The hotel industry continues to evolve as it adapts to an increasingly demanding marketplace.

In the hotel industry it's tough to find a metric for success that does not include Sept. 11, 2001. The events of that day impacted the lodging industry with a pronounced blow, and the subsequent deflation of hotel occupancy and revenue had staggering effects. Many predicted, correctly, that the industry would be forever changed.

Many trends evolving in today's hotel industry can be traced to 9/11 and the need to reshuffle the deck in order to stay in the game. From consolidation to new brands to innovations in guest pampering, it's all an effort to refashion an industry that is still treading through the long wake of its worst-ever setback.

Still, the setback continues to retreat into the distance, and nearly every indicator from the past year points to a strong year ahead. Despite natural disasters in the United States and Mexico and the ongoing threat of terrorism throughout the world, the hospitality industry has managed to gain momentum.

The energy comes from myriad sources, including the rather significant help of the meetings industry. As revealed in the MPI and American Express FutureWatch 2006 report, the meetings industry is expected to grow again—the third consecutive year of improvement—and that will certainly make a positive impression on the hotel industry. There are also many other influences at work shaping current hotel trends. Demand is strong, revenue per available room (RevPAR) is up and the promise for new supply is as confident as ever—expansion is the key word.

Brand News

The past year saw at least eight new or renamed lodging brands launched into the hotel marketplace. The introduction of a new brand is typically a response to market shifts—a new way of thinking about and responding to the customer. It may take awhile for a new brand to resonate with the customer, the result is typically an expedited and expanded ROI for developers and operators.

A textbook example of a response to market changes is Hilton Hotels Corp. unveiling a new luxury hotel line that will address the upsurge in guest demand for amenities. The Waldorf=Astoria Collection is designed to extend the cachet of its namesake New York hotel to properties throughout the company's holdings.< /SPAN>

Similarly, Starwood Hotels & Resorts is bulking up its portfolio by developing new brands and acquiring established ones. The recent acquisition of the London-based Le Meridien hotel brand will increase Starwood's presence in Europe, Africa, the Middle East and the Asia-Pacific region.

Starwood has also set its sights on the value-minded guest with the development of the new "aloft" brand. Scheduled to begin opening in 2007 and designed by the people who brought developed W Hotels, aloft will be a pronounced change for the select-service market—offering loft-like rooms, social lobby areas and landscaped outdoor spaces. The brand will also offer first-of-its-kind business amenities, including private booths equipped for presentation design, color printing and checking e-mail.

Barry Sternlicht, founder and former head of Starwood Hotels & Resorts, is back in the game with the launch of the Crillon brand, named for the famed Hotel de Crillon in Paris. Developed by Starwood Capital Group (not affiliated with Starwood Hotels & Resorts), the new brand is an effort to tap into the luxury market through select worldwide locations. According to Sternlicht, the locations will feature European-style hotels and serviced residences.

Veteran hotelier John Russell is embracing the lower-cost, select-service market with his newly introduced NYLO hotels. The NYLO brand will compete in secondary and tertiary markets and, similar to the aloft brand, is offering a residential loft concept in a hotel format with high-ceilings, oversize windows and amenities with urban appeal for an average of between US$115 and $135 per night. Competitors, including Courtyard by Marriott and Hilton Garden Inn, will undoubtedly respond in kind.

The introduction of new brands is usually not directed at the meetings industry, but at the individual traveler. However, the advent of brands in today's marketplace is influenced at least somewhat by the needs of meeting groups.

"There's always a need to stay fresh," said one veteran Northern California-based planner. "When you're dealing with meeting planners, especially corporate planners, there's an urgency to provide something new and novel that will attract the eye of their group. When you offer a new brand, you can package and deliver innovative concepts without conveying the perception that you're trying to reinvent an old brand, which very often can alienate your loyal groups."

Developing Trends

Many brands are looking at flexibility and agility in the fast-paced hotel marketplace. The recent announcement that Embassy Suites—part of Hilton Hotels Corp.—would work with a new prototype design for building hotels with a scalable model and flexible layouts signals a new trend in hotel development. With this new design, called Design Option III, developers can adjust the number of rooms to be built in a hotel based on the market, rather than being confined to a corporate building template. Design Option III provides operators and developers adaptability when it comes to moving into previously underserved destinations—especially second- and third-tier cities.

