The new “cheap & chic” players

Midscale hotels are doing well. Results for the year 2007 bear witness to this fact. In Europe, the revenue per available room improved by 8.3%, leading to a better than average increase that was essentially the same as that of upscale hotels, which has been a veritable growth engine in recent years. On the other side of the Atlantic, the growth rate of the “midscale” range - in particular around “selectservice” concepts – is higher than that of 4*. Several hotel groups have tried to take a position on a segment that is generally occupied by brands such as Courtyard or Hilton Garden Inn. Aloft by Starwood and Hyatt Place by Global Hyatt are examples. The new offering combines very contemporary design, a strong presence of services and high-tech solutions, as well as services limited to the essentials to achieve more “affordable” prices. Thanks to improvement of the hotel industry’s cycle, the ex “sick child” is regaining its health. At the low point in the cycle for the hotel industry overall, the midscale segment found itself stuck between the dynamic economy hotel segment and upscale hotels seeking guests. The logical result, which was detrimental for hoteliers in the 3* range, was that hotel groups at either end of the spectrum invaded the 3* hunting ground. This is no longer the case today. Average daily rates are up and previously lower occupancy rates are now catching up to the overall level.The hotel The Five reports some of the highest profitability per square meter in Paris with its average daily rate of 160 euros. This price is particularly high for rooms that are 9 sq.m on average… smaller than those at a Formule 1! No magician had a hand in helping Philippe Vaurs, Christophe Sauvage and Pascal Laffon, the three creators of the concept, conjure up its success. Instead two inventive decorators – Vincent Bastie (who worked for Le Murano and Le Petit Moulin) and Marie-Paule Clout – transformed this worn-out 1* into a resolutely “arty” 3*. And to magnify the small surface of the rooms, the decorators played on decorative elements that make it possible to visually expand the space, such as suspended beds. The Five has found its niche in Paris’s 5th district where it glorifies the 5 senses. The 24 personalized rooms convey a particular emotion to guests, who may choose both their visual and olfactory setting. This success results in an occupancy rate of nearly 80%. After a first experience, the founders are thinking of new variations for their rehabilitation concept.The positive points that may explain this renewed health include the growing appeal of this hotel category to businessmen. Travel budgets at major corporations are shrinking. With global growth in the price of upscale hotels, travel managers are increasingly inclined to shift their choices to hotels with an attractive quality-price value. Unrelenting, self-booking tools are developing and favor an increasingly stringent application of house policies. Of course, not all corporations are so uncompromising when it comes to their employees’ travel. Many of them offer their managers a certain amount of flexibility. In the United States alone, American Express, Conoco Phillips and Nestlé have revised their policy down. Gone are 5* accommodations that boost the egos of managing directors but hurt the pocket, even recourse to 4* is limited to the essential. For these major corporations, midscale hotels constitute today’s standard.Corporate key accounts have been increasingly drawn to midscale hotels since these properties upgraded their offer. With reasonably priced access to the latest technologies –WiFi is often free– businessmen find themselves in a universe that is propitious to working as well as relaxation… and all within a friendly setting. The new concepts rising out of the ground today further accentuate this element. Lobbies are becoming living spaces as their walls come down. The F&B offer is more diversified in order to meet guests’ many demands (“grab & go” for a quick dinner; welcoming restaurant with healthy and simple cuisine; lively bar).Another aspect that characterizes the evolution of midscale properties: many hoteliers have successfully kept up with fashions by producing properties that are increasingly trendy and design conscious. This emphasis on resolutely contemporary interior design has a strong impact when it comes to convincing tourists. The “cheap & chic”, “small & smart” or “no frills chic” variations are meeting with great success. This is a key favorable point since, on this leisure segment, consumer habits are undergoing great changes. The old habits have been overturned: eBay, Easyjet and consorts took care of that. The same client who takes advantage of Ryanair’s tempting offers to make a weekend getaway might stay in a fine hotel upon arrival. Consumers are increasingly on a “treasure hunt”. In the client’s mind, there is less and less room for average products.A kind of bipolarization of the market is taking place. This is already the case in mass distribution as Michael Silverstein observes. His book “Treasure Hunt, Inside the mind of the new consumer” highlights the fall of midscale