Big Blur: Options Abound When it Comes to Hotel Categories
Harvey Chipkin, Travel Weekly, 5/22/2007 (excerpted)
In a recent New York Times review of the Five, a hip new hotel in Paris, the writer described one room as so small that "the bed, pushed into a corner, almost entirely filled the space."
The writer continued: "There is no formal room service and no minifridge, but the staff delivered coffee to the room. It took more than 30 minutes to arrive, and we weren't charged."
And how did the writer describe the guests? "Moneyed, if ever so slightly offbeat."
All of this begs an obvious question. Why would "moneyed" travelers stay in a place where the rooms are cramped and there is no real room service?
This phenomenon is part of a seismic change in lodging -- a landscape in which a hotel is defined as much by who stays in it as by the room rate, and in which traditional hotel categories (luxury, midscale, boutique, design) are becoming increasingly blurred.
The reasons for this are widely varied: big changes in traveler demographics, a record number of new brands, the upgrading of hotels in every category and the reinvention of old brands. It all makes for a crowded and frequently confusing field of options.
"Blurring is the operative word, with all these lifestyle hotels trying to find a niche," said consultant David Brudney, of David Brudney & Associates.
Roger Cline, CEO of Roundhill Hospitality and a veteran consultant said, "The traditional method of classifying customers in the hotel industry by their motivation to travel [business, leisure or convention, for example] needs to be revisited, despite the fact that most of the industry has for much of its history insisted on such categorization."
The tech factor
According to Cline, the need to change relates to two trends, both relating to technology. One is that today's customers "are intermingling their professional and business lives with their personal lives as never before. As a result, they are engaging in business when on vacation and engaging in all manner of guilt-free leisure pursuits while traveling on business."
What this means, Cline said, is that "so-called business hotels have needed to adapt to the provision of leisure-style pursuits with spas, etc., and resorts have needed to respond to the needs of the business traveler."
The second trend, Cline said, involves the use of technology to generate and maintain loyalty among their best customers.
Being able to identify customers who are apt to be loyal for emotional reasons, as opposed to differentiating customers by travel motivations, such as business, leisure or meeting, is the mark of a successful organization, he said.
These trends, in turn, have inspired a flurry of new "lifestyle" hotels such as InterContinental Hotel Group's Indigo, Starwood's Aloft and NYLO, which is being created by longtime hotelier John Russell.
"These hotels take a more holistic approach to the total travel experience," Cline said.
Ian Schrager, who invented many of the concepts that are common in hotels today, such as communal lobbies and hip design elements, was quoted recently in Travel & Leisure as saying, "It's not about age or wealth, it's about a shared sensibility." He recalled his Studio 54 days when "moneyed types socialized with people who had no money at all."
Today, the attitude might not be quite so egalitarian, but it is definitely inclusive of like-minded travelers. In a recent interview with the New York Times on new brands, James Abrahamson, a senior vice president with Hyatt, declared, "Business and leisure travel are blending; what we discovered was not so much a demographic but a mind-set."
 "It's becoming a more confusing and more diluted marketplace," with all these new brands, said Mark Sharkey, COO of Remington Hotels, which manages a portfolio with 13 brands. "While we in the industry have our reasons for operating the way we do, consumers don't get it and don't care."
Parsing price points
While consumers may not look at price in the same way they used to, rate is still central to the way the hotel industry operates, especially in the employment of data collected by Smith Travel Research, which sets the standards for rate, occupancy and other measurements.
STR groups hotel chains in a number of price segments, including luxury (Four Seasons, Peninsula); upper-upscale (Hilton, Hyatt); upscale (Wyndham, Radisson); midscale with food & beverage (Holiday Inn, Ramada); midscale without food and beverage (Hampton Inn, Comfort Inn); and economy (Motel 6, Super 8).
Because of anomalies in the market, there are some unlikely brands sharing STR segments: W and Four Seasons in the luxury category, for example; Embassy Suites and Westin in the upper-upscale category.
Rick Swig, an analyst, explained the groupings this way: "Smith determines its scales by the top percentage of rate production within the market in general. As a result, the top 15% of all hotels in any market fit into the luxury set, while the next 10% to 15% are in the upper-upscale grouping. The groups have nothing to do with products and services, only the ability of the brand or management to hit the rate percentile in which they are then grouped."
For the consumer, those distinctions may be meaningless. Raul Leal, president of Tecton Hospitality, which manages a number of franchised and independent hotels, said, "I was at a conference with a speaker from a large franchiser that had opened a new, hip brand that carried a rate of $100," he recalled. "That was the same rate as that company's upscale brand. When I asked if there would be some erosion of the upscale brand's occupancy and rate, I didn't get a real answer."
