The studio layout for the new Home2 Suites by Hilton.
By Jim Adair
Real estate investors looking for a “recession resistant” business were wooed in Toronto recently by a group of hotel executives representing four Hilton brands.
The focus was primarily on brands that specialize in extended stay (five consecutive days or more) bookings. “Extended stay really is recession resistant and offers great value to both to our customers and our investors,” says Dawn Koenig, vice-president, hotel performance and support for Homewood Suites and a new brand, Home2 Suites by Hilton.
In Canada, Homewood Suites has nine hotels and three more in the pipeline. It has seen occupancy rise by 9.2 per cent during the last year, and REVpar (revenue per available room) go up by 19.6 per cent. The newest Homewood Suites property in Canada (featured in REM in October) is part of a dual brand strategy. It shares its Toronto property with a Hampton Inn. Each brand has its own tower of rooms and a lobby, but