Is your extended stay hotel near a hospital? It may pay to know.
“Medical tourism is on our radar,” says Nicole Nicoloff, director of exceptional family and patient experiences at Community East Hospital in Indianapolis. That’s a rather remarkable declaration in a city that’s busily gearing up to be the site of the 2012 Superbowl. But while city fathers are certain that the Superbowl will have a lasting effect on the local economy, they are equally certain that it’s never a good thing to have all your eggs in one basket.
“We’re a competitive factor for the whole community,” says Nicoloff. “The city has to become diverse. With healthcare reform, anyone can get healthcare anywhere.” Her title says it all: hospitals that can deliver exceptional treatment to their patients and their families, provide them all with a comforting experience in a difficult time, will be able to attract more business — to both their facilities and their cities. There’s no denying that the US healthcare community has taken note — and some lessons — from the loss of market share to other countries.
Though it’s focused on medical tourism outbound from the US, the Florida-based Medical Tourism Association (MTA) cites another factor in favor of Indianapolis’s diversity-based economic development. The city offers a cluster of health care services — “probably the most important single step in establishing a medical tourism destination,” says MTA.
At Community East, and the four other Indianapolis facilities under the Community Hospital umbrella, being competitive also means helping families find affordable accommodations on short notice. “It’s usually a family who comes from out of town and then learns that they have to stay longer than expected,” says Nicoloff. She estimates, “conservatively,” that there are five to 10 families per quarter at each of the four sites who are far from home — Community East draws patients from 30 states outside Indiana for its cardio-vascular care — and in need of help finding accommodations. The five hospitals are ready with negotiated rates, discounted to about half the rack rate, at a dozen hotels near their campuses. Those who use the service are given an ID card to be assured they are given the proper rate.
Whether it becomes part of the hospital’s hotel discount program or not, the new Candlewood Suites Indianapolis East entered this busy market early last month. And true to the diversity cited by Nicoloff, there’s more than football and healthcare to recommend the location. When it announced the opening, Intercontinental Hotel Group (IHG), owner of the Candlewood brand, listed the presence of not only Community Hospital but of Pratt Corporation, Hostess and Wonderbread, Schneider National, Caito Foods and Raytheon.
That could mean that businessmen traveling to those companies won’t always find available space, especially if the local hospitals are successful in attracting patients from a widening market.
Buffer In Bad Times
Competition based on quality of care is an integral part of healthcare reform, says Jason Wolf, executive director of The Beryl Institute: “Hospitals will soon receive a portion of their Medicare reimbursement based on patient satisfaction scores.” Beryl Institute was founded in 2006 by The Beryl Companies, providers of healthcare IT; its account reps have cited Community East’s patient care program to many of its other clients.
In fact, Wolf tells readers of his blog, some US-based luxury hotels are experimenting with the idea of a medical concierge to serve patients “who have lengthy but uncomplicated recovery times or lengthy treatment scenarios.” Ritz Carlton hotels is one of them.
But, as Wolf points out, not all patients who need such long-term attention will be able to afford such upscale digs. For the more cost-conscious market segment, extended stay hotels offer a more practical option.
Hospitality industry analysts don’t appear to be tracking the role of the US healthcare industry in hotel occupancy rates. Indeed, in its 2008 report on the extended stay segment, HVS International cited the hospital segment as a part of the leisure market. But the connection has been acknowledged for quite a while in various international economies in a business model that layers attentive hospitality on top of quality low-cost healthcare. In Thailand, which is generally credited with creating the concept, the average foreign patient spends about US$358 (13,600 baht) per day — that’s three times the average spend of a leisure tourist.
Hospitality executives in the US are not unaware of the connection. Development of new hotels near healthcare centers “happens quite a bit,” says Gina La Barre, vice president of brand delivery for the Americas division at Intercontinental Hotel Group, whose brand portfolio includes Candlewood Suites and Staybridge Suites. “A medical facility in the market is always a good thing to have.” She points out that the demand drivers are not just the patients and their families. Rotating temporary nursing staffs go through some hotels on 13-week assignments. There will also be visiting specialists and consultants as well as account reps from pharmaceutical and medical device companies.
