||Budget Brands Aim for Piece of Hotel Recovery
Budget hotel chains like Motel 6 and Microtel Inns & Suites by Wyndham are stepping up amenities and branding efforts in the hopes that the travel rebound that's been led by upper-end hotels trickles down to the economy sector.
Motel 6, which is owned by Accor, is using its 50th anniversary this year to promote its approximately 1,100 North American hotels, with plans to upgrade about 100 of them this year with touches such as improved flooring, new signage and flat-screen TVs.
Motel 6 CEO Jim Amorosia said that he expected most of the chain to add the upgrades during the next few years.
Paris-based Accor is looking to spur sales in the Motel 6 brand, whose growth since the recession has trailed that of Accor's other brands.
Last year, Motel 6's same-store sales growth rate of 4.3% lagged Accor's 5.2% growth rate, indicating that demand grew faster at the company's higher-end brands such as Sofitel and Pullman.
Meanwhile, Wyndham Worldwide, which operates or franchises about 300 Microtel properties in the U.S., is stepping up its marketing efforts to both travel agents and the general public to highlight chainwide property improvements that started about five years ago.
Wyndham is also giving a $10,000 credit to hotel owners who upgrade signage -- the company's logo was recently altered for the first time in the chain's 25-year history -- and estimates that all Microtels will have upgraded signage by next summer.
The improvements at Microtel appear to be already paying off. In 2011, Microtel's revenue per available room (RevPAR) increased about 9%, compared with Wyndham's companywide RevPAR growth of 7.1%.
The primarily leisure chain is looking to attract more business travelers to boost revenue, and Rui Barros, brand senior vice president for Wyndham's Microtel, Howard Johnson and Travelodge chains, said, "We have the product to support it."
Both companies are hoping that the upgrades make their mark in the form of higher occupancy, as neither company has a lot of wiggle room when it comes to room rates.
Motel 6 has long marketed itself as the lowest priced national hotel brand, while Microtel's average room rate last year was $59.07, beating out only Super 8 and Knights Inn among Wyndham's 14 brands.
Both chains operate in a budget sector that so far has trailed most of the other higher-end sectors when it comes to the rebound in U.S. spending on lodging.
While overall U.S. hotel occupancy and room rates last year increased 4.4 percentage points and 3.7%, respectively, economy hotels' occupancy and room rates advanced 3.7 percentage points and 2.2%, respectively, according to Smith Travel Research.
STR said that this year, RevPAR at U.S. economy hotels will likely increase 3.1%, lagging the predicted 4.3% growth rate across all U.S. hotel sectors and substantially less than the 7.4% RevPAR growth rate forecast for luxury hotels.
"It makes sense that these hotel brands across the U.S. are trying to attract new travelers, and some of the owners were probably a little lax in their property-improvement plans over the past few years," said Jan Freitag, senior vice president at STR.
"It's just a question of time until we see the room-rate gains at the lower end, and whether the investment makes sense."
Motel 6 and Microtel aren't the only economy brands with upgrades in the works.
Earlier this year, Choice Hotels International said it would institute upgrades for its Comfort Inn and Comfort Suites brands and may deflag many as 10% of the brand's lesser-performing hotels.
The company estimates that about 70% of the company's approximately 2,000 Comfort Inn and Comfort Suites hotels will complete the improvements to their bedrooms, bathrooms and public spaces by 2015.
The cost of the improvements can add up, especially for an owner of a relatively small hotel. Motel 6's Amorosia estimated that his chain's upgrades will range from $3,000 a room to $5,000 a room in materials alone, putting the price tag for improvements of an 80-room Motel 6 as high as $80,000, excluding labor.
Still, Amorosia said the 100 improved hotels are a mix of company-owned and franchised properties, adding that there hasn't been a problem getting hotel owners to invest in the improvements.
"The owner-operated group was already putting in the improvements before we required franchisees to put them in," Amorosia said. "They saw the returns we were getting."
He added that there may be payback in more ways than just occupancy or room rate, as some of the upgrades involved making Motel 6 properties more environmentally sensitive by adding features such as solar power, double- and triple-paned windows and low-flow showerheads, cutting utility costs in the process.
As for Microtel, which was founded in 1987 and which Wyndham acquired four years ago, Barros is looking for the chain's improvements and marketing scheme to get some customers to "buy down" from the midscale segment.
"As long as we can provide an exceptional product with excellent service, there's no reason Microtel couldn't steal share from a Holiday Inn Express, Hampton or other midscale product," Barros said.
(Source: Travel Weekly, 04/17/12)
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