NATIONAL REPORT—It’s no secret that select-service hotels are the darling of the hospitality industry: Developers want to build them, financial institutions want to invest in them, and guests want to stay in them. And certainly, select-service hotels were a more budget-friendly option for guests, particularly business travelers, during the Great Recession, when corporate budgets tightened and the future of the government’s per diem looked uncertain. But with the economy in recovery and the industry brimming with positivity, are these budget-friendly options still the choice of the business traveler?
According to the December 2014 TravelClick North American Hospitality Review, which looks at group sales commitments and individual reservations in the 25 major North American markets for hotel stays that are booked by Nov. 30, 2014, for the period of December 2014 to November 2015, the business segment has a positive future. For this period, transient business (both negotiated and retail) occupancy is up 3.9% and ADR is up 4.7%, and group occupancy is ahead by 2.4% and ADR is up 3.7%, compared to the same time last year. John Hach, SVP, global product management at TravelClick, noted that while the group component is still strong and positive, it’s not increasing at the rate of growth it was in Q3 2014, so the positive momentum is shifting into RevPAR and ADR opportunity, as opposed to pure, organic growth from either the transient or group side.
Egencia, the business travel brand of Expedia, Inc., noted that the company’s bookings grew in 2014. “For our last reported quarter, Egencia’s gross bookings increased 14% year-over-year,” said Egencia’s Kristy Nicholas. “We believe that is in part due to increased travel and an improving economy.”
“With the recession, people were concerned about a double dip and that didn’t happen, and now we’ve reported, for the better part of a year, a really good resurgence, including group. We’re in a very strong U.S. economy in terms of travel, and we do anticipate that continuing,” said Hach. “Regarding specifically the midscale corporate, we see it rising with other similar types of transient hotel business… Because the U.S. economy is relatively strong, maybe there are higher per diems; [we see]travelers moving up to a full-service hotel with room service and full amenities in certain markets, but not as a significant overall trend or direction throughout the United States. It’s very specific to local markets.”
Indeed, select-service hotels are still extremely popular for business travelers. According to D.K. Shifflet & Associates Ltd., a U.S. travel research firm, roughly half of all U.S. hotel room nights by transient business travelers were in limited-service hotels in 2014. And, according to Egencia, pricing is still incredibly important, with 56% of travelers reporting that pricing impacts their purchasing decision in the 2014 Expedia/Egencia Mobile Index, a global study of mobile-device-related behavior and preferences among travelers in North America, South America, Europe and Asia-Pacific. “Data seems to indicate travelers care about finding the best price,” said Nicholas, pointing to the GTMC/Amadeus Business Travel Insights: Hotels 360 2014 report. “69% of business travelers compare prices outside their system. In addition, 57% spend at least 10 minutes researching hotel prices outside their corporate system.”
Hach noted that for the road warrior, select-service tends to focus on the value-add amenities that this traveler emphasizes. “Free WiFi brings in a heavy amount of corporate travelers,” he said. “Where we do see the mid-tier corporate market having upward momentum is where hotels have a free WiFi offering that is strong and robust: the speed is strong and travelers can use multiple devices. That’s what’s attracting the most interest among corporate travelers that we see from our data.”
Egencia’s data also reflected that, noting that WiFi availability impacts purchasing decisions for 56% of travelers, and for business travelers, that number only increases: complimentary WiFi was rated very or somewhat important when booking a hotel for business travel by 86% of travelers.
In addition, select-service hotels have other amenities that the business traveler values. “The corporate traveler normally has time for a quick meal in the morning before they leave the hotel—not a full sit-down breakfast, so being able to grab something of value and go is very important as well,” said Hach.
Roddy McCrory, regional VP of general contractor Brasfield & Gorrie, noted that this trend is reflected in the types of hotels being built. He started seeing plans to construct more mid-level, select-service properties not long after the Great Recession. “We had opportunities to build a SpringHill Suites and a Marriott near Hartsfield-Jackson in Atlanta, both of which were designed to serve business travelers,” he said. “Since then, we have seen more mid-level hotels being built in all the markets we serve. Luxury hotels are still being built, but those brands and developers are choosing markets that have not only business travelers, but also attractions and entertainment venues that draw tourists.”
Currently, the firm is working on a seven-story, 144-room Aloft hotel in Greenville, SC, that will open later this year. McCrory agreed that amenities like WiFi are crucial for guests, but noted the property would have other features designed to attract business travelers. “It will have an amenity pool deck with a tiki bar, pool tables and a W XYZ bar,” he said. “Additionally, the hotel will connect to the adjacent Bank of America terrace and offer direct access to ONE City Plaza (formerly Piazza Bergamo) and nearby retail.”
And, of course, it makes sense that select-service and streamlined full-service properties are what developers are building, since it’s what the road warrior of the future wants. Hotels and brands have increasingly focused on Millennials, who value budget, customization, flexibility and localized, unique experiences over traditional luxuries. “We see that sustaining; we don’t see this as a fad,” said Hach. “It’s a fact that needs to be managed on a regular basis, especially in attracting a generation of travelers that will be on the road for the next 15-20 years.” HB