Select-Service Hotel Boom: Pros & Cons
In 2014 and 2015, select-service rooms accounted for 70 percent of all rooms added to U.S. supply, according to STR. As of February, select-service comprised 67 percent of the U.S. pipeline.
The industry’s steady trend toward select-service may not be great news for corporates that rely heavily on large meetings hotels, but for some programs, the growth of these properties could prove to be a boon, bringing more diverse, higher-quality products into the marketplace.
Select-service, or limited-service hotels, offer some full-service amenities like breakfast and a fitness center but do not have certain features like a dedicated food-and-beverage department or a concierge. While much of the new select-service product in recent years has been in the upscale and upper-midscale tiers, hoteliers like Best Western Hotels & Resorts and Hilton Worldwide are banking on such products in the midscale tiers, crafting boutique-style hotels aimed at modern travelers. “The boutique or lifestyle hotel trend is continuing to grow, and you have a lot of boutique and lifestyle brands in the upper-upscale and upscale segments but none in the midscale segment,” said Best Western CEO David Kong.
Best Western has introduced two midscale select-service brands during the past two years: Vib for urban hotels and GLo for suburban properties. Both feature sleek room design and large, social lobby spaces. Vib offers a grab-and-go food-and-beverage option, while GLo offers hot breakfast and some other basic food options. The first two or three Vib hotels are expected to open in the United States in 2016. Best Western has signed a number of GLo deals, and Kong said there’s a “tremendous interest” from developers.
In January, Hilton unveiled Tru by Hilton, its own boutique midscale brand. Its lobby features “zones” for playing, working, lounging and eating, with a self-service food-and-beverage area. “We listened very carefully to our customers and to our owners to make sure we got all of the details exactly right,” Hilton CEO Christopher Nassetta said at the launch. “We truly believe that Tru could ultimately be our largest brand yet.”
Why Select-Service?
Hotel companies and, more important, hotel owners and investors like select-service products because they’re easier to develop and they offer a better return on investment. “If you’re a new builder, it’s just so much easier to secure the financing for construction of a select-service hotel today than it is a full-service hotel,” said Interstate Hotels & Resorts chief investment officer Leslie Ng. “The costs for building full-service hotels are so high now that lenders are much more comfortable financing select-service hotels. It’s a proven investment commodity. When it comes time to renovate, your costs per key are much lower because you don’t have the public space that a full-service has.”
Ng added that there’s more consistent demand at select-service hotels, which are less beholden to the group market.
Reported by: Businesstravelnews.com
The industry’s steady trend toward select-service may not be great news for corporates that rely heavily on large meetings hotels, but for some programs, the growth of these properties could prove to be a boon, bringing more diverse, higher-quality products into the marketplace.
Select-service, or limited-service hotels, offer some full-service amenities like breakfast and a fitness center but do not have certain features like a dedicated food-and-beverage department or a concierge. While much of the new select-service product in recent years has been in the upscale and upper-midscale tiers, hoteliers like Best Western Hotels & Resorts and Hilton Worldwide are banking on such products in the midscale tiers, crafting boutique-style hotels aimed at modern travelers. “The boutique or lifestyle hotel trend is continuing to grow, and you have a lot of boutique and lifestyle brands in the upper-upscale and upscale segments but none in the midscale segment,” said Best Western CEO David Kong.
Best Western has introduced two midscale select-service brands during the past two years: Vib for urban hotels and GLo for suburban properties. Both feature sleek room design and large, social lobby spaces. Vib offers a grab-and-go food-and-beverage option, while GLo offers hot breakfast and some other basic food options. The first two or three Vib hotels are expected to open in the United States in 2016. Best Western has signed a number of GLo deals, and Kong said there’s a “tremendous interest” from developers.
In January, Hilton unveiled Tru by Hilton, its own boutique midscale brand. Its lobby features “zones” for playing, working, lounging and eating, with a self-service food-and-beverage area. “We listened very carefully to our customers and to our owners to make sure we got all of the details exactly right,” Hilton CEO Christopher Nassetta said at the launch. “We truly believe that Tru could ultimately be our largest brand yet.”
Why Select-Service?
Hotel companies and, more important, hotel owners and investors like select-service products because they’re easier to develop and they offer a better return on investment. “If you’re a new builder, it’s just so much easier to secure the financing for construction of a select-service hotel today than it is a full-service hotel,” said Interstate Hotels & Resorts chief investment officer Leslie Ng. “The costs for building full-service hotels are so high now that lenders are much more comfortable financing select-service hotels. It’s a proven investment commodity. When it comes time to renovate, your costs per key are much lower because you don’t have the public space that a full-service has.”
Ng added that there’s more consistent demand at select-service hotels, which are less beholden to the group market.
Reported by: Businesstravelnews.com
