Don’t discount the impact of Millennial momentum. It’s changing the face of business travel, especially in their individualized choices of where to lay their yet-to-gray heads for the night.
“I really think we’re facing a very special moment in the development of the hotel industry,” asserts Lukasz Dabrowski, senior vice president, global for corporate hotel solutions provider HRS. Of the roughly worldwide 300,000 properties in the HRS portfolio, two-thirds are independents.
The generational shift is propelling younger business travelers to book hotel properties much the same way they arrange for their private travel, Dabrowski says. “The balance is definitely shifting from the same room, with the same amenities wherever they go worldwide towards the new, the local, the unique.”
Marwan Batrouni, senior director and hotel practice area leader at corporate travel consultancy Advito, echoes that assessment. “Younger travelers want the best of both worlds,” he says. They crave frequent stayer points, the better to spend them on their personal leisure longings. At the same time they’re also in search of “a non-traditional or new experience while on the road.” It’s the sort of thing that keeps Millennials smiling, whether they traveling for business or pleasure.
“The marketing is evolving and travelers want options,” agrees Rodolfo Elizando, vice president and head of global business consulting at American Express Global Business Travel. Business travelers “accustomed to alternative lodgings from their leisure travel want these options for corporate.”
Those options include true independents and increasingly the so-called ‘soft brands’ – independent properties that find economies of scale and marketing prowess under the corporate umbrellas of big chain hoteliers.
A Soft Landing
The chains are catching on fast to the trend. After all, the Millennial market matters more every day. Consider some of the major players in the game: Hilton Worldwide’s Curio Collection, Lowes Hotels & Resorts’ OE Collection, Marriott International’s Autograph Collection, Starwood Hotels & Resorts’ Tribute Portfolio, Choice Hotels International’s Ascend Hotels Collection, Best Western International’s BW Premier Collection and Vantage Hospitality’s Lexington Legacy Hotels.
The growing trend presents significant opportunities in the independent hotel space in general, as well as among soft brands, according to Carlson Wagonlit Travel. By 2020 the march of the Millennials is expected to account for a full half of all business travelers says CWT Hotel Solutions group director Eric Jongeling. “We have seen, and expect to continue to see, a larger appetite for these unique properties.” By contrast, the older guard – “travelers with longer tenure,” as the CWT executive calls them – are looking for “the tried-and-true traditional hotel.”
For example, Marriott International’s luxury and lifestyle portfolio includes such trusty names as Ritz-Carlton, JW Marriott and Renaissance Hotels. However, also populating that list are up-and-coming brands such as EDITION, AC Hotels and hip newcomer Moxy Hotels. But it is the Autograph Collection, Marriott’s portfolio of one-of-a-kind independent hotels, that is the hotel giant’s fastest growing brand.
Together, luxury and lifestyle brands account for nearly 25 percent of Marriott’s system-wide pipeline, and that’s prior to any post-merger contribution of Starwood’s flags in the same category.
For Hilton Worldwide, executive Dianna Vaughan knows what it’s like to operate with one foot in each arena – as senior vice president and global head both of soft brand Curio and more traditional DoubleTree.
Curio has over 30 properties, with more in various stages of development. They range across a couple of dozen countries – with hotels as diverse as The Hotel Roanoke & Conference Center, nestled in the Blue Ridge Mountains of Virginia, to the grand dame Reichshof Hamburg. Another of the additions to the collection is Juniper Hotel Cupertino, which sits a scant mile from the Apple campus. It’s the very essence of a Millennial enclave.
What renders these properties distinct, says Vaughan, is that every one of them reflects the “distinct culture of their respective community.” Each is an integral, sometimes legendary, part “of the city that they call home.”
In a more traditional brand such as Hilton’s Hampton, “standards are more prescriptive,” she says. “If you go to a Hampton and look at that front desk, you know you’re staying at a Hampton.” The likeness is more than skin-deep: guest rooms must be “X-square feet,” the artwork behind the front desk fitting a familiar pattern. Soft brands such as Curio afford hoteliers the “opportunity to be a little bit more flexible.”
Points are important as well – they can help drive property preference, a point that’s not lost on the soft brands. “The feedback we get is that travelers want their HHonors points,” says Vaughan. But there’s got to be more than points to convince corporate travelers to book an independent or collection property. “Curio is backed by Hilton. It provides that quiet assurance” that the reservation won’t get lost or the room double-booked. Then there’s the matter of researching properties. Respected hoteliers, such as Hilton, make the job of scoping out the independents that inhabit their “collections” easier.
The Global View
Even as big chains cast an ever-widening net, both through their own mainline properties and via collection brands, they can’t be everywhere.
“Outside the US the hotel makeup is actually quite different,” notes Suzanne Neufang, HRS’ vice president of the Americas. According to research from STR, the breakdown among hotels in the US is 60 percent chain vs. 40 percent independent. But it’s outside the USA that the indies flat out dominate. “It’s like 85 percent independent/15 percent chain,” Neufang explains, and perhaps as high as 90/10.
Some context that puts her numbers into perspective: Among European hotels, 88 percent are independents, 12 percent chain. In South America, 91 percent of the lodging inventory is independent, 9 percent is chain. And in burgeoning Asia/Pacific, 95 percent of hotels are indies, a mere 5 percent are chain properties.
“We have some areas in the world where independent content is absolutely dominant,” says HRS’ Dabrowski.
Perhaps it’s travel patterns that give the appearance chains are more widely dispersed than they are. It could be that the presence of flagship chain hotels in the world’s banking capitals – London, Paris, Frankfurt, Hong Kong and Shanghai – impart the illusion that they’re just as prevalent in smaller so-called secondary cities.
“It’s not that the chains are not represented” in cities that are more off the beaten path, Neufang says. “It’s just the proportion of how many, on average, chain properties you have in the region vs. the independent supply.”
Opening New Doors
How does this all fit into the bigger picture? The newfound focus on independents and soft brands “really completes the cycle,” contends Dabrowski. “Look at what’s happened to those independent properties. They’re really being pushed and squeezed by the consolidation process in the industry.” As a consequence you have big chains with big brands, but that are also developing their own independent entrants. That puts pressure on the remaining true independents.
How this cycle of consolidation and renewal plays out remains to be seen. Currently, the market is assimilating this new array of one-of-a-kind, lifestyle hotels. And there are manifest reasons they’re ascendant just now, not least among them the Millennial shift. But the results of that shift, both from a purely business travel as well as larger societal perspective, aren’t in yet.
The embrace of the new breed of independents may present “challenges in dealing with corporate travelers and their organizations,” according to American Express’ Elizondo. Remember, many independent properties “were designed for leisure travelers. It’s possible that they can evolve to meet corporate needs, but it will require a deep understanding that there’s no one-size-fits-all solution.”
Experts do agree on this much: For now, this shift in the makeup of hotels – be they true independents or soft brands – is opening up a wealth new business accommodations for a new generation of business traveler.
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