Owners Flex Their Expansion Muscles As Mid-Market Development Opportunities Improve

NEW YORK— Owners opting to play in the middle of the industry, whether its midscale product with food and beverage or without— the grumble is you can’t tell the difference anymore except statistically— are flexing their expansion muscles as the segment’s overall health continues to improve. While midscale with f&b continues to lag its counterpart, new prototypes, e.g. Holiday Inn, are redefining restaurant concepts in an effort to lure developers to the fold. “The midscale with f&b segment is one of the oldest ones there is,” said Bobby Bowers, vp/Smith Travel Research. “A lot of product that’s out there now is just not viable. A lot of consumers say the product’s tired, the product’s old. And the product’s in certain markets that are really not there anymore.” It is no secret the once-robust niche has shrunk over the decades in terms of development, and may never return to prominence, particularly in today’s environment. “That type of product was built to be all things to all people— it had meeting space, and f&b and all of the stuff that— from an owner’s perspective— was kind of expensive to build as far as the revenue you get out of it; you don’t get much out of it. That’s why midscale without f&b cropped up,” said Bowers. “They just strip out the f&b and the meeting space.” But even that premise does not hold water anymore. Witness the up-scaling of continental breakfasts over the past five years and the addition of lobby-level “honor” or grab-and-go f&b outlets. f&b without the full-blown kitchen is a key element for owners wanting to profit in midscale. “Our concentration is on midscale products like Hilton Garden Inn and Homewood Suites development. These product types are succeeding today for one reason: Because they have really focused and refined the f&b component to a safe, winning component,” said Pace Cooper, president of Memphis, TN-based Cooper/CSS Hotels. (Both of these product, however, are classified as upscale by STR.) “More and more, the Hampton Inns, the Holiday Inn Expresses of the world have come in and added small boardroom-type spaces where you could have a small get together.” Such enhancements, Cooper said, has product “morphing back toward more of a midscale with f&b, but in a newer way.” In terms of development Cooper said his company has been waiting on the sidelines and is just now starting to investigate and pursue projects “that we have had on hold or otherwise not pursued these past few years.” With 22 properties representing 4,122 units in the Cooper/CSS Hotels portfolio, three are without f&b. Cooper hopes to launch two projects this year and to complete as many as four projects in the next 2.5 years. “We’re looking to markets where rate offers the best opportunity. We also want to expand by one unit in our hometown, Memphis,” said Cooper. For his part, Ravi Patel, president/CEO of Charlotte, NC-based SREE Hospitality Group, said his preference is for midscale “with f&b because there are not too many developed. We believe there is a great demand for this product.” Of 28 properties, including brands such as Comfort Inn and Holiday Inn, Patel counts 22 of them as midscale, six of them with f&b, and believes the concept is feasible. “Yes, it works for 150-200 rooms. We believe midscale with f&b is on the comeback trail,” said Patel. STR’s Bowers agrees midscale with f&b is viable, but really works only in select markets, i.e., secondary and tertiary, where local community traffic can support the f&b operation. Even then, he said it is harder now for a hotel’s restaurant to flourish due to competition from freestanding, relatively inexpensive branded chain restaurant outlets. “The real key to that is proximity to the hotel. If it’s easy to get to and you don’t have to get back in your car, just walk across the parking lot, it’s going to be tough,” Bowers said. There is also a lot of product Bowers believes needs to be “knocked down or renovated. There’s a certain point