IHG, Hilton and Marriott dominate U.S. future hotel growth

IHG, Hilton and Marriott will likely dominate the US landscape for upscale and upper midscale hotel lodging development over the next decade. This is one of the pieces of information reported from the 2011 STR Hotel Data Conference in Nashville this month.

U.S. Hotel Pipeline

The hotel industry calls new hotels in development and construction the “hotel pipeline”. The hotel pipeline is currently led by three hotel chains:

• Hilton Worldwide
• InterContinental Hotels Group
• Marriott International

These three hotel chains represent 13 of the top 15 hotel brands in the pipeline for new hotels coming to hotel loyalty members in these programs.

Which brands are building new hotels?is the Hotel News Now article showing the current U.S. Hotel Pipeline top 15 brands.

The data from the HNN article was used here to create the graphic below showing the top growing brands in the U.S. I added hotel chain, size and market segment data to the HNN pipeline data.

Tough economic times have given large hotel chains the ability to grow even larger as banks look to name brands as better investments than independent hotel projects.

What does this mean for the loyalty traveler?

The growth of IHG, Hilton and Marriott will outpace Starwood and Hyatt in the coming years. These three hotel chains are each racing to 5,000 hotels globally. Choice and Wyndham are already over 5,000 hotels with their midscale and economy chain brands.

The complaint that Starwood (1,050 hotels) and Hyatt (450 hotels), as the two smaller upscale and upper-upscale hotel chains with major hotel loyalty programs, do not have sufficient geographical coverage for frequent guests will likely continue to be debated as the super hotel brands of IHG, Hilton and Marriott continue to experience rapid growth. Another decade might see five or six hotel loyalty programs in the 10,000 hotels club for loyalty travelers around the world.

The good news for frequent guests in the short term is I think SPG and Hyatt Gold Passport will maintain high value promotions to be competitive in the upscale and upper-upscale hotel market segment.

SPG obviously targets its loyalty efforts around its American Express credit card but then throws out a great promotion like the recent “Three stays earn a free resort night”.

Hyatt Gold Passport is currently in a transitional phase as it recently repositioned its credit card with a membership anniversary free night offer and additional benefits for top level Diamond elites and benefits that attempt to match or exceed Starwood Preferred Guest.

Road trips across the western states this summer revealed to me Marriott’s Fairfield Inn brand has grown significantly in recent years. There were new build Fairfield Inn properties in many of the roadside towns I visited.

Hampton Inn and Holiday Inn Express open new hotels around the U.S. every week.

La Quinta is a brand that I have never frequented, but I sure saw plenty of these hotels around the western U.S. La Quinta Inns & Suites are 800 hotels in a midscale brand almost twice as large as the Hyatt chain in the U.S. There are more La Quinta Hotels in the U.S. than Starwood Hotels.

STR Hotel Data Conference

STR is Smith Travel Research out of Hendersonville, Tennessee.  Hotel News Now provides digital news from STR and the hotel industry. There were several good reports from the Hotel Data Conference published on HNN and the rest of this Loyalty Traveler post shares some of the interesting information to me along with my commentary.

Hotel brands vs. independent hotels – Hotel News Now

• 1990 = U.S. hotels 57% branded. Branded means hotels like Hilton Garden Inn and Marriott Courtyard where the hotel is affiliated with a major hotel brand (and typically a hotel loyalty program with benefits).
• 2011 = 70% branded hotels in U.S.
• Independent boutique hotels tend to be higher priced than chain boutique hotels, but the prevalence of independent boutique hotels in Manhattan may skew the data. Boutique hotels are undergoing soft branding with new affiliations of independent hotels with major brands like Marriott’s Autograph Collection, IHG InterContinental Alliance Resorts, Choice Hotels Ascend Collection and Starwood Luxury Collection.
• Resort Hotels in chains tend to be higher priced than independent resorts. Loyalty points redemption is the consumer advantage here for high priced resorts.

