakfast and cocktails. These amenities were provided instead of a full-service hotel's typical public space. The guest could get all that private space, value, and ambiance for about the same price as a standard room in a full-service hotel. 

However, did these all-suite properties serve a different segment of the traveling public than the full-service commercial hotels in its market? It was obvious that the all-suite hotel's target market was the same commercial traveler; generally these guests, the mainstay of the hotel industry, had no use for a hotel's function space. Further, the average size of some of these properties was over 200 suites. They never struck me as a significant development because they just seemed like they were merely the suite portion of a larger hotel moved to the suburbs or, at a minimum, a moderate size commercial hotel with parlors instead of lobbies and meeting rooms! 

Developers, however, perceived the all-suite hotel to be a more financially viable project by eliminating the disproportionately expensive public and function space and adding facilities and amenities which could purportedly increase occupancy and average daily rate (ADR). An additional benefit from a developer's perspective was that a standard apartment building could be converted to this use for a reasonable cost if there was market support for commercial rooms at full-service hotel's ADR. Of course, if you look at an all-suite hotel today the meeting rooms, restaurants and bars are back! Aren't they now just full-service hotels in which all the guestrooms happen to be suites? Therefore, the financial "edge" for the all-suite developer/owner is significantly lessened if not eliminated and it would stand to reason that this "loss" at some point is passed onto the guest. 

Of course, even before the advent of the all-suite hotel we were all familiar with the upgraded Ma and Pop tourist court. I do not recall them being called economy lodging/limited-service in those days. They were motels with names like, among others, 8 Days Inn, Econolodge, Regal 8, Rodeway Inn and, oh yes, the ones with the restaurants: Holiday Inn and Ramada Inn!

So where do I think segmentation really started? Since commerce between communities began thousands of years before the birth of Christ there were two kinds of lodging establishments. Inns in town and at trail side! In some cases they may only have been attachments to eating establishments or temples and encampments near water supplies along the trail. As economic power became disproportionately distributed these establishments started offering a choice of accommodations. Various rooms and dormitories were offered inside while others of lesser means were accommodated with the animals. During peak demand periods over-bookings were apparently accommodated here, also!

Trailside inns evolved concurrently with available technology and demand. They have not changed from what they basically were then as compared to today's Ma and Pop or even a family-owned and operated property with a franchise affiliation. Construction changed from hides or clay to studs with sheet rock or brickfacia. The "down and out" room, always popular with the weary traveler, so he could be near his, not her, horse has only changed to the extent that women can now own property (cars)!

As communities evolved into towns and cities and land costs rose, the so-called downtown lodging facilities evolved into larger properties with more complex infrastructures. The style continued to be three or four floors of rooms and dormitories with shared bathrooms down the hall. Usually there was an attendant on each floor to let people into their sleeping area and to maintain order.

Soon, cities like New York started getting what might be described as the modern hotel. The big ones had elevators (thank you Mr. Otis), a bath in every room (thank you Mr. Statler and others), and two restaurants, one of which was usually a very sterile, white coffee shop and soda fountain. The other was, of course, the more upscale restaurant for business meetings and entertaining. Just as these old time hoteliers knew they needed two types of restaurants they realized, probably based on considerable experience, that some guests (potentates) were willing to pay more for nicer accommodations. The private bath which had previously been associated with being located only in the several fine suites each hotel had, were already popular and expected to be included in new hotels as they were built. The typical guest room in these hotels were small rooms with one or two twin beds and were so small that one's knees touched the small dresser when sitting on the bed. The nicer tub/shower combinations consisted of tubs about twelve inches deep and two feet square!

At some point, somebody, probably a developer or investor new to the industry not looking at it through a hotelier's paradigm (few truly new hotel ideas have come from mainstream hoteliers, which is also true in other industries) noticed that even bigger rooms with nicer decorations would be popular among some travelers. These guests might include commercial men sharing a room to save money, as in the old days when there were dorms, women or couples coming to the city for shopping and the theater. Hilton's original Lady Hilton rooms were the precursor to the upgraded decor schemes used today in all their rooms!

Previously, any variety in room size had been a result of structural happenstance driven by the desire to use space around stair wells, add or conserve storage space, or create exterior architectural features. Suddenly the idea of attracting more guests of different types became a conscious decision as hotels got larger and larger and the public space grew. Hotels and inns historically have been the commercial and social centers of communities and often have spurred economic development. Additionally, hotels also have followed other types of real estate development. 

As John Kahler recently reminded me, Bloomington, Minnesota's hotel strip evolved partly because the trains went out of favor and the airport became important. 

Consider a hotel typical of its time even though it was the largest in the world, Chicago's Stevens Hotel, subsequently known as the Conrad Hilton and now the Chicago Hilton and Towers. The Stevens Hotel's approximately 2,400 rooms were of many different types, ranging from the previously described knee-knocking mini-singles to opulent suites. The hotel catered to a wide range of market segments. Whether one defined segments in terms of purpose of travel (commercial travelers, convention attendee, casual tourists, etc) or quality of accommodation desired (mini-single, standard rooms of various sizes and types, or elaborate suites) the Stevens could accommodate any market segment in large quantities. 

Let's not forget that the bell staff, as well as the rest of the hotel's staff, were well aware of the disparity in the various guests as it related to their ability to tip! It would follow that the guests in suites got service while those in mini-singles got worse than what we refer to today as Limited Service/Economy Lodging!

Does segmentation simply mean that some of the mini-singles at the Stevens have been sliced off and moved down the street? If so that is not really new, after all specialized hotels, usually upscale, have been well-known for years. It wasn't called segmentation when they were full-service upscale hotels or road-side suburban motor inns. It only became segmentation when the franchising industry reached over twenty years of age. At that point the original franchises started to expire and the geographic pattern of economic growth had changed travel routes into outlying areas which are today's suburbs.

The big franchisors had brand names that were getting too stereotyped and tired facilities that diluted the various brand names' reach for quality as a means of competing. Service, price creep and new roads created an opening for new economy lodging/limited service properties for hotel companies that no longer had products with that reputation. In addition, a continual increase in services, facilities, and amenities throughout the hotel industry resulted in a perceived need for hotel companies to create more upscale brand identification as well as downscale.

Hence the addition of "Royale", "Plaza", among others, to existing brand names in an attempt to create new products and further differentiate themselves in the increasingly crowded and competitive market. The franchisors also had non-compete clauses whereby they could not franchise new properties that impacted existing ones. The result was a marketing strategy to sell new hotel franchises which ostensibly would not impact existing ones. The only way they could do that was to have hotel products that appeared to appeal to different guests or segments of the market.

However, in my opinion, only the hotel company executives truly understand the definition and target markets of each of their brands. The traveling public has gotten only more confused over time and understandably frustrated. Rightfully, they bemoan that it seemed all so simple before. It appears that all the hotel industry has accomplished is the alientation of its customers by "introducing" something (segmentation) which has always existed.

Further, the hotel companies have alienated their franchisees (their direct customers) by heightening competition between each other. 

These thoughts lead me to ask: isn't segmentation the same old thing in a pretty new wrapper? and, who, if anyone, has benefited substantively from its evolution?