Executives from several select-service brands talk about how to better refer to their segment and how guest trends are the No. 1 driver of success.
NEW YORK—Whether you call it select service, limited service or focused service, this hotel segment isn’t slowing down as a favored brand choice for customers.
The reasons why, according to speakers on a panel at the recent NYU International Hospitality Industry Investment Conference, are because successful brands in this space haven’t been afraid to adapt to customer and developer needs—a trend that will continue into the future, they said.
All the panelists were quick to establish one baseline—that the terms “select service” and “limited service” for this group of hotels don’t fit the bill anymore.
“It’s not limited service, because we’re not limiting our services, and it’s not select service because we’re not allowing guests to choose from among services,” said Rajiv Trivedi, EVP and chief development officer for La Quinta Holdings. “So the reality is that focused service is the right approach, in my opinion, because we provide focused services to the guest that are clear and that fit their expectations.”
Hannes Spanring, CEO of Meininger Hotels, a hotel-hostel hybrid brand based in Germany, reiterated that focusing on what guests want and being transparent about it makes “focused service” the best descriptor. He added that it can mean different things for different brands.
“We ask our customers and clients what they prefer … and it’s a focused service,” he said. “For us, that means a guest kitchen because we know families appreciate that while traveling. It’s a focus on the guest segments we’re actually serving.”
Lance Miceli, EVP and chief marketing officer at G6 Hospitality, which owns and franchises Motel 6 and Studio 6 brands in the U.S. and Canada, said he prefers the term “focused service” because it means the product is “focused on the guest.”
“If you’re able to keep a very clear focus on the guest, the guest delivery, and how (to) actually over-deliver on those expectations while still protecting margins for (your owned hotels) and partner’s hotels, I think that’s a very robust business model,” he said.
Ron Swidler, principal of branding with The Gettys Group, which provides hospitality design, consulting, branding and other services around the world, went one step further in describing the segment as “strategic service.”
“We’re trying to look at what we do as the intersection of three circles in a Venn diagram,” he said. “One is: how do we deliver the basics really well and make sure we’re delivering on the guest expectations of security and cleanliness and attentive service? The next circle is about: what can we selectively premium-ize? Are there elements, like with some food and beverage, that we can premium-ize to exceed guest expectations? And last, what are the elements of the personality of the brand that we can integrate into the entire message?”
How it’s changed
The panel agreed that the segment has changed a lot in the last few years as brands have laser-focused on what guests want. That’s true of the development side of the business as well.
“I’ve seen in the last few years that hoteliers (in this segment) have gotten so much better at what they do,” said Roger Bloss, president of global development for Red Lion Hotels Corporation. “Before then, these hoteliers had to know how to own their corner. Now they need to know how to sell on the internet, add great photos, achieve great ratings. So we’re seeing operators operate so much better than they used to.”
Miceli said brands in this segment, including those in economy chain scales, have led the charge by responding quickly to new shifts in technology, mobile-first booking patterns and even design.
“Economy is a very powerful segment, and it has absorbed the technological advances guests have demanded over the years; many caught up much quicker (than other segments),” he said. “The guests in this segment have better expectations, and transparency and technology have forced the economy segment to figure out ways to be smarter and more efficient.”
Trivedi said increasing transparency has been a positive game-changer.
“The industry has become much more transparent with the information your hotel gets, and that has made operators more agile,” he said.
Thus, product consistency is not “the Achilles heel for focused-service brands” like it was 10 or 15 years ago, Trivedi said.
“Simultaneously, guests come to your hotel knowing more about you than they ever did in the past, and you’re required to meet or exceed those expectations,” he said, “so that has made brands more agile in their ability to analyze the guest, to understand who they are and to provide feedback to properties so they can operate more effectively.”
Metrics to watch
Increased transparency includes operating metrics as well. Almost unanimously, the panelists agreed that market share is a top indicator of success in the segment, and a way to keep business steady throughout downturns.
“I think that (focused service) especially is more resilient when it comes to financial downturns, because of good market share,” Spanring said. “In Europe in 2008 and 2009, we saw a lot of companies prohibiting travel in (higher-end) hotels, and for us, that had no impact at all—actually, we had higher occupancies then.”
Trivedi said that in good times or bad, “if your property is among leaders in market share with the right comp set and you stay at that level, ultimately you will have long-term success. What brings market share? It’s guest satisfaction.”
That is achieved, he said, through a cycle of net promoter scores, matching product quality to service quality, representing the hotel correctly online through photos and content, earning good TripAdvisor scores and more.
“That all allows you … to still create a good price-value proposition for your guest, with better pricing,” he said.
Trends in consumer travel
At the end of the day, consumer trends drive hotel services and amenities in this segment. The panelists agreed that by focusing on what guests want, they can deliver at a price point that still emphasizes value.
“The future really is data-driven, and when you’re running a hotel brand that has thin operating margins, you have to pay very close attention to what your guests say they want and what (the data shows) they want,” Swidler said.
He cited an example in which a brand surveyed guests on what they wanted for breakfast items. In some cases, what people said they wanted didn’t match the consumption data that showed what they actually ate.
“Getting data on what people are really doing is critically important to forecasting without wasting money,” he said.
Design is changing, too.
“There’s a whole different aesthetic today, even in the pure economy segment, from an architecture and design standpoint because people have come to expect a degree of finish and experience even at an appropriately focused price point,” Miceli said.
Bloss pointed to Red Lion’s latest brand revamp, the Signature Inn concept. That is a focused-service lifestyle brand, he said, that “takes that old box in a really cool location and allows the owner to become very creative with it”—all in an effort to bring the trends of customization and local flavor to all segments and price points.
Global travel trends also are at play, the panelists said, with focused-service brands particularly poised to profit.
“Looking at India, China, Korea and Japan, there’s a massive, growing group of middle-class people who want to travel and have an experience while doing it,” Spanring said. “They’re cost-conscious, but they want to have that experience, too. We’re seeing a huge influx of this.”
Miceli said that’s happening in the U.S. as well.
“People are traveling because they want to connect and experience, and the focused-service segment is in the best position because we can help guests get to their destination, accommodate them along the way and help them spend their money on the experience,” he said. “The experience is no longer in the room.”
“People look at experience so much more,” Bloss said. “Do I spend $200 on the room and $50 on dinner, or $100 on the room and $200 on my night out?”
Evolution will continue for this segment, the panelists agreed, pointing out some particular trends they anticipate will play a larger role in coming years:
- “We’ll see better workout facilities,” Trivedi said.
- “You can look at any technology out there and forecast it will find its way to the economy segment,” Swidler said. “Things get more and more affordable.”
- “One is better guest service and guest delivery,” Miceli said. “And we’ll see expanded public spaces—more room to connect and engage.”
- “We’ll see charging stations for the next wave of cars,” Bloss said. “And more people traveling with recreational vehicles.”