Online Travel Agencies (like Expedia, Orbitz) cost U.S. hotels $2.5 billion in 2010 – Hotel News Now

• $2.5 billion is based on the number of U.S. hotel rooms sold on OTAs in 2010 and assumes the additional revenue that would have been generated by hotels if these rooms had been sold through direct hotel channels. This study looked at nearly 25,000 hotels in nearly 100 brands.
• 10% of hotel rooms in U.S. booked through OTAs.
• 17% of hotel rooms booked online directly with hotel brand’s websites. For example a Hilton brand hotel booked through one of Hilton’s websites.
• 13.7% of hotel rooms booked via telephone and central reservations system of hotel brand.
• 7.9% booked through GDS (travel agent systems).
• The article doesn’t state where the other 50% of room bookings come from.

One of the more significant findings for the consumer is data indicating that increasing market share taken by OTAs reduces the room rate for hotels. OTAs have increased their market share from 1.34% of total hotel industry revenue in 2001 to 7.35% in 2010.

Four outside influences impacting the hotel industry – Hotel News Now

1. Airplanes are 22% more full today than five years ago and operating near capacity in U.S.  Business travel recovered, but leisure travel has not. Air travelers are also to a large degree hotel guests. Airlines pulled airplanes out of service while hotel rooms still being added to system.
2. Hotel guest satisfaction is down in 2011 according to JD Power North America Hotel Guest Satisfaction Index Study released last month. Guest satisfaction scores are higher when guests have breakfast at the hotel. (My wife kept talking about how great the Holiday Inn Express breakfast was after two stays last month. I found it amusing since she has not stayed in the HIX brand frequently enough to grow tired of the same food at 2,000 different hotels.) The survey indicates guests recognize the rise in hotel rates over the past year. And they also recognize the decline in staffing level since 2008 and absence of room renovation and material replacement. The decline in staff has seemed more of an issue to me in 2011 as hotels are more crowded. Overall I think room quality and hotel improvements are being addressed from what I have seen in my stays in 2011, except for a small number of hotels I visited. San Francisco is one of the strongest markets in the U.S. and I feel 2011 rates priced me right out of the city again like it was back in 2008 before the economic meltdown took hotel rates cascading down like Yosemite Falls  (San Francisco 2011 rates commonly over $200 for hotels that were under $140 much of 2009-10). The DOW has dropped more than 500 points while I am writing this morning and that is down 15%  in two weeks. San Francisco might be affordable again by November!
3. Business travel has come back and the hotel industry will follow. Funny how two weeks can change the global outlook as the world stock markets have shed hundreds of billions in U.S dollar value today, and trillions of investment worth in the past two weeks since this presentation at the Hotel Data Conference. Will the double dip recession take hold before the close of the year and lead to business travel decline again?
4. Online booking effect should grow by 10% year-to-year. Business travel has picked up, but travelers are still waiting and booking rooms at short notice. My Loyalty Traveler research over the past couple of years showed that rates San Francisco typically dropped with the lowest rates offered 3 to 14 days before arrival. I’ve noticed a different pattern in 2011 with rates lower at two weeks, but typically higher within one week of arrival. Another development is there have been more hotels available for last minute booking through offers like Starwood Starpicks, IHG Last Minute Rewards and Marriott weekend discount rates (available by email subscription).

Adding Google Hotel Finder to the mix – Hotel News Now

I admit that I never checked out Google Hotel Finder before today.

I like it.

The site allows the user to set an area on a map to search hotels. Results display hotels and the hotel room rate compared to the average rate for that property with a percentage above or below average.

The complaint from the hotel industry is the rates shown on Google Hotel Finder do not necessarily represent the rates on the hotel brand’s website.

Loyalty Traveler points out frequently that rates shown on OTAs are the Best Available flexible rate or Advance Purchase rates, but OTAs do not show AAA discount rates, senior rates, corporate rates and some special brand website online discounts.

This means the rate shown on Google Hotel Finder might be higher than what you can find on the hotel brand’s website. The fact that the rate might be higher is a common issue for all branded hotels so this is not too much of a concern.  Google Hotel maps indicates where the good deals might be and then the consumer can check the hotel brand website for even better discounts.

I’ll try to write up a more comprehensive review of Google Hotel Finder next week.