products (-3%) as clientele shift towards the entry range (+7 to 8%), or the upscale (+10 to 15%). The buyer saves money on necessities in order to offer himself the accessory of his dreams. The result: this bipolarization is threatening midscale products. This slow, but progressive, loss of the middle range does not inconsequential for the economy sectors and the 3* sector in particular. This segment represents the bulk of the offer with nearly one third of properties worldwide (some 40% in Europe and over 30% in the United States). And times could prove to be difficult for those that stuck to the middle of the road without making any changes. Changes in consumer habits invite hoteliers to take an original approach necessitating consideration and marketing. The coming generations – the X generation (1965-1976), but to an even greater extent the Y generation (1977-1994), only swear by hotels that have more to offer than just a bed. The new concepts launched by both groups and independent hoteliers all have clear and innovative positioning : offer the guest emotion.ALT Hotels, midscale hotels go green The Canadian group Germain, known for its boutique hotels is now launching ALT Hotels. This new brand of “trendy and glamorous” hotels “at a miniscule price” opened its first link in Montréal in September 2007. This concept highlights design, comfort and service with hotels in urban centers for Can$129 per night. ALT Hotels offer a single fixed rate, contrasting the widespread use of variable rates throughout the hotel industry. One original quality, and not the least, for these hotels in urban centers: green technology. ALT Hotels has mastered the art of energy conservation thanks to geothermic heating and air conditioning systems that are a voluntary adoption of good environmental practices. Another innovation: prefabricated rooms that lower production costs, and thus result in competitive rates to guarantee a moderate rate strategy. Fifteen ALT properties are planned in the 5 years to come. Base2Stay, an apartment hotel boutique conceptNestled in the heart of the London neighborhood of South Kensington, the first Base2stay opened in April 2006. This concept is a hybrid of the trendy boutique hotel – at competitive prices – and long stay offers. For £93 (125 euros) to £195 (250 euros) a night, guests receive the winning trio of new midscale hotels: comfort, technology and freedom. One trick for gaining space: storage under the king size bed opens up more space in the room for the desk, the bathroom and the kitchenette. Outfitted with a microwave, guests may enjoy a meal at any time by heating up a dish delivered by nearby restaurants. Base2Stay, managed by Nassar Khalil, is financed by capital risk firms. The concept has been awarded by Condé Nast Traveller’s Hot List, and is now developing in the fashionable neighborhoods of major cities.CitizenM, extreme technology for mobile travel A forerunner of affordable high-tech hotels, Yotel appeared as a combination of Japanese capsule hotels and First-class airline seats. For its first hotel in Amsterdam-Schiphol, CitizenM took its inspiration from luxury yacht cabins. This concept, once called “One star is born”, targets the sophisticated itinerant traveler: the Mobile Citizen. Furniture designed by Vitra outfits the 230 rooms that all offer king size beds, a rain shower and a flat screen. These rooms rely on the latest technology. The touch of a button adjusts all the room’s functions (temperature, light, alarm clock, music). These preferences may be stocked on an RFID chip in the room key delivered to loyal guests. The large, friendly lobby is a living space for meeting and relaxing around the clock. Guests have full freedom with “grab & go” catering services at CanteenM and its check in/out kiosks. Like Yotel, Citizen’s second property will be located near the Dutch capital’s World Trade Centre. The construction method is called IFD (Industrial Flexible Demountable) and promotes rapid development. Twenty CitizenM hotels are scheduled in the mid term and all Europe’s major capitals are its targets.Dakota, design where you least expect it Dakota airplanes democratized air transport in the 30s. With room rates set at 125 euros, regardless of the season, Dakota hotels put luxury accommodations within reach of all budgets. Ken McCulloch is no beginner: after the success of the Malmaison and Columbus hotels, the hotelier has launched a midscale adventure with the F1 pilot David Coulthard as his associate. Other major backing comes from Amanda Rosa, the renowned founder and designer’s wife. The result: contemporary hotels that are very masculine to seduce businessmen and offer them rest within an atmosphere that is both warm and stylish. While avoiding costly extras it offers a restaurant grill with classical cuisine and a touch of originality and spacious 25 sq.m rooms, leading Dakota hotels to win over customer fidelity. They also received recognition from their peers. The first property opened in 2004 in Nottingham and received praise from Condé Nast’s Hot List. And the Dakota Eurocentral received the award for the most stylish Scottish hotel. At the major crossroads