Independent properties and soft brands are making a splash in the hotel pool – each in their own way
The march of the Millennials continues its forward movement, altering business travel as we’ve known it. It’s more than a mere matter of exchanging wingtips and high heels for Skechers, or single-malt Scotch for craft beer. The changes wrought by this slice of the business travel community go deeper than that, spawning whole new segments of the hotel industry.Lifestyle Lodging
“Lifestyle brands are aimed at guests looking for more exciting, interesting and unique experiences than they get at the typical hotel,” says Kim Kearns, senior director for global hotel relations at BCD Travel. “For example, they may wish for their hotel to reflect the authentic characteristics of their destination city rather than a hotel brand whose Boston property is indistinguishable from its Santa Fe property.”
Lifestyle hotels, which are chain affiliated, began to proliferate several years ago, as hotel brands responded to changing traveler tastes. Today, the landscape is loaded with trendy properties, with even trendier names (see chart), as the major players jumped in the game:
Kearns says these lifestyle hotels “combine the best elements of boutique hotels – small, intimate and modern – and the advantages that only a chain can offer, like loyalty benefits, consistency and economies of scale. Lifestyle hotels are meant to be more affordable and accessible than independent boutique hotels.”
These characteristics are finding their way into the aesthetic of today’s business travelers as well, according to Gary Steffen, global head of Hilton’s Canopy Collection. “When it comes to business travel, we are noticing an increased desire for authentic, local experiences and have positioned Canopy by Hilton to appeal to a broad base of guests, including our modern business traveler who expects a well-designed, contemporary hotel with services and amenities that support them in business and give them an edge.”
Consider Canopy Central, multiple-purpose spaces where travelers can take care of business, socialize and eat; when work is over there’s a daily gratis tasting of local brews and such.Just around the Corner
‘Local’ is a concept that permeates the lifestyle lodging landscape. Local food, local location, (i.e., very often city center) and local art. One example is the AC Hotel in Asheville, NC, an all-in exponent of local. The property makes it easy for guests to “engage in the location’s art, music and cultural scene,” says Karl Oates vice president of lifestyle hotels for McKibbon Hospitality, one of whose properties is the AC Hotel Asheville, a Marriott brand. Indeed, you don’t have to leave the hotel to do so, Oates explains. Just head to the ninth floor where the star of the show is “the work of 10 local and regional artists. A variety of sculptures, hand-blown glass pieces, and paintings are situated throughout the hotel’s public spaces and guest rooms,” he says.
“Hotel guests and locals can enjoy an ‘art walk’ through the property to preview the entire collection.” On the ninth floor, there is also an art wall with pieces for sale by a featured local artist. ‘Local’ may also equate with ‘limited’ (although sometimes luscious) food service. The Asheville property sports Capella on 9’s, a tapas bar offering breakfast in the morning and small plates fare in the evening.
Another Marriott brand occupying the lifestyle upscale space is Aloft hotels. There’s the W XYZ bar, but you’ll have to settle for grab-and-go gourmet light meals and mix-and-match munchies in lieu of a sit down, full service meal.
While the food and beverage service tends toward the ‘light’ side, the high-tech is terrific. Connectivity is key to business travelers and lifestyle hoteliers have gotten the message. IT is a strong point in virtually all lifestyle hotels.
Ever in search of ways to differentiate themselves from other hotels, one lifestyle brand is putting on a full-court press when it comes to promoting healthy travel. Billing itself as “the world’s first and only hotel wellness brand,” IHG’s EVEN concept spotlights a menu of locally-sourced, healthy foods and multi-zoned gyms. The wellness focus encompasses the all-important guest rooms, with sleep-inducing bedding, aromatherapy amenities and specialty lighting designs.
However there’s still plenty of room in the business travel market for the tried-and-true. “A certain type of traveler may prefer a traditional chain hotel versus a lifestyle hotel,” says Oates. “Traditional chain hotels are familiar, where lifestyle hotels are relatively new and take some time for traditional patrons to warm up to. The more modern look in the rooms and non-traditional layouts are not always well received. And, a more vibrant feel is not always appreciated by hotel traditionalists who prefer a quieter environment in the lobby or bar area.”Irrepressible Indies
While lifestyle brands are ascendant just now, the independent properties they seek to emulate still comprise the lion’s share of the global market. In fact, according to Lukasz Dabrowski, senior vice president for HRS Hotel solutions, “Seventy-five percent of hotel room inventory worldwide is independent. It’s only in North America where chain properties dominate the corporate landscape.”
