Friday, September 18, 2009
Glenn Haussman

Though they’re not giving up on standards entirely, the major brands are becoming a little more malleable with their expectations. And that’s not all the major hotel companies are doing to try to keep costs down as rates have plummeted an average 18 percent this year, according to Smith Travel Research.

By all accounts, owners are increasingly skittish about their ability to keep up with brand requirements while also paying what they perceive to be onerous fees during the worst downturn the hotel industry has faced since the early 1990s. It’s putting pressure on the major franchisors to do something, and they’re listening.

At the Real Share Hotel Investment Summit held last week in New York City, representatives from franchising companies such as Hilton, Starwood and Choice, as well as others, shared how they’re trying to alleviate franchisee pressure.

“We have lowered our fees 12.5 percent for existing owners and will do it again in 2010. However, you have to maintain brand scores,” said William Fortier, Senior Vice President - Development, Americas with Hilton Hotels Corporation, who also said the company is focusing on lowering costs all around. One example he gave was the company’s ability to negotiate a deal for franchisees to pay the same for USA Today as they were 10 years ago.

And non-essential upgrades - such as replacing functioning tube televisions - have been delayed.

Laura Benner, Vice President, Real Estate Portfolio Management with Starwood Hotels & Resorts Worldwide, said the company has critical and non-critical brand standards. “We have not delayed items like Heavenly Bed or the W Living Room. Other standards are not as critical to us, like the number of bottled waters in the room or the number of towels in the bathroom,” said Benner.

Meanwhile, Choice Hotels International is looking at ways it can drive more traffic to hotels through training initiatives and promotions. “As a pure franchisor our goal has always been to make decisions based on ROI,” said Shane Platt, Vice President of Franchise Sales – West, with Choice Hotels International.

The company has been offering what it calls streetwise training sessions, which are free workshops held in local markets that give hoteliers a better sense of how to operate their hotels and garner more business. Platt also added that they are still pushing hard on marketing and will spend nearly $300 million doing so this year alone. “It’s about getting and keeping customers,” Platt added.

The company’s promotion earlier this year to give a free night with every two stayed proved to be one of the most successful ever run by Choice. This fall the company will be giving away $50 cash cards with every qualifying stay. He said this is a great deal for business travelers who can save their company money by staying at a mid-tier hotel and then have a cash card to spend on their family.

 At the emerging extended-stay brand Value Place Inns, Gina-Lynne Smith, President of Value Place Franchise Services, said that their hotels are actually benefitting because of the economy. The company sells their rooms by the week only and are up 4.2 percent in revenue over last year, she said.

But to make sure their franchisees are armed, she said they are meeting one-on-one with their owners and getting back to the basics. “People tend to panic when recession happens; they scramble for new ways to do things when a lot of times you have to stick to your niche. Our people come in and help them refocuse their efforts. Within 30 days of property visits they tend to trend up 10-24 points in occupancy.”

Hilton’s Fortier said the owners that are faring best in this down market are the ones that take advantage of the tools Hilton’s various brands offer.

“Owners that panic in an environment like this and don’t ask for help are the ones that end up in trouble the quickest. Customers look for value, consistency and rewards points, but you have to use all the marketing tools available. [They] are paying for it and [they] might as well get the benefit,” said Fortier.

Robert C. Hazard III, Vice President of Acquisitions and Development with Hersha Hospitality Trust, said that since they operate hotels with multiple brands they can select programs from one brand and in many cases implement it with another. “We get the knowledge of all the brands and select best practices from them,” said Hazard.