Before the pandemic, the majority of new hotel brand launches fell into one of two camps: luxury and lifestyle.
But as the pandemic subsides, the pendulum appears to be swinging in the opposite direction. The industry sees a surge in new brand activity towards more affordable segments such as midscale and long-term stays.
Robert Cole, Senior Research Analyst for Accommodation and Leisure Travel at Phocuswright, said this shift to the other end of the pricing ladder means that “the hotel industry is becoming more and more realistic about diversifying its brand offerings. It is said that it is suggesting that it is becoming.
“I think a lot of developers are getting very ambitious,” Cole says. “Because it would be cool to develop a boutique hotel or a nice luxury hotel. But the alarm bells are ringing that these types of hotels are very expensive and labor intensive to build and run.”
And based on the sheer volume of new midscale and economy brands that have debuted in recent months, the industry’s biggest players seem to be taking such cost concerns seriously.
Earlier this year, Hilton unveiled its first economy flag. Spark by Hiltonthe company said it would play in the “premium economy” space. Hilton CEO Chris Nassetta announced The company also revealed that it is preparing to launch a low-to-midrange extended-stay brand that will offer a price point just below Home2 Suites.
Similarly, in mid-April, Hyatt Hotels Corporation. Introducing Hyatt Studiosa long-stay flag that the company called its first foray into the upper-midscale space.
Then, last week, Marriott International joined the fray with CEO Anthony Capuano. Teasing Upcoming Launches A medium-sized extended-stay brand, he said, it will be a “simple, modern, streamlined, new-build product.”
That announcement came as Marriott officially signed the deal Acquired City Express It marks the company’s entry into the mid-sized segment from Hoteles City Express in Mexico. On the group’s recent first-quarter earnings call, Capuano said Marriott sees “imminent opportunities to accelerate the growth of City Express” in the Caribbean and Latin America.
Phocuswright’s Cole expects developer interest in this type of choice service to grow, especially in the current macroeconomic climate.
“There are greater risks for developers looking to build new hotels at higher interest rates,” Cole said. “Economic uncertainty and recession concerns also make doing larger, full-service projects riskier.”
And it’s not just hotel owners and developers who are potentially pulling back on the investment front. Generally speaking, Hilton, Marriott, and Hyatt have yet to report a significant slowdown in potential demand, but most industry insiders believe that the economic turmoil later this year will bring some relief to consumers. We anticipate the impact.
Hilton advertises Spark as a premium economy brand.Photo credit: Hilton
“We expect things to slow down,” Nassetta said on a conference call with analysts in late April. must be given.”
Lindsey Roesch, travel and hospitality analyst at business intelligence firm Morning Consult, also said consumers could tighten their travel budgets soon.
“Economic concerns are having a huge impact on travelers right now,” Roeschke said. “People aren’t always in places they travel to and from. I’d like to say that’s a short-term concern for the industry, but I don’t think it’s true.”
Roeschke also points out that the recent surge of new midscale and economy brands means that Generation Z travelers—most of whom earn less than $50,000 a year—are making serious inroads into the market.
“The pandemic delayed their entry into the category, but they’re starting to travel now,” Roeschke said. It’s likely, but that doesn’t stop them from traveling, and they need somewhere to stay, so there seems to be a great opportunity for these hotel chains.”
Extended Stays Edge
It’s probably no coincidence that most of these mid-scale plays are also in extended-stay spaces, due to non-economic trends.
According to Roeschke, long-term stay concepts that typically incorporate a kitchen or kitchenette as a major component tend to be more advantageous in terms of attracting leisure travelers, and hospitality companies are taking notice.
“People who combine business and leisure [tend to] Extend the trip a little longer,” Roeschke said.
Additionally, extended stay hotels have the advantage of being able to compete more directly with vacation rentals, and the latest newcomers are also looking to inject excitement into the segment.
For example, Hyatt promises that its Hyatt Studio concept will combine “the coziness of a studio apartment” with the energy of a “creative studio,” in addition to incorporating contemporary design elements.
“Extended-stay hotels have traditionally not had the highest prestige,” says Roeschke. “But now, I think the growth and popularity of vacation rentals with more of that ‘cool factor’ is really challenging traditional brands to find a way to play in that space. ”