of Edinburgh and Glasgow, this property is representative of the Dakota concept: a “home away from home” located at the center of areas of passage - highways, airports – or business parks. A fourth hotel should open near the airport in Farnsborough, a distant London suburb.Hoxton Urban Lodge, low-cost luxury in city centers Fast-food magnates love the hotel business! Simon Woodroffe, who is the man behind the success of Yo Sushi, is a pioneer with the Yotel concept. Sinclair Beecham, founder of Prêt à Manger, joined the Hoxton Urban Lodge adventure. He wants to make it the archetype of the furiously trendy, inexpensive hotels that are flourishing in the center of major cities. Like easyJet or Ryanair, the London hotel that opened in 2006 takes a very aggressive approach to sales and has precise marketing tactics. The winter and summer sales are particularly appealing. Last January, the hotel put 5 rooms on sale on Internet for 1£ per night and 5 others for 29£. The happy winners of this great lottery received confirmation of their reservations by email. As with low-cost travel, reservations for the Hoxton Urban Lodge only remain open for a very short period of six months to optimize yield management. And, of course, the earlier reservations are made, the lower the price. Prices range from 99£ (135 euros) to 189£ (260 euros). And for this price the guest enjoys many benefits: a big bed with a duvet, bed linens by Frette, a desk, flat screen, free Wi-Fi, free water and milk in the refrigerator. The lobby is decorated in an “American West” style, and a busy restaurant and meeting rooms complete the hotel’s appeal. This offsets the ever so slight inconvenience of its somewhat out of the way location with respect to the City, but at the heart of the fashionable Shoreditch neighborhood.NYLO Hotels, the American loft revisited Like Dakota hotels, NYLO Hotels (pronounced N.Y.L.O.) try to inject the beautiful where it’s lacking, to economy areas on the outskirts of major cities and to secondary and tertiary cities. It would practically be a euphemism to say that NYLO is renewing the genre. This new brand baptized by Michael Müller, ex-director of development at W by Starwood Hotels, targets businessmen who are forced to stay outside the fervor of urban centers. Red brick and glass outside, industrial design inside: the first NYLO opened in Plano, in Dallas’s suburbs, takes its inspiration from its setting while adding a thick layer of design. The Loft constitutes the core of the building: the hotel comes to life in its lobby which opens onto a 24-hour restaurant and bar, a business center and leisure areas with billiards... Weather permitting, the hotels have a terrace and an outdoor pool. Meeting rooms and a 24-hour gym-sauna area allow clients to combine work and pleasure. Sold at moderate prices – between $115 and 135 a night (between 75 and 90 euros) – the rooms also rewrite the brand’s loft spirit. The next NYLO hotels will open in the industrial park in Providence, Rhode Island and in the Interlocken technological park in Colorado. The Atlanta-based group plans to use these locations as launch pads to reach 50 properties in 2010.Propeller Island City Lodge, the most “unusual” of midscale hotels Lars Stroschen is not what one might call a seasoned hotelier. To finance his record label, in 1997 this experimental musician opened a small 4-room B&B just a skip and a jump away from Berlin’s famous Kurfürstendamm. The concept of unusual rooms appeals to a clientele looking for escape, a hotel that offers a unique experience. Its success encouraged the artist to go further. He bought the building next door to create 31 rooms and transformed them into 31 works of art. Each room has its own special décor imagined by the artist. Since 2005, clients have been able to choose their ambiance: château, prison or mirror. Sleep in a casket or a lion’s cage: it’s possible at this hotel. Service is reduced to a minimum and reception is only open from 8am to noon. But this doesn’t keep the rooms from costing 75 to 190 euros. The Five, small but very profitable The hotel The Five reports some of the highest profitability per square meter in Paris with its average daily rate of 160 euros. This price is particularly high for rooms that are 9 sq.m on average… smaller than those at a Formule 1! No magician had a hand in helping Philippe Vaurs, Christophe Sauvage and Pascal Laffon, the three creators of the concept, conjure up its success. Instead two inventive decorators – Vincent Bastie (who worked for Le Murano and Le Petit Moulin) and Marie-Paule Clout – transformed this worn-out 1* into a resolutely “arty” 3*. And to magnify the small surface of the rooms, the decorators played on decorative elements that make it possible to visually expand the space, such as suspended beds. The Five has found its niche in Paris’s 5th district where it glorifies the 5 senses. The 24 personalized rooms convey a particular emotion to guests, who may choose both their visual and olfactory setting. This success results in an occupancy rate of nearly 80%. After a first experience, the founders are thinking of new variations for their rehabilitation concept.