It’s a brave new world for global corporations, and international travel to places where US brand names are not always household words is the norm. So it’s vital that corporate travel managers source these properties especially in the nook-and-cranny hotel markets of some countries. “When it comes to their access to business travelers and travel programs, independent hotels in the past truly didn’t have any options,” Dabrowski says.
Today they do. Finely-crafted requests for proposal are the tools. One of the movers and shakers in this arena is HRS Hotel Solutions. “Today, thanks to the HRS platform, they have a pathway that can get them in RFPs,” says Dabrowski. “They see this major opportunity coming to life in the form of more programs exploring their properties.” The result is that “everyone benefits,” he asserts.
“We’re in an age of renaissance for independent hotels,” contends the HRS executive. Chain consolidation such as Marriott’s purchase of Starwood has significant consequences, specifically “the pricing options many travel managers are faced with. Many indie hotels that target business travelers have invested in their properties in an effort to stand out with travelers – in the lobby, room design, catering to electronic online connectivity.”
As Dobrowski puts it, “Increasingly, independent hotels offer quality alternatives to business travelers. As a reaction to market pressure, they’ve ramped up their creativity, raising the bar for both product and service. Marry that with the fact that business travelers are also increasingly open to having new kinds of experiences and one can see why indie properties are stepping up their efforts to work with corporate programs big and small.”Senior vice president global strategy and consulting for Reed & Mackay DeAnne Dale agrees. “Independent hotels have the flexibility to customize their offering to a traveler persona more than the larger chains. Small touches like less standardized interiors can make the overall experience feel more personalized. Independents also have greater autonomy in the negotiation stages than the larger chains which can mean better overall value and traveler experience.”
That said, working against the pure independents is the powerful gravitational pull of the big loyalty programs. “The loyalty schemes offered by larger chains are a big deal for business travelers and so is the comfort offered by the brand standard,” Dale says. “For some travelers, the consistency across hotels that a chain offers is a plus point, and for travel managers it can make it easier to manage guest expectations. In regards to loyalty programs, with all the recent mergers – Marriot and SPG, for example – the choice for travelers has also expanded and will create even greater brand loyalty when attached to a rewards program.”
Dale says there are other forces which factor into the indie equation as well. “When it comes to managed programs, limited geographic coverage and inventory per room category can make it more difficult for independents to secure a spot” on the ‘go to’ roster of corporate travel managers.Racking Up RevPAR
Despite the loyalty and market penetration issues, independents are doing just fine – at least when it comes to RevPar in the important luxury category. BCD’s Kim Kearns says in a 2016 analysis by the Highland Group that between 2011 and 2016 luxury independent hotels enjoyed the strongest growth in revenue per available room: 29 percent. That was followed closely by upper-midscale independents and soft brand “collection” properties. Both these segments saw RevPar bound ahead by 27 percent. Notably, lifestyle chain performers were the weakest performers. Still, they grew a respectable 24 percent from 2011 to 2016.Perhaps part of the indies’ performance is the fact that rates can be a bit pricey. “Independent hotels typically have higher customer acquisition costs,” says Karnes. “They simply don’t have the brand power and financial muscle of the chains to attract guests. Lifestyle hotels, on the other hand, are part of chains. So, they combine the best elements of boutique hotels – small, intimate and modern – and the advantages that only a chain can offer, like loyalty benefits, consistency and economies of scale. These hotels are meant to be more affordable and accessible than independent boutique hotels.”
Via the magic of ‘soft branding.’ indies benefit from a have-your-cake-and-eat-it-too arrangement where they join ‘collections,’ partaking in the services of powerful hotel brands without having to follow the sometimes-stringent chain standards. The big US chains are players in this arena too, as the chart from BCD on page 12 illustrates.
Lukasz Dabrowski believes there are seminal reasons both chain lifestyle and independent properties are prospering just now. “Indie properties have flexibility with both their product and pricing that traditional chains may find more challenging. Guest expectations are often different with indie properties, and plays into the hands of creative indie hotel owners and managers. On the pricing front, indie hotels are (usually) not burdened by franchise fees and vast distribution expenses, and they are not beholden to some corporate HQ’s version of marketing strategy in their local market. They often can price their rooms more aggressively since they have lower marketing and distribution costs. Independent hotels often represent a more genuine local experience, which has become increasingly important to business travelers, especially Millennials.”
Dubrowski sums up the overarching trend this way: “Less standardization and more unique features can be a major advantage these days – just look at the many chains following this strategy with the launching of lifestyle brands.”