Mid-scale properties find common ground catering to a variety of travellers
Like every industry, hospitality has its share of confusing acronyms and oblique terminology, but defining the mid-scale hotel segment is refreshingly straightforward. Just like the name says, the game is medium-priced rooms with medium-level service and amenities.
While mid-scale hotels lack the glamour of upscale, luxury and boutique properties, they make up for it with steady growth, lower risk and the widest client base. In fact, PricewaterhouseCoopers’ 2007 U.S. Lodging Industry Report and Forecast predicts the demand for mid-price hotels without food and beverage will grow by 3.6 per cent this year — the largest for any hotel tier, and more than double the 1.5 per cent growth rate of the overall U.S. lodging industry.
In Canada the prognosis is just as good, with 2007 occupancy basically holding steady at 64.4 per cent for mid-scale with F&B, and 65.4 per cent for mid-scale without F&B, according to Betsy MacDonald, managing director with HVS International in Vancouver. Citing the most recent figures from Smith Travel Research, MacDonald says ADR for properties with F&B was up 3.5 per cent to $115.16, and up 4.7 per cent to $101.32 for properties without F&B. And true to the segment’s middle-of-the-road mandate, those rates fall neatly in the pricing ladder above economy’s 2007 ADR of $91, and tucked in below upscale ($122), upper-upscale ($164) and luxury ($207).
“I think mid-scale is the wave of the future — you’re going to see more Courtyards (by Marriott), Hampton Inns and Hilton Garden Inns,” says MacDonald. With new builds ranging from 80 to 150 rooms, MacDonald says, “You’re no longer seeing 600-room Hyatts or 700-room Hiltons. Coming in small keeps costs in line and occupancy up. And they achieve their average room rates because they don’t have to worry about peaks and valleys.”
Broadly speaking, Rachel Koller, senior director, Sales and Marketing with CHIP Hospitality in Vancouver, defines the mid-scale traveller as someone who wants value, experiences and service, but isn’t comfortable in four- or five-star surroundings. And these guests cross many demographics — from blue- and grey-collar business travellers to women’s groups to sports teams — and there are a lot of them. “As part of the experience they want a restaurant with good quality food and beverage — gone are the days of the hamburger and ham and eggs — and a lounge to watch the game. Mid-scale customers want to get out, otherwise they would go to an economy hotel with a quality room but nothing else,” she says.
At Realstar Hospitality — the Canadian master franchisor for Days Inn, plus Accor’s Motel 6 and Studio 6 brands — president and COO Irwin Prince says its mid-scale hotels are driven by pragmatic business travellers looking for location and a modest amenity package. This also leaves properties like Days Inn well-positioned to pick up guests who are trading down a tier thanks to corporate belt-tightening. “It’s the (traveller) who’s busy all day, wants dinner and a drink, and space to do some work, watch TV, then take it easy to get ready for the next day,” Prince says.
Additional nice-to-have amenities include an exercise room, pool and nearby attractions, and must-haves for the business traveller are high-speed Internet, an ergonomic work space, either Continental breakfast or a hot breakfast nearby and, of course, a great bed. “Everybody focused on the bed over the past three years — the duvet, the pillowtop,” says Koller. “Now it’s electronics. Two years ago flat-screen TVs cost $1,000 per room, but prices are coming down. Still, it’s a piece-by-piece transition.”
While providing a comfy bed, flat-screen TV or iPod clock radio hardly seems controversial, mid-scale hotels are increasingly in the position of attracting the customer who wants it all but doesn’t want to pay for it all. The uncomfortable truth about the middle is that it can’t exist on its own — it’s defined by the extremes, and when those shift the middle has to follow.
“The segment’s got to be careful of amenity creep,” says Prince. “The concern is layering on costs faster than rates are increasing. Think about it — we are bumping up against the tier above, yet not getting the same rate.” For example, guests at upscale hotels pay for high-speed Internet access, but mid-market hotels rarely charge for this service, plus there’s often a complimentary continental or even hot continental breakfast. “The question operators need to ask is: Are we creating expectations that become very expensive for us to maintain? And are we doing it because the guest wants it or because the [competition] down the street has done it?” says Prince.
At least half of CHIP’s properties are in the mid-scale segment, and while occupancy has been strong and rates are climbing, its market share in occupancy has fallen slightly. “My concern is the lower mid-scale creep,” says Koller, especially in secondary and tertiary regions. “There are lots of boxes coming up with restaurants and fitness facilities. So there is a risk from the budget properties coming into this area.”
Similarly, when speaking to Hotelier last issue, Roman Jaworowicz, the new chairman of Best Western International’s Board of Directors and owner of the Best Western Highland Inn and Conference Centre in Midland, Ont., specifically cited competition from new brands entering the mid-scale marketplace as the driving force behind his chain’s new Atria prototype. Unveiled in October at Best Western’s North American Convention in Montreal, Atria is an upper mid-scale concept designed to compete directly with brands like Courtyard by Marriott and Hilton Garden Inn.
Another bright spot for the segment is the conference business. “It’s a growing market for us. We see mid-scale with meeting space as a great opportunity,” says Koller. Even if the leisure market falls off or business-types travel a bit less, she expects people will still want to meet and learn at association-based conferences and events.
Ultimately, keeping the mid-scale segment healthy depends on convincing budget travellers to pay a few dollars more, while offering a surprisingly upbeat experience for upscale guests taking a chance an a cheaper night’s stay. That means exceeding guest expectations, ideally with small touches they don’t expect, but that won’t drown operational budgets in red ink: duvets instead of bedspreads, modest but up-to-date computer and entertainment options and, as always, personal service. That’s the thing about the middle path: there are fewer lofty heights and cavernous lows — just slow and steady progress toward the finish line. Or in this case, the bottom line.