While La Barre doesn’t say the healthcare market is a particular niche being pursued by IHG, another Candlewood Suites opened in June in San Antonio, near the South Texas Medical Center. “We are pleased to grow with our owners to build the right hotels in the right market,” said Jim Anhut, IHG’s chief development officer for the Americas, at the opening of the Candlewood Suites San Antonio Northwest. Granted, what makes that location “right” isn’t simply the proximity of the medical center. Also nearby: Lackland Air Force Base, several corporate offices, the new Kohl’s call center, Sea World and Six Flags Fiesta Texas.
The healthcare market acts as something of an economic stabilizer for the hotels that are able to tap into it. Business was down in 2009 but healthcare continued to run well, reports Doug Soule, general manager of Candlewood Suites Boston — Burlington. His hotel is two miles from the Lahey Clinic, a cancer research and treatment facility that has brought hotel guests from as far away as Texas and Bermuda. Many of those guests stay for 30 days or more, which is the lowest cost per room night in the hotel’s four-tier schedule.
Weekdays, the hotel also draws guests coming to the nearby convention center or visiting local companies. Weekends brings some variation from baseball fans coming to Fenway Park — “in general we don’t get over-boisterous sports fans so it hasn’t affected other guests too much,” says Soule.
The owner of Candlewood Suites Boston-Burlington, Hospitalities Properties Trust of Newton, MA, owns a similar property near the Mayo Clinic campus in Jacksonville, FL. Forty-eight percent of the patients who come to the clinic are from outside the Jacksonville metropolitan area; 2 percent from outside the United States. Most people who come to Mayo-Jacksonville are treated on an outpatient basis, which means that 48 percent of them use local lodging at the end of the day.
The Clinic has its own residence facility — the 78-suite Inn at Mayo Clinic — and notes that the 156-room Marriott Courtyard Mayo Clinic/Beaches is near the front entrance. There are 21 more hotels within six miles of the Clinic. Most do not offer discounted rates for patients, perhaps because there are so many leisure attractions close enough to attract compensating traffic.
But Cancer Treatment Centers of America, like Community Hospitals in Indianapolis, has negotiated reduced rates (as low as $40 per night) with some hotels near its facilities. Some, notes the Schaumberg, IL-based company, also offer special gathering rooms for their patients and caregivers. Most of the Centers are in metropolitan areas where business travelers are also likely to need accommodations. The company lists negotiated rates in Tulsa at a Candlewood Suites and a Hilton Garden Inn; in Philadelphia at the Korman Suites; and in the Phoenix area at a Towneplace Suites.
The proximity of the Texas Medical Center in Houston is “clearly” a major demand driver for the Hampton Inn & Suites Houston — Medical Center, says Jeff Fisher, whose Chatham Lodging Trust just purchased the hotel for $16.5 million. “This property is not distressed. The key to acquiring is finding a distressed seller. This owner has 65 or so properties and is selling a successful hotel in order to fund the rest.
“We learned a lot by buying this hotel and analyzing its occupancy over the recession,” continues Fisher. “It was very consistent. When the rest were drying up, they stayed within [profit margins].” The developing portfolio that’s now anchored by the Hampton Inn Houston won’t be “all medical center proximities but I’m interested now.”
The Texas Medical Center is the world’s largest — “on 1,000 acres, equal to the area of the Chicago Loop” says Jeff Waldt, senior vice president of sales with Island Hospitality Trust, which operates the Hampton Inn & Suites Houston. Seventy percent of the hotel’s occupancy is medically-related, according to Waldt. Broken down further, that occupancy is 60 percent patients and their families and 10 percent doctors, nurses and suppliers.
Hospitality companies aren’t the only parts of the travel industry that are paying attention to the potential in domestic medical tourism. But involvement, this time by Southwest Airlines, may come more from corporate social responsibility than market segmentation. Southwest announced in January that it would donate $1.2 million in transportation to 29 medical organizations this year for the benefit of patients and family members in need. The airline’s Medical Transportation Grant Program, now in its third year, is administered by each location through its social work administrator, travel concierge service or patient assistance department.
