A lot has happened since then, both in the economy and mid-scale hotel segments and to Red Roof in particular.
A lot has happened since then, both in the economy and mid-scale hotel segments and to Red Roof in particular.
Acquired by Accor North America in 1999, a recent resale has placed Red Roof, now grown to 325 properties nationwide, under the umbrella of Citi's Global Special Situations Group and Westbridge Hospitality Fund with hopes of growing through franchising, acquisitions and new development.
Its prospects aren't bad. Red Roof is second (Mictrotel Inns & Suites is first) in JD Powers' 2007 overall guest satisfaction survey in the Economy/Budget segment. Their beds also scored highest amongst the 15 largest hotel brands in Powers 2006 "Comfort in Bedding." And while this bed comes in all rooms, the All Inclusive King Room package includes a communications package of high speed internet, unlimited local and long distance calling and in/outbound fax service.
"I think most hotel chains have learned that a good night's sleep is the price of admission. Red Roof Inn was the first brand in the economy segment to upgrade our bedding package — in 2006," says CEO Joe Wheeling. "We upgraded the mattress top, blanket, pillows and added 30 inches to the top sheet to create the hygienic feel of a triple sheet. We also added piping and present the bed in a turn down fashion.
"Most hotels have upgraded products, services and amenities over the past 5 years, so segmentation has remained intact, he observes. "The economy segment must keep up with guest expectations. However, we have to be creative and do it in a way that is affordable so that we can remain the preferred option for the cost-conscious guest."
The New Normal
"A competitive advantage with mid-scale properties is their ability to provide what was once considered frills as now basic services and this sets the 'new normal' for the mid-scale class of hotels as they can deliver these services at far lower cost to guests, compared to higher end properties — even those with F&B. In other words, what a mid-scale may lack in creature comforts makes up nicely in all their add-ons. It makes their product more attractive for a travel planner seeking to budget travel with more restrictions but not face worker backlash," explains Jason Price, executive vice president, Hospitality eBusiness Strategies. "A new normal of basic comfort is being provided and in some cases exceeding expectations.
"This is not a new concept and we have seen this happening for some years, but with a potential economic slowdown, economy and midscale hotels offering complementary breakfasts, free parking, free Internet, free newspaper and other options are great value to the leisure and business traveler. I suspect the marketplace will have an even greater appreciation for mid-scale and economy brands in the present economy ... companies like Choice Hotels and others will be the winners through an impending economic slowdown."
Among the variations within the economy and mid-market brands the options no longer cease to amaze. For example, thanks to a missed connection in San Juan, Puerto Rico two years ago, I was introduced to the airport's upgraded Best Western Hotel with LCD TVs hanging on the wall, a sublime fitness center, a business center with multiple computers — all functioning and online — not to mention a breakfast room with complimentary hot breakfast food.
Similar can be said for the Holiday Inn Express Surprise, just west of Phoenix, in Arizona. "I like nice things. So, we took it to another level, assuming that in time we'd make our money back," says managing member Bruno Salamone, of Stadium Village Holiday Inn, LLC. "Everyone loves our flat screens!" Salamone's group hired an architect to design the two-and-a-quarter acre, 115-room new construction, which opened on January 1, 2008. With 15 hotels throughout California and Arizona, the group had a good idea of what to expect in terms of wear and tear and therefore opted for tiling in high traffic areas where carpet is more common. They chose hardwood floors in the breakfast room and tile in the guestroom entries and bathrooms. The bathrooms boast upgraded showerheads by Kohler, a new line of cinnamon-scented bath products and upgraded pure cotton towels.
"Our portfolio continues to expand in markets like Phoenix," says John Merkin, senior vice president of brand management for Holiday Inn, the Americas. He goes on to explain the creation of a more contemporary brand image starting with a new logo, to demonstrate the tremendous efforts being made to increase quality and drive consistency in all 3,189 Holiday Inn brand family hotels around the world.