"The creation of Design Option III was a way for us to offer another option for hotel developers—lowering the cost to build—while providing our guests with an exciting new design and still maintaining the innovations business and leisure travelers have come to expect from the brand," said David Greydanus, senior vice president of brand management for Embassy Suites. "With less land, lower construction costs, enhanced public areas and meeting spaces and better business services, it's a model that can expand the brand into new markets, with less investment by the developer."

Innovations in development, along with increased demand and new product types, have filled the pipeline to an all-time capacity. Hotel projects scheduled to begin construction in the next year have reached record levels, with 1,471 projects approved and ready to be built, according a 2006 report by Lodging Econometrics—a Portsmouth, N.H.-based hotel real estate research firm. In total, the projects will add 187,189 rooms to the U.S. hotel room supply. The report also forecasts that new openings in 2007 will expand at a 2.5 percent growth rate.

The forecast for 2006 is equally sunny in Canada, where, according to Lodging Econometrics' annual forecast for the Canadian lodging industry, some 60 new hotels will be built and opened in 2006. This figure (which totals 5,854 rooms) shows a healthy increase over 2005 numbers, during which 55 new hotels were added. It's also a good reflection of a Canadian economy on the rebound and a larger indication of the improvement in the global travel industry's economic health.

The full pipeline is an excellent indicator of a hospitality industry on the rebound. It also translates directly to the increasing health and stability of the meetings market. With additions to supply, hoteliers are looking to capitalize on a meetings industry that by most every measure is poised to gobble up the new stock. According to a recent survey by PKF Consulting, 56.8 percent of planners indicated their volume of meetings and events planned would at least match their 2005 levels, the busiest year so far this decade. But more persuasive for hoteliers, 52.2 percent of meeting planners believe their per-delegate expenditures will increase in 2006 compared to 2005. Operators are therefore eager to avail themselves to larger, more free-spending groups to help them expand their profit margins.

The U.S. hotel industry is not alone in enjoying the benefits of an expanding marketplace. Indeed the growth trend is global. Despite recent setbacks brought on by nature (hurricanes in Mexico) and humans (terrorism in the United Kingdom and the Middle East), the overall appetite for travel—both leisure and, more strongly, business—remains on the rise.

Based on hotel performance data for 2005 released in the HotelBenchmark Survey by Deloitte, RevPAR continued to show gains throughout the year in all corners of the world—from Europe and the Middle East to Asia.

Higher Rates, Increased Amenities

Increases in RevPAR throughout the industry are not simply a reflection of increased demand. In fact, it has more to do with the ongoing trend of rising room rates. According to a recent PricewaterhouseCoopers survey, average daily rates are expected to increase by 4.7 percent in 2006. This primarily impacts the corporate customer, whose penchant for upper-end room types will require buyers to negotiate spikes of up to 5.5 percent.

But there may be some relief for those paying the higher price, arriving in the form of pampering. Today's hotel rooms are more likely to be appointed with significantly upgraded amenities than those found in comparable rooms just a few years ago. Luxury is the new standard, and hotels around the globe are feverishly elevating room stock to match the needs of the new breed of discriminating guest. From allergy-free rooms to cutting-edge spas and workout facilities, the list of amenities is continuously being enhanced to respond to increased consumer needs.

According to a PKF survey, hotel amenities of growing importance for meeting attendees are upgraded bedding and spas, and the race to add these features to hotel inventories is a clear indication that meeting planners continue to influence hotel operators.

"Hotels are responding with amenities that are generally better in quality and often offer guests more than they might expect at a particular price level," said Bjorn Hanson, global industry leader and partner of PricewaterhouseCoopers Hospitality & Leisure division.

As evidenced in new brands like NYLO and Starwood's aloft, the price of a room will no longer be a determinate of its standards of luxury. When Westin introduced its Heavenly Beds, the industry promptly followed suit, establishing a trend that is now part of the average room's interior landscape. The tone set by boutique (or lifestyle) hotel operators such as Kimpton, Joie de Vivre and Morgans has seeped outside its niche to affect most every hotel brand—the amenities war has been joined on all fronts.

