NEW YORK— Sessions at the NYU International Hospitality Investment Conference gave a glimpse of what’s going on in the various pricing segments spanning the hotel industry. During the “Hotel Survivors: Economy Segment” session, panelists noted that continued growth in the segment may come through conversions, rather than new construction. “Conversion is the name of the game to grow in the economy segment,” said Hasmukh Rama, chairman/CEO, JHM Hotels. Mike Leven, president/CEO, U.S. Franchise Systems, added that the industry should see mature brands, like Super 8 and Days Inns, disposing of older and lower quality properties to stay competitive with new-construction budget chains, like Microtel. “The budget segment is under-demolished,” said Leven. Eric Pfeffer, chairman/CEO of Cendant’s Hotel division, noted that independent regional chains may feel added pressure to convert to franchised brands as amenities and operations improve at the larger chains. The cost of amenities and distribution were also debated. Rama noted that many luxury hotels don’t offer a free breakfast or newspaper, and many are charging resort fees, business center fees and energy surcharges. “Budget hotels do everything for free, we don’t charge,” said Rama. He added that in past five months energy costs at his properties have increased more than 20%, but his hotels do not charge a surcharge. Even with the sudden jump in prices, Rama said that energy “is not a big percentage of his costs.” He noted that the free continental breakfast and in-room amenities were his third largest expense. In addition, many budget hotel chains are now becoming part of GDSs and are installing more high-tech reservation systems, which Leven said, “was unheard of six years ago.” Nick Kellock, brand vp for Fairfield Inns by Marriott, added that many of his large franchisees no longer want to build 60-room hotels because of high development costs and low profits. Instead, they’re choosing to build 80-room Fairfields, “which is our next step up,” or to build Courtyard by Marriott hotels, he said. Employee retention was also a concern for panelists, and Rama noted that he “can’t keep a general manager, because they’re bored. There’s no action in the economy segment; they’re just selling rooms.” Pfeffer explained that Cendant often has multiple owners, who own six or more budget hotels, and “they create an area manager that manages all six hotels— it combats the boredom,” he said. And despite low occupancy rates— most budget hotels run 50% to 60% full— panelists agreed that potential demand in the U.S. for economy lodging is growing. “The majority of the public is looking for an economy product, whether it’s retail, like Kmart, or hotels, like Super 8,” said Pfeffer. In addition, most budget hotels have yet to tap into the friends and family market. “Statistically more people travel and don’t stay at hotels, than do [stay at hotels],” said Leven. Rama added that if economy lodges could capture just 5% of that market it would translate into $10 million in additional revenues for hoteliers. Mid-Priced Hotels Meanwhile, at the “Betwixt and Between: Mid-Priced Hotels” workshop, the tone was optimistic in light of increasingly slumping business travel statistics. “A positive impact is being seen in our segment because of trade-downs,” said Jim Abrahamson, president/COO, Baymont Inns & Suites. “A memo has gone out to corporate America saying expenses must be cut.” Doug Vicari, Prime Hospitality’s CFO, supported Abrahamson’s observations in noting the disparity between the health of the company’s AmeriSuites and Wellesley brands. “Business travel numbers in April and May have come down significantly. Occupancy and rate are up for Wellesley as people trade down a bit. AmeriSuites is higher-priced than Wellesley and not doing nearly as well,” said Vicari. Representing the mid-priced, extended-stay market, James Roos, president/COO, Candlewood Hotel Co., reported that