If you brand it, will they come?
According to PricewaterhouseCoopers, a record 24 hotel brands were launched in the U.S. in 2005 and 2006, the largest number in any single two-year period since 1989.
They ranged from extensions of well-known individual hotels, like Waldorf-Astoria, to expansion of successful boutique hotels, like Gansevoort, to new segments introduced by big chains, like Hyatt Place and Starwood's Element (an extended-stay product.)
Sometimes, it seems that companies are blurring categories on purpose to reach a new kind of traveler. Hyatt, which had long resisted segmenting its brand, is now busily creating multiple brands. It recently launched Andaz, which means "personal style" in Hindi, according to a company announcement.
According to Hyatt, Andaz will be "a highly functional environment characterized by sophistication, innovative design, local identity and casual elegance."
The lobby will be "like a living room" and guests will be checked in by a "host" with a PDA device rather than at a desk. Rates, according to the announcement, "will be comparable to high-end boutique and luxury hotels in a particular market."
Hyatt spokeswoman Katie Meyer said Andaz was indeed a luxury brand, with "synergy between a conventional five-star hotel and a boutique, design-driven product, but the service model will really differentiate it."
Blurring with a purpose
Similarly, when W announced a new hotel in Atlanta's Buckhead neighborhood, it was described this way: "From arrival to departure, guests will feel like they are visiting close friends while enjoying sophisticated, fresh and gracious hospitality in a chic, yet geographically relevant locale."
Just plain "luxury" won't do anymore.
Leal predicted that many of these new brands would never see the light of day.
 "Blurring happens when we start to add brands that are not defined to the customer," Leal said. "If a major [hotel company] decides to roll out a brand in today's marketplace, it's not always defined. Consumers have a lot more information today than they did 10 or 15 years ago, and they are able to see through what I call 'fictitious branding.' That means rolling out something to a specific demographic without actually understanding that demographic."
As for launching a brand, Leal said, "Branding should be left to the Marriotts and Hiltons that have the firepower. If a new brand doesn't work, they're still OK."
As an example, Leal pointed to Renaissance, a brand operated by Marriott.
"Even most people in lodging are not quite sure what a Renaissance is," he said. "It was launched as a lifestyle brand, but sometimes you get that and sometime you don't. But Marriott will make it work because they deliver on so many other things."
Leal sees W Hotels as a poster child for brand strategy appropriate to the new landscape.
"W is a branded hotel, but consumers don't think of it as a brand," Leal said. "By partnering with names like Bliss for spa products and Jean-George for restaurants, they have taken some tried-and-true components and come up with a stylish, edgy design. It's very clever."
Upping the amenities ante
Another blur issue is the fact that hotels in each of STR's price categories keep adding amenities and services that make them tougher to differentiate from the segment above.
"You go into a Quality Inn, and all of a sudden you're seeing things you only saw at a Hyatt or Westin in the past," Brudney said. "All these franchisees have a little nicer furniture, a more pleasant lobby, free wireless Internet access, free breakfasts. They're great products."
No one can argue with the perennial value of a strong brand, particularly one with resources like a powerful loyalty program. That would include Marriott, Hilton and Starwood, plus all their various sub-brands.
The importance of brand is demonstrated by the recent decision by Hilton to add "by Hilton" to all of its hotels in Latin America and Canada (Hampton Inn by Hilton, etc.)
Cline said, "There will always be a very significant role to play for clearly defined niche products, both large, as in convention hotels, and small, as in a variety of limited-service products."
However, brands today must walk a sometimes tricky line of not putting off long-time customers while subtly adapting to potential new customers.
Leal said, "Brands must stay true to what the consumer expects. If I'm going to a Residence Inn, I don't expect a hip boutique. There is a tremendous value in brands. They have to adapt in some way, but I think sticking to their customer base is their best strategy."
And even with the emphasis on the new generation of travelers, that market should be addressed with caution.
"There is a new generation of travelers who don't want to stay at their father's Hilton or Marriott," Sharkey said. "That's the mistake some car companies made. But we have to keep in mind that they may change brands as they get older, so you don't want to change those traditional brands too much."
Sharkey summed up the shifting landscape this way: "All this segmentation and categorization doesn't mean anything to customers. They don't know if a hotel is upscale or upper upscale, franchised or managed, and again, they don't care. They will go where they're comfortable, and if we're lucky, over time they will become loyal."
|