"Our focus is on what matters to guests. Ninety percent of what's important in a hotel stay is a modern, clean, safe property with efficient, friendly service that affords a great night's sleep. And that's what they'll get at every Holiday Inn and Express, from Birmingham to Beijing. We aim to finish the quality audit of our hotels and to roll out the new look and feel of Holiday Inn around the world by the end of 2010, when all our hotels will have to meet our new brand standards to keep the flag. The first guests will be able to stay in a re-launched Holiday Inn this spring," says Merkin.
With options at many economy hotels now mirroring the conveniences of upper market brands, one may be left to wonder, does this present a clouded comparative to the consumer, who in addition to conveniences, is often challenged with the task of getting the most bang and a little fluff for his or her buck? The answer, according to Wyndham Hotels representative, Rob Myers, is a resounding no.
"No, the general upgrading has not blurred the distinction between economy and mid-scale hotels. The reason being that the upgrades are relative among all segments. For example, even though economy hotels are now offering amenities that they might not have three years ago, so are the mid-scale hotels. As such, the gap isn't changing and hotels remain in their original segments," explains Myers.
However, at Motel 6, there is a difference of opinion.
"Amenity creep has become an issue for much of the hotel industry, often blurring the line between economy and mid-scale hotels. At Motel 6, we are very conscious of our brand positioning as the lowest-priced room of any national chain. All of our purchasing decisions are led by our desire to provide comfort to our guests while maintaining our brand identity and the price point and value that our customers rely on," says Jim Amorosia, president and CEO of Motel 6.
National Differences
But Amorosia also recognizes that the playing field varies from country to country when defining hotel categories: "In Europe, for example, one would not necessarily expect an in-suite bathroom at an economy property, while in the US, customers have high expectations of privacy and comfort."
There Wyndom agrees, according to Myers, who went on to say that, "In the United States, where the market is far more competitive and evolved, the consumer tends to expect more value from the economy segment, which is why you're seeing more and more economy hotels offering things like free wireless Internet access and flat screen televisions. In Europe, where the economy branded market is less competitive and mature, the consumer tends to expect a lower cost with fewer amenities. Though it's worth mentioning that the market there continues to evolve as more and more hotels join global brands."
As for the rest of the world, Myers continues, "markets like China and India are still emerging ... it will be interesting to see how these markets ultimately settle in terms of cost versus value."
The Wyndham umbrella includes Wyndham Hotels and resorts, Ramada, Days Inn, Howard Johnson, Super 8, Travel Lodge, Wingate, AmeriHost Inn, Knights Inn and Baymont for a diverse blend of brands from economy to upper mid-scale. Several of the brands offer franchisers various options for upgrades (see Movin' On Up chart).
The rewards program at Choice Hotels was recently expanded to include the Econo Lodge and Rodeway Inn economy brands, which attract a mix of business and leisure travelers, according to Choice spokesperson Kevin Bradt. But the change wasn't made in lieu amenity and style upgrades, he explains: "The decision to incorporate these brands into our Choice Privileges rewards program will allow Choice Hotels to achieve marketing and communications efficiencies by operating a single guest loyalty program. Furthermore, Choice Privileges members have indicated a strong interest in seeing the Econo Lodge and Rodeway Inn brands added to the program."
Stepping Stones
There's an axiom that minorities are somewhat forced to enter the hospitality business on the ground floor. But that's not the whole story.
In 2003, James Guilloroy, a member of the National Association of Black Hotel Owners Operators and Developers (NABHOOD), built and opened his first property, a 62-room Hampton Inn in Houston. With a 110-room Fairfield Inn & Suites under construction in Houston, where he also has a 122-room LaQuinta Inn & Suites under renovation, and the pending closure of a deal on a 110-room Holiday Inn Express & Suites in Memphis, TN, Guilloroy sold his freshman project this past January.
"Economy brands get many African Americans in at a price point that allows for the development of expertise and building additional capital, thereby allowing them to become multiple unit owners, or to elevate to the next level," acknowledges Andy Ingram, founder, president and CEO of NABOOD. But he also points out that 120 of the 300 hotels represented in his organization fall under the more upscale Marriott and Hilton brands and are owned by Bob Johnson, founder of the Black Entertainment Network, and a millionaire.
And Guilloroy says that he and many of his fellow NABHOOD friends are "brand conscious, seeking mid-scale and upper mid-scale brands such as Courtyard, DoubleTree and Holiday Inns, for example."
"Economy hotel brands are a logical entry point for entrepreneurs (including minority entrepreneurs) looking to get into the business. Brands in higher segments require both more capital to get started and more management expertise due to the more complex product offering, which often includes F&B. At the same time, you have to be an entrepreneur who enjoys pinching pennies to be successful in economy lodging," explains Red Roof's CEO, Joe Wheeling.
To that, Amorosia, of Motel 6, adds "It [entry level economy hotel ownership] allows new franchisees the opportunity to learn the hospitality business without the additional burden of food service involved in the mid-scale market.
"Entrepreneurs are by definition, people willing to take risks. Entering the budget/economy sector as a starting point tends to lower the risk, yet raise the rewards for first-time operators," says Roger Bloss, CEO, founder and president of Americas Best Value Inn and The Vantage Hospitality Group. "Typically, it can take six to eight months for any new hotel to stabilize and become profitable," adds Bloss. Thus, Americas Best Value Inn offers one year of free membership fees for anyone building a new construction. "By waiving the first year membership fees, that money goes right back into our hotels to jump start their businesses. They can now use the money from their first-year membership fee to participate in local marketing programs, hire sales people, and make upgrades to their new construction that would have been too costly before the waiver."
In a unique approach among hotel brands, Americas Best Value Inn does not mandate to its hotel owners. "At ABVI we concentrate on education," says Bloss. "It is our belief that no one knows his local market better than the hotel owner. Therefore, we allow our members to institute the amenities, bedding, décor and price points that are relevant to their market and competitive set. After all, what's important to guests and business travelers in New York City may be completely different to the needs of guests in Lusk, WY."
There's a similar approach for franchisers within the Lexington Collection. "Interestingly, even with our free style lodging package, which allows owners to select the amenities they deem appropriate for their market and competitive demands, more than 90 percent are utilizing the highest possible upgraded amenity packages," says Steve Bellmonte, CEO of Lexington.
Diversity Commitments
And with the number of entry-level hotels in the economy and mid-priced range, one would have to wonder how they compete with the more established properties. Is there a means of leveling the playing field so that the new guys on the block get their share of the pie? According to deputy director of communications at US General Services Administration, Jennifer E. Millikin, there are no Federal regulations concerning the patronage of diversity-owned hotels. "The only regulation affecting choice of hotel is that the lodging properties should be deemed fire safe and in compliance with the Hotel and Motel Fire Safety Act of 1990. Such properties have a fire safe identification numbers issued to them by the US Fire Administration.
Instead, says the GSA's Rick Freda, there is a code to follow, which operates more according to per diem. Under this system, the business traveler could very well end up at a Five Star property for the night, if it met the approved per diem.
"Federal travel contractors have certain supplier diversity clauses in their contracts with the government and cost reimbursable contractors working on government projects also have small business and diversity requirements/goals they must meet. Some of these goals may be met by using diversity-owned hotels, but I do not think they are required to meet these commitments by using hotels," says Scott Lamb, director of the government segment at Hilton Hotels Corporation. "Sometimes government contracts directly with a hotel for specific needs, such as conferences and training events. In awarding these contracts, the government can give preference to small business, veteran-owned, and other diversity-owned operations. Travelers attending these events therefore support the diversity programs."
The real competitive edge remains the same: value for the price.