Hospitality Consulting Services
400 Spear Street, Suite 106
San Francisco, CA 94105
|by Rick Swig, March 2005
During the year ahead, most major markets are predicting upturns in occupancy and ADR as the economy expands and more commercial travelers hit the road. Although many hotel operators remain unconvinced that the individual business traveler has returned in full force, the pace of group bookings in both urban and resort locations is ahead of recent years. That’s the good news.
It will be more of a challenge for hotel operators to capture market share. Hotels will again compete for business based on their product and service attributes, rather than their sales department’s ability to discount rates. Major chain operators have also learned that their loyalty program members may not be so loyal. Customers can often find better rates through a multiplicity of points-program memberships. The success of independent hotels may provide a hint to the larger brands that there is more to life for customers than cut-rate discounts and loyalty programs.
Technology has leveled the competitive playing field via the Internet and user-friendly booking engines. Customer relationship management technology will present further personal service and identity options to overshadow loyalty program credit value.
Smith Travel Research reports that independent hotel occupancy performance and ADR trails full-service national brand hotel performance in most competitive markets. However, independent, or boutique, hotels are setting new competitive standards for products and service.
Trendy design, although credited for much of boutique hotels’ success, is only one element by which differentiation and resulting market penetration is achieved. A complete environmental focus is necessary, which includes product and service delivery to address customer needs and preferences. This begins with the booking process and extends through after-stay recognition and subsequent communications. Customer satisfaction goes beyond an efficient check-in and sleep experience. Value enhancement is more than just a discounted rate. The focus now is on quality of life.
Boutique hotels in the industry are synonymous with independent record labels and film studios. These entities have strategically defined their customers as interested in more than a formula blockbuster—they are looking for something new with which they can identify socially, spiritually or environmentally. Smart hotel operators are aware of these differences and are sculpting hotel experiences to reflect this diversity and need for personal identity.
Independent hoteliers were the first to recognize and address these fundamental issues. These pioneer tastemakers are forcing the traditional hotel operator community to recognize that fashion and entertainment are key elements of differentiation. Historically, hotels provided cus-tomers with surroundings, services and amenities, which were enhancements over their at-home experience. This is not entirely true today, as many hotels have cut services, slowed capital improvements and have fallen behind the domestic technology curve in the wake of recent revenue downturns. Predictable and mundane experiences are often the norm versus memorable and creative experiences. Customers are now making choices between tangible experience or environmental value versus discount pricing and the ordinary.
Starwood’s Heavenly Bed program, for instance, established that travelers place a real value on comfort-able sleep. Ian Schrager and a flock of his disciples have confirmed that guests will forego their generic brand experiences for a combination of fashion and the “right” scene. Meanwhile, the Kimpton Group’s Monaco collection, along with the W Hotel brand, are proving that environmental distinction can be delivered in multiple destina-tions and in non-generic building formats. These hotels and features enhance travel life and provide more than a voyager gets at home.
Large brands have taken notice. Marriott and Hilton are rolling out more creative designs and stimulating environments, while the Indigo brand shows InterContinental’s recognition that today’s customers are looking for more than their parents’ Holiday Inn.
The views expressed in this article are those of the author and not Real Estate Media or its publications.
Rick Swig is president of RSBA & Associates, a hospitality industry consulting firm based in San Francisco. He may be contacted at firstname.lastname@example.org.
RSBA & Associates
400 Spear Street, Suite 106
San Francisco, CA 94105
Tel: (415) 541-7722
Fax: (415) 541-5333
|Recent Occupancy, ADR Growth Still Do Not Spell Post-9/11 Relief; Total 2% revenue growth over four years has not kept up with national annual average inflation growth of 2.5% / Rick Swig / RSBA Associates / November 2004|
|Hotel Success Hinges on Relationship Between Owner, Asset Manager, GM / Rick Swig / August 2004|
|Hotel Operators Can Gain Market Share Through Distinctive Brand Images; A 100-room boutique hotel can develop more identity within a market than its 1,000-room competitor through customer impact points / Rick Swig / May 2004|
|Hotel Operators Must Share Blame with the Economy for Stagnant Performance / Rick Swig / RSBA Associates / January 2004|
|Investors Seeking Opportunistic Hotel Buys Are Likely to Come Up Empty Handed / November 2003|
|Hotel Sector Remains in the Game Despite Reaching Strike Three; Occupancies are now beginning to improve compared with last year and a poor first half of 2003 / September 2003|
|Some Stability Has Returned to the Hotel Sector, But Its Staying Power Is in Question; The Plundering of Lower Market Tiers Has Cost Upscale Hotels / May 2003|
|New Business Practices Essential to Lodging Companies’ Success / February 2003|
|Unreliable Market Trends Yield an Uncertain Direction / October 2002|
|The Bigger They Are, The Harder They Fall / September 2002|
|News of Boutiques’ Demise Is Greatly Exaggerated / May 2002|
|Management by Spreadsheet Erodes Full-Service Hotel Core Values / Feb 2002|
|Hotel Lenders Face Challenges In Tough Climate / October 2001|
|Where We Are Now Depends on Starting Point / Summer 2001|
|Solid Management Practices Can Improve Franchise Value / May 2001|
|Hotel Market Stagnation To Continue / January 2001|
|Here Today…but Tomorrow? / November 2000|
|Ready, Willing, and Unable? / August 2000|
|Independent Hotels: The New Brand Alternative / June 2000|
|Ankle Biter Syndrome / January 2000|
|Redefining a Mature Hotel Sector / November 1999|
|Focus On Operations Is Not Enough / August 1999|
|What’s Next?? / May 1999|
|Growth Through Management / Feb 1999|
|Expect a Subdued Market in 1999 / Feb 1999|
|Hotel Real Estate: Back to Fundamentals / Nov 1998|
|The Hotel Investment Barometer For Institutional Investors / 1998|
|The State of Independents / 1998|
|Success (or Survival) of Boutique Hotels and Resorts / 1998|