Amid lag in demand, midscale hotel brands roll out new designs

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Wingate lobby designChoice Hotels International, InterContinental Hotels Group (IHG) and Wyndham Worldwide are all pushing new design prototypes to spur supply growth and room-rate increases within the upper-midscale and midscale sectors, which have accounted for a shrinking slice of U.S. hotel revenue in recent years.

IHG announced a new design prototype for its Holiday Inn Express upper-midscale brand late last month, and Wyndham did the same for its midscale Wingate by Wyndham brand.

Choice announced additional funding incentives for prospective developers to build new properties under the Comfort Inn and Comfort Suites brands.

IHG, whose Holiday Inn Express brand accounts for more than half of the hotelier’s 3,600-plus hotels in the Americas region, said facets of the 93-room prototype will likely be worked into existing properties starting later this year, with newbuilds slated to start opening early next year.

Wyndham didn’t put a timetable on the expected debut of its 99-room, 49,000-square-foot prototype, which it said cuts newbuild costs relative to previous version by 10%. Wingate by Wyndham accounted for 159 of the company’s approximately 7,500 properties as of the end of last year.

Neither IHG nor Wyndham will be building any of the prototypes themselves. Still, both companies appear to be taking a cue from higher-end brands by designing the lobby areas as both a social hub and connected work area, with touches such as flat-screen TVs and flexible spaces that can be used for complimentary breakfasts, happy hour and events.

The Holiday Inn Express prototype calls for check-in pods instead of the traditional front desk.

The hoteliers are investing in boosting both supply and demand for upper-midscale and midscale sectors whose revenue growth has lagged the industry’s general recovery.

Holiday Inn Express’s revenue per available room (RevPAR) growth in the U.S. was 2.3% last year, compared with IHG’s 2.5% increase in the U.S.
Wingate’s 2.2% RevPAR increase last year trailed Wyndham Worldwide’s 3.8% increase.

Holiday Inn Express lobby designWhen combined, the two sectors boosted RevPAR in the U.S. by about 4% last year, lagging the overall 5.4% increase, according to STR. And while the U.S. inventory of upper-midscale properties has edged up about 7% in the past three years to about 890,000 rooms, the U.S. midscale room supply is actually down about 9% since 2010, to about a half-million rooms.

Upper-midscale room rates almost match the overall industry’s $110 average, while midscale hotels on average charged almost $77 a night.

With the idea of boosting room rates in mind, Choice Hotels, which franchises almost 1,900 Comfort Inn and Comfort Suites properties, said last spring that it would set aside $40 million to help fund improvements at individual properties.

And late last month it added an additional carrot for the brand’s prospective developers: It is waiving three years of royalty fees from hotel owners who commit to building new Comfort-branded properties within the most recent design prototype guidelines.

CEO Stephen Joyce said in early 2012 that he expected about 70% of the Comfort-branded properties to receive improvements by 2015 and estimated that a typical 75-room Comfort Inn would require “about a couple hundred thousand dollars” to meet the new standards.

“We want to bring these new-generation hotels to more primary urban markets and to places where the existing product is in need of a competitive upgrade,” said David Pepper, senior vice president of global development at Choice Hotels. “We are investing our own capital to get it done as quickly as possible while the lodging cycle is so favorable.”

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