As top performers in three different market segments illustrate, thriving in today’s economy means constant innovation and attention to service and value.
This year has been far from a banner year across the board for the hotel industry, observes David Larone, national managing director at PKF Consulting in Toronto. Larone reports that nationally the full-service segment is ahead by 2.5 per cent to three per cent in RevPAR, depending on the market, while the mid-scale and limited-service segments are up approximately three per cent to 3.5 per cent in RevPAR. “The rest of the market nationally is ahead by about a point and a half. There are some pretty fine tolerances in there,” he says.
For the most part, the limited-service segment is resilient to the effects of the economy, says Steven Robinson, president of Travelodge Canada Corp., an operating division of Royal Host Limited Partnership, which has 93 Travelodge and Thriftlodge locations across Canada. “With full-service or some of the luxury models, that type of spend has huge swings when the economy changes,” explains Robinson. “We’re in the smaller markets on the fringes of major cities, with a lot of road warriors and individual travel laced with some leisure travel, so we seem to ride out the economic ups and downs fairly easily, but it really does boil down to where you are geographically throughout Canada.”
Sixty per cent of Travelodge Canada’s properties are located in Western Canada, where the economy is faring well, notes Robinson. Properties in northern Ontario are also enjoying growth, thanks to resource-based industries located there, he adds. “If you look at the first six months of 2013, our occupancy hovers around 53 per cent, but we’re seeing a nice lift in ADR — our rate is up about five points, so we’re experiencing a five-per-cent increase in RevPAR, but it’s rate-driven,” he says.
Robinson credits Travelodge’s growth to a number of key factors, including a solid national sales program and good tactical marketing. Sponsorship agreements, such as the integrated marketing program Travelodge entered into in 2012 with the Western and Ontario hockey leagues of the CHL provide great opportunities to extend brand awareness. The partnership includes traditional and social-media components, in-venue and rink promotion and contests such as the Travelodge Canada Fan Faceoff.
Another winning ingredient for Robinson is an aggressive revenue-management strategy. “If you’re constantly working with franchisees across Canada, you become their coach,” he explains. “We’re trying to find ways to uncap a little more lift on the rate or a few more advances in selling more rooms, and then we can chisel away at capturing more share. To me, it’s a matter of trust. As a franchisor, you do what you can to maintain awareness and a respect for that brand. Once you build that trust, you can bring a strategy to the table. It’s a matter of getting inside the head of the hotel owner and saying, ‘Try this,’ and keep poking around to find the sweet spot for that individual hotel. It’s different everywhere you go. We’re all after the same thing: if I can increase your top-line revenue, then I’m going to be more successful.”
Robinson foresees slow but steady growth for the balance of 2013 but believes 2014 will mark a turning point. “I think next year, we’re going to see more rate growth — a little more demand, maybe a point or two in occupancy, but five per cent to eight per cent in rate. Nationally, I think we’ll see a five-per-cent RevPAR growth in 2014.”
Since mid-scale properties are generally smaller and built in suburban locations, they’re also cheap to build and easier to operate, enabling owners to offer a quality product at a reasonable price, says Larone. “People are always looking for the value proposition,” he says. “The cost of providing the FF&E in a hotel on a per-room basis has gone down from where it was 10 years ago. A select-service property that has a great lobby, a really good room and a breakfast can deliver a lot of people to your door for $150.”
The model is working for Courtyard, Marriott’s largest global brand, which has 938 properties worldwide and is slated to top 1,000 by the end of 2014. The 20 Courtyards in Canada are also performing very well, says Manlio Marescotti, VP, Lodging Development. “We’ve increased year-to-date system-wide on all metrics: occupancy rate, guest satisfaction and RevPAR,” he says. “A lot of it has been on the rate side, and in Canada, we’ve maintained that.”
St. John’s, N.L., and Calgary are top markets, notes Marescotti, adding that one of Courtyard’s secrets to success lies in continual enhancements to the brand, such as the Refreshing Business it introduced in 2007 to upgrade lobby and communal areas and simplify its food-and-beverage offering in favour of a bistro concept. “By the end of 2013, 92 per cent of our hotels will have the Refreshing Business. It’s had a big impact in terms of higher guest satisfaction scores, higher intent to recommend and also in terms of performance: on a system-wide basis, we have a 115-per-cent RevPAR index,” reports Marescotti. “Of the 20 Courtyards we have in Canada, 16 were open and operating for all of 2012, and 11 of those had higher than the 115-per-cent RevPAR index. So, within those markets, the Courtyards are outperforming their immediate direct competitors, which is very good news.”
Of the eight hotels Marriott opened last year, four were Courtyards, and six more are in development, including units in Calgary South, Winnipeg Airport, Toronto/ Greater Toronto Area and Montreal. These new Courtyards will be the first adopters of Marriott’s Generation Next Guestrooms — designed to appeal to younger travellers, says Marescotti. “We’ve improved the functionality of the room and made the decor resonate with that generation,” he explains, noting that new sofas reflect the desire to lounge in front of the TV while working on laptops rather than sitting at a desk. “When you’re doing these enhancements, the key is accomplishing them while being cost-neutral, and that’s what we’ve been able to do,” adds Marescotti. “It’s had great reception both in terms of our consumer research as well as what the franchise owners’ community is saying. That’ll keep the brand very ahead of the curve.”
Marescotti feels Marriott’s marketing strength, loyalty program and user-friendly website and mobile app enable the brand to steal market share from coast to coast. “These are things that help our hotels achieve that market penetration and have an advantage over others in terms of how we get business to come to us.”
Looking ahead, Marescotti believes Courtyard’s growth will vary by market — Montreal, Toronto airport and Vancouver remain more challenging markets to crack — but will continue to climb, especially with conversions. “We’ve had a couple of properties that have re-opened last year, and it’s easier to come into the market, establish the rate positioning of the hotel, then start working on different strategies to increase occupancy over time,” he says. “Marriott has dedicated account managers for major Canadian accounts, so we target those clients and make sure they’re using our product. We leverage the sales tools we have at our disposal.”
And, it helps that the hotel company is bringing the Spain-based AC Hotels by Marriott brand to Canada next year. Execs are planning to enter key travel markets in Canada and the U.S. with the concept, which is geared toward the gen-X and -Y market.
“You’re paying more because they provide more,” Larone says of the boutique segment, which caters to a small, growing niche of travellers looking for an exquisite room with exceptional service in a trendy location. “You’re getting into a smaller footprint, maybe 100 to 150 keys, and a great room. It’ll cost you more to build that asset, because there’s more going into it from a design
The Hazelton Hotel, located in Toronto’s chic Yorkville district, attracts travellers to its 62 rooms and 15 suites with its 1940s Hollywood decor, coupled with unique amenities such as a private screening room featuring mohair-lined walls. “The Hazelton Hotel is fortunate to be at the top end of the luxury segment in Toronto,” says Nancy Munzar Kelly, GM. “There’s been a significant increase in supply of luxury hotel rooms in Toronto, which has been great for the city, but has also increased competition. We differentiate ourselves with our intimate size, location in one of the city’s most high-end neighbourhoods and exclusive guest offerings.”
While Munzar Kelly won’t disclose specific numbers, she’s pleased with the hotel’s performance over the past year. “We work hard to ensure loyal clients are well taken care of, and we use in-depth marketing programs to target both loyal and new guests; we recognize our best marketing tools are our satisfied guests,” she notes.