Similarly, American Marketing Group unveiled Well-Being Travel in June, designed to be a go-to resource for medical tourism “to help travel agents get in on the ground floor of this rapidly growing niche that is sweeping the world.” But Well-Being’s focus is more on the international side of medical tourism rather than domestic, so may not magnify the trend’s affect on hotel capacity inside the US.
Proximate Importance
It’s not necessarily those hotels that are closest to a medical center that have negotiated rates for long-term medical stays. Children’s Hospital Boston (CHB), a 386-bed pediatric health care center, lists nine hotels out of 23 in its area that offer CHB-preferred rates for its patients and their families. Among the closest (.75 miles) is the Holiday Inn Brookline. Another Holiday Inn — Boston at Beacons Hill — also has CIB rates, but it’s 3.7 miles away. Similarly, the Marriott Courtyard South Boston, which is 2.5 miles from the hospital, offers a CHB preferred rate, but two Courtyards closer in do not. And the Embassy Suites Boston is nearly six miles away (more than an hour by public transportation) but does offer a CHB rate.
Nor is it always extended stay brands that serve the healthcare market — luxury hotels have found a comfortable niche in many of the world’s medical tourism hot spots, after all. In Boston, the Omni Parker House, 3.2 miles away and with a CHB-preferred rate, is a luxury hotel but will provide a fridge and microwave on request. Another luxury hotel, The Taj Boston, offers a medical rate as opposed to CHB preferred, and also offers extended stay rates.
And in Cleveland, IHG announced completion of a $4 million renovation of the Crown Plaza Cleveland South — Independence, “just steps away from the renovated Cleveland Clinic.”
The healthcare market’s attraction for hotels is the likelihood that patients who come from outside the immediate vicinity are coming to see specialists, undergo extensive treatment and stay for a week or more. Most of those patients are looking for a comforting, home-like atmosphere, a recurring mantra among extended stay marketers. Country Inn & Suites’ home-like atmosphere — with plank flooring and fireplace in the lobby, a lending library and a front porch — will strike a familiar note with many patients who come to the University of Arizona Medical Center in Tucson. The new hotel was opened in February.
It’s also been one of the beauties of investing in extended stay brands. While their pro forma occupancy levels are similar (75 percent compared to 70 percent for full-service brands), extended stay facilities usually have lower overhead because the guests are happy with simpler service.
Further, extended stay hotels cover the spectrum from luxury to economy, increasing the format’s attraction for long-term medical stays. In February, the Marriott Residence Inn Fort Lauderdale Pompano Beach hotel was offically opened after completion of a multi-milion renovaton that converted it from the Ocean Sands Resort & Spa. The announcment noted not only the hotel’s proximity to the Broward Medical Center and Holy Cross Hospital but to Pompano Beach Airpark, which caters to private airplanes. That “makes the Residence Inn a perfect rejuvenating headquarters for elective surgery recovery, as well as for people visiting family members who are having procedures at the nearby medical facilities,” noted the new owners, Aztec Group, Mercury Investment and Concord Hospitality Enterprises Company.
Developing Signals
Though the domestic medical travel market is still developing, those with some experience have begun to identify the factors that signal a potentially significant driver of occupancy.
Those same factors may suggest unexpected constriction of hotel room inventory in one of your business travelers’ destinations:
• A cluster of healthcare facilities serving different types of medical needs.
• A market draw that extends beyond 300 miles.
• Airports — commercial and private — that are nearby.
• Convergence of two or more major highways.
The optimal distance, from hotel developers’ and owners’ standpoint, between the medical facility and the hotel does not yet appear to be quantified — and may never be in light of all the possible variations in public transportation and a healthcare cluster’s footprint and specializations. A not-comprehensive survey of medical centers’ hotel listings show preferred hotels as close as one-tenth of a mile and as far away as 14 miles.