High-thread-count sheets are the minimum. Today's guest expects nice sheets and a whole lot more. Free wireless Internet access, flat-panel plasma TVs, cordless telephones, CD and MP3 players and top-of-the-line spas are fast becoming standard fare.

Increasingly, wellness is integral to the guest visit, especially among meeting attendees. The gym and spa are no longer nice extras, but essential amenities. In fact, many hotels are designating valuable square footage to install state-of-the-art gyms and head-to-toe pampering spas. Marriott's new ClubSport brand is a logical extension—the product is a fitness resort, with boutique-style accommodations centered on a vast fitness facility offering the latest in exercise equipment. Planners are often able to justify increased cost at some of these properties by implementing wellness programs as meeting components. 

ROBERT P. FARMER is a freelance writer based in San Francisco.

Sidebar 1: Laboring Over Labor

Though the hotel industry horizon appears sunny so far in 2006, there are a few ominous clouds that could quickly gather into a storm. One of the most threatening thunderheads is the ongoing labor dispute.

The new year brings with it the expiration of labor contracts at nearly 200 hotels in many major U.S. and Canadian cities and includes major chains like Hilton Hotels Corp., Starwood Hotels & Resorts, Marriott International and Fairmont Hotels & Resorts. The ongoing labor dispute involves tens of thousands of workers and could prove catastrophic for the industry if a full-blown strike is engaged. In fact, many hotel industry analysts predict that a strike of such magnitude could negate all the financial gains made by lodging companies in the past few years. For the meetings industry, it could prove an equally significant setback.

It's clear that everybody stands to benefit by avoiding a strike. But is a strike inevitable?

Recently, UNITE HERE (the labor union representing hotel workers) President John Wilhelm told a group of industry analysts and stakeholders in a panel sponsored by The Wall Street Journal that a nationwide strike could be averted if the hotel industry adopted some of the policies major casino companies currently use. From the worker perspective, employees are increasingly at the mercy of large hotel operators, who in recent decades have become more prevalent in the face of expansion and consolidation.

Hotel workers face an ever-changing job description and an increasingly demanding workload—from understaffing to the challenges of washing more sheets and heavier mattresses (thanks to the ongoing amenities war). Wages for these jobs vary widely depending on state and city, but there's been an attempt to mass together to challenge the labor policies of the major hotel operators. The union is calling for higher wages, improved benefits and employee training to improve workforce skill.

Contracts between hotel employers and the union will expire in February in Toronto and later this year in Boston, Chicago, Honolulu, Los Angeles and New York.

Sidebar 2: The Smart Hotel Room

Time was that nice sheets were enough to keep a guest comfy and quiet. No longer. In today's hotel room, upgraded linens and sumptuous spa-quality bath amenities are part and parcel to check in. Following quickly in their place is in-room technology. Flat-panel plasma displays and DVD players have become the new standard for comfort. Meeting planners are increasingly looking to amenities when booking room blocks as attendee comfort and functionality is expanding beyond the meeting room.

While studies show that guests increasingly demand amenities such as Wi-Fi access in their rooms (at no charge), a recent survey of more than 2,000 travelers by Gartner Inc. in the United States and the United Kingdom showed that just 25 percent of U.S. travelers and 17 percent of U.K. travelers used the feature.

Still, hotel guests and technology make great roommates. Today's in-room TV does more than peruse channels. It now serves as a virtual command center, allowing guests to set the temperature and check out of their rooms. The "smart" hotel room is customizable to individual preferences, learning guest habits and anticipating them throughout the stay. With smart technology, a room is operated through a central remote control from which guests can dictate everything from heating and air to lights, curtains, music and wakeup calls.

"It's a convenience that goes well beyond personal voice mail and in-room faxing," said a staff member of the Mandarin Oriental in New York, which became a showpiece of modern hotel-technology convenience when it opened in 2003. "This sort of technology allows us to take our guest experience to another level, and we can do it simply and quietly."

Reprinted with permission from The Meeting Professional, March 2006, volume 26, number 3. Copyright Meeting Professionals International 2007.

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