Select-Service hotels, with their suggestion of “no-frills”, will always appeal to the cash-conscious and business travellers. Why pay for amenities you don’t use? But these limited-service properties are also coveted by developers, builders and operators because, unlike full-service hotels, they’re quicker and easier to construct and renovate, more economical to run, easier to finance and they offer a healthy return on investment. So, it’s no surprise that this continues to be the fastest-growing, least complicated and most profitable segment of the industry — even for companies typically known for their high-end properties, such as Hilton and Marriott, which have built a significant presence in the market.
A BROAD APPEAL
“Of the 31 hotels built in the last 12 months across the country, 16 of those fall into the select-service category,” says Carrie Russell, managing director of hotel valuation firm HVS. “Operators like them because it’s a more efficient model; they can be more profitable if you eliminate some of the more expensive services. Developers like them because they tend to be quite prototypical and the brand provides a lot of support, in terms of what you’re building. Guests like them because they’re [often] a bit more modern, with a focus on what’s important: a great bed, good Wi-Fi and a shower. The typical business traveller or cost-sensitive leisure group doesn’t need extra amenities that add to the cost.”
Brian Stanford, senior managing director of CBRE Limited, echoes the observation. “From the developers’ perspective, they’re not building 30,000 sq. ft. of meeting space, four restaurants, a spa, et cetera, so [the properties] become far more streamlined. And, every one of the brands has a very effective development prototype [with] very defined criteria that doesn’t have too much gravy in it, so to speak, in terms of unusable, non-revenue-generating space.”
And guests are increasingly proving that they can live without gravy — the valets, concierges, turn-down services, business centres, airport shuttles, room service and high-end art on the walls — as long as they have a clean room, comfortable bed and high-speed Wi-Fi.
“At the end of the day, that’s what guests want — to be able to connect all their devices,” says Reetu Gupta, COO of The Gupta Group and Easton’s Group of Hotels, which operate a portfolio that spans selects-ervice and upscale properties in Ontario and Montreal, and include Hilton, Marriott, Westin and Holiday Inn. But they want that connectivity in a functional space. “We just opened an Embassy Suites near Toronto airport [which features] beautiful rooms, all-wood floors, mobile access to the rooms. For those guests who just want to check in, get their work done and leave, this is perfect for them.”
That’s not to say these brands are bare bones. “Health and fitness has become such a trend, so all of the Easton’s properties have pools and gyms,” says Gupta. However, she notes that pools are becoming less popular. “In the past we’ve had a small gym and small pool. Now we’re seeing the brand saying, ‘take out the pool, make a larger gym.’”
Stanford agrees. “Many [select-service hotels] still have the gyms or pools, but not to the extent you would see in a full-service hotel. The gym may have four or five pieces of equipment in a 400-sq.-ft. room [as opposed to] a 1,500- to 2,000-sq.-ft. gym with 60 pieces of equipment. The pool is there, in many cases, to satisfy the sports groups, but it’s not trying to be a destination pool. So you have a much broader product appeal but at a more acceptable price point.”
LESS IS MORE
Hotels are further trimming the fat by eliminating a full food-and-beverage service in favour of a slimmed-down menu. Gupta notes that in many of Easton’s properties, instead of a restaurant, guests can grab a drink and a snack from the lobby. “It makes it easier on guests who just want something quick to take up to their room and get some work done.”
It also makes it easier on the operator, says Gabor Forgacs, associate professor at Ryerson University’s Ted Rogers School of Hospitality and Tourism Management. “A lot of hoteliers never understood how to make food-and-beverage profitable, so they’re [relieved] that they don’t have to operate a restaurant, rely on production, food facilities, supply-chain management, staffing.”
Whatever food is offered is not served up in a traditional format, to appeal to a primarily younger demographic’s tastes.
“Millennials are eating differently from their parents,” says Forgacs. “They don’t want a sit-down restaurant with tablecloths, a cold appetizer, soup, main course and dessert. They want grab-and-go. But they don’t want burgers or hot dogs. They want good-quality food — a fajita or chicken wrap — nicely presented. And they want it at 2 a.m., or their main course at 4 p.m. That was the tipping point, when customer preferences [changed] this approach.”
The provinces with the most select-service development are Ontario, B.C., and Quebec (particularly Montreal). “Right now we’re seeing all-time-high demands for these types of hotels and they’re driving better price points than they’ve driven in a long time,” says Stanford. “The data shows an occupancy somewhere in the range of six- to seven-points above the overall national average, as a group.”
In fact, Russell says the pipeline of new builds in Ontario and Eastern Canada is up almost 25 per cent, while B.C. is also up, but land in the Greater Vancouver Area has become scarcer. And Alberta used to be the hot spot when oil prices were $100 a barrel. “You’ll see a lot of hotels under construction in Alberta, but there are no new projects being added. There’s been a real cooling off.”
Stanford says other weaker markets include Regina, Saskatoon and St. John’s — all because of over building — as well as Alberta, due to the resource sector downturn. “[Still], even in the markets where we’ve had some impacts on performance, the select-service segment has continued to maintain its premium.”
But, will there still be land available to accommodate that premium? Gupta says it all depends on where you look and what you’re looking at. “In Toronto, for example, we opened the Embassy Suites, which was a renovation of a Quality Suites. And we have the Four Points by Sheraton, which is on the airport strip. There are areas, even in the GTA, which need the focused service; you just have to look in the right places.”
YOUNG GUESTS ARE KEY
Most experts agree the popularity of select-service hotels will continue its upward swing as guest-preferences evolve — particularly young guests. Forgacs says even room design has been affected, primarily because of millennials. “Research has shown this generation doesn’t unpack, so there’s
been a departure from classical room features like a chest of drawers or shelf space. They [prefer] hangers, good work surfaces, nice bathrooms — but with no tubs, because 99 per cent of this generation uses the shower.”
They also use the lobby, which increasingly includes clusters of work areas, meeting and socializing spaces, with drinks and snacks on tap. As a result, guestrooms are becoming smaller, while public spaces are getting larger. Sit-down foodservice has been overtaken by grab-and-go. And while it’s not necessarily being driven by millennials, it’s certainly being fuelled by them.
“This segment’s appeal crosses all user demographic/psychographics, not just millennials,” says Stanford. “But all the brands in this segment have ensured that, from a design, service, decor, form and function perspective, the wants and needs of millennials is a key focus.” And what benefits millennials, benefits us all.
Written by Robin Roberts