Fighting for the highest-paying guest won't be the most controversial aspect of the hotel ecology in the future years.
The more cheap end of the hotel dining range is where it is currently taking place.
Historically, the largest hotel businesses, like Marriott International and Hilton, have concentrated on upper-midscale brands (such as Hampton and Fairfield Inn) and above.
Hotel executives used their higher-end brand reasoning as a tactic when inflation first spiked along with rising gas prices because their typical clients were in a more secure financial situation and, as a result, a little more immune to price rises.
In recent months, that reasoning seems to have been abandoned.
Marriott intends to buy City Express, a chain of midscale, reasonably priced hotels operating in Latin America and founded in Mexico. As part of its midscale expansion, Marriott will compete against companies like Ramada by Wyndham, Tru by Hilton, Avid by IHG, and Sleep Inn by Choice Hotels.
The Hilton initiative to enter the luxury economy market with Spark, a brand that is anticipated to debut its first hotels in the United States later this year, is the biggest puzzler. According to Hilton CEO Christopher Nassetta, it may someday have the most hotels of any Hilton brand. It will mostly accomplish that goal by encouraging more current hoteliers to brand their establishments in accordance with Spark's specifications.
What is the trend's origin? Consider it as adding a new rung to the food chain of loyalty programs. The lower weekly rates of the economy and midscale brands will draw younger guests who aren't yet able to afford accommodations like a Ritz-Carlton or a Waldorf Astoria.
By giving these tourists a choice, the hotel chain's loyalty program will reach them earlier. When they have more money available for travel, they are more inclined to persist with it.
"If you look at that customer group, at least half, perhaps more than half, of that customer base are consumers that are early in their travel life and are going to grow up and do other things," Nassetta said on an analyst call this month.
The sooner you integrate them into the system and develop a sense of loyalty with them, the better.
"I mean, it's not sexy, OK? It's not as seductive as lifestyle or luxury," he continued. Yet, "I'm as enthused about this as anything else we've done in terms of an ability to be a value creator in the billions of dollars for this company and its shareholders."
Inside the battle for budget travelers
At the recent Americas Lodging Investment Symposium in Los Angeles, rumors circulated that Wyndham and Choice Hotels, two hotel parent companies with a substantial presence in the budget and economy hotel industry, were being pursued by Hilton.
While Choice Hotels has trademarks like Econo Lodge and Rodeway Inn, Wyndham has names like Super 8 and Days Inn.
The development teams at Choice and Wyndham may suffer as a result of Hilton management's emphasis on choosing only the best properties to merge into Spark.
But, it doesn't seem like these companies' executives are having any sleepless nights about competing with Hilton or Marriott.
On an investor call earlier this month, Choice Hotels CEO Patrick Pacious stated, "When we look at the quality of what we're giving to our hotels and we look at that marketplace, be it midscale or economy, we are winning the better quality hotels that are out there. We are winning the hotels that we want to win from a competitiveness standpoint.
Geoffrey Ballotti, CEO of Wyndham, said during his company's investor call this month that attracting customers and budget hotel owners is more difficult than simply introducing a new brand.
He pointed out that Wyndham's budget brands are not only less expensive for travelers to stay at than some of its rivals, but also less expensive to run from an ownership perspective.
The costs of Wyndham's renovations and build-outs in relation to the brand criteria of the corporation are three to five times lower than "many of our larger brand peers," according to Ballotti.
We've been in this market for more than 30 years, and we have the most well-known economic brands.
These clients are people we know.
Knowing the owners, we are aware of how crucial it is for both.
The budgetary struggle has begun.
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