Competition is heating up in the economy-hotel segment, as operators strive to meet the expectations of increasingly discerning guests who want better bang-for-their-buck from economy hotels. For operators, this means basic lodging can no longer equate to a basic guest experience.
“The bar, in terms of quality, has been raised,” says Aly El-Bassuni, SVP, Franchise Operations for Radisson Hotel Group, adding guests’ standards for comfort and service don’t lessen just because they’re paying less.
Trevor Hagel, EVP of Travelodge Canada, agrees economy hotels are delivering a better experience for guests than ever before. This is great news for consumers but also means a new challenge for operators being pushed to take their game up a notch.
Hagel says some of the push for higher standards is coming from midscale properties, which will often reduce room rates when occupancy is low. “A lot of the different tiers try to compete in our market,” says Hagel. “Then all of a sudden we’re competing against the higher-tier properties that are charging economy-brand prices.”
Once guests have paid an economy price at a midscale property, expectations for their next economy stay are raised. “We need to look at what our individual economy tier is doing, but also to what the tier above us is doing because there’s always going to be the bleed between the two,” explains Hagel.
Hagel and El-Bassuni both say the best way to keep guests happy in this demanding market is to over-deliver and not only meet guests’ elevated expectations, but exceed them.
Exceeding guest expectations is also a key focus for Choice Hotels’ economy brands, notes Brian Leon, president, Choice Hotels Canada. “A lot of times we go into markets and the economy hotels tend to be older, dated properties that aren’t anywhere near the standard of the midscale competition,” says Leon. “You’ve got a real opportunity [in this segment] to surprise people with how good the quality of the stay can be.”
While operators agree exceeding guests’ expectations is key to standing out in this segment, every brand has a different approach to achieving this goal. For Realstar Hospitality, the franchisor of the Days Inn, Motel 6 and Studio 6 brands in Canada, going above-and-beyond means offering guests more stylish accommodations than they might expect from an economy hotel.
“The look and feel of Motel 6 today is much more contemporary,” explains Irwin Prince, Realstar’s president & COO. “We spent a fair bit of time thinking through design, colour, light that appeals to a broad section.”
Hagel says breakfast offerings have been a focus in Travelodge’s plan to offer added value for guests. The brand has added pancakes and waffles to its standard continental-breakfast spread, but Hagel notes there can be drawbacks to offering guests more than the basics.
“We’ve had many conversations about breakfast because as soon as you go down the path of offering hot [items], guests are going to complain that: ‘I’m getting bacon but I prefer sausage and they’re not offering sausage,’” says Hagel. “So the unfortunate thing with a lot of these programs is that amenity creep — where guests’ expectations start changing. Guests are walking away dissatisfied because they’re comparing that hot breakfast to the Denny’s hot breakfast.”
Many operators say an emphasis on customer service is an effective way to offer guests a more-premium experience at an economy rate. “In some cases — all things being the same in terms of amenities and quality — it’s the people that make the difference,” says El-Bassuni.
The same approach is true at Travelodge. “Often, guests who usually stay at mid-range or high-end hotels are completely wowed by our thoughtful customer service, as they don’t expect that service level from an economy brand. We love to surprise them and often develop strong loyalties because of it,” says Hagel.
Leon says Choice has been able to consistently surpass guest expectations by converting some of its older midscale properties into economy hotels. “We could have a hotel that, to keep pace with the market as a midscale, needs to spend a lot of money to keep up to the expectations of that midscale/upper-midscale clientele,” he explains. “With some of those hotels, we’ll do more modest renovations and convert them to an economy brand and the guest-satisfaction levels go through the roof because they’re quite satisfied to have that experience in an economy hotel.”
When it comes to opening new properties, Leon says developers often prefer to build midscale hotels because the difference in construction costs between economy and midscale is typically minimal, yet a midscale hotel can charge higher rates (and thus generate more revenue) upon opening. However, he notes there are still markets where economy builds can be profitable.
“There are a lot of cases where we see markets [with a lot] of midscale hotels and not really anything of good quality in the economy segment,” says Leon. “That actually offers a good opportunity to create something that’s positioned a little bit differently from everybody else. And, hopefully, it can do really well because of that.”
Leon points to Choice’s recently opened Econo Lodge in Fox Creek, Alta. as an example of this approach. “It was a market that had a number of midscale hotels. So we built a hotel that was just a beautiful hotel — smaller rooms than what you would get in a midscale hotel, smaller public space, a little more limited breakfast servings, et cetera,” he explains. “But it has become extraordinarily popular and the guest reviews are some of the highest in our system.”
While new builds such as the Fox Creek property have been successful for Choice, Leon says the majority of the company’s economy growth is in converting independent or otherwise-branded hotels to the Choice brand.
According to Hagel, Travelodge is also primarily a conversion brand. “We’ve been trying to grow the Quebec market and now we’re at six properties,” says Hagel. “There are a lot of independent properties in Quebec that are unbranded, so we see an opportunity to come in and add a brand and give franchisees the opportunity to gain more business.”
Quebec also appears to be a growth market for Choice, with some of its most-recent openings including Rodeway Inns in Gaspé and Pikogan. Rodeway Inn currently has 27 active conversions across the country, according to Bruce Ford, SVP and director of Global Business Development for Lodging Econometrics (LE). Other brands leading in the economy market include Red Roof Inn, which has 26 active conversions; and Best Western’s SureStay and SureStay Plus brands, which have 40 active conversions, according to LE data.
Ford says while the economy-hotel market isn’t growing, it remains steady overall. “It would be hard to say it’s on the rise,” explains Ford. “I would say it’s in line with historical trends.”
And, even as expectations change, Leon is confident there will always be a strong market for economy properties. “There are always people looking to save a little bit of money, but they’re still looking for basic, clean, comfortable accommodation and that’s something that’s not changing,” he explains. “Value never goes out of style.”
Written by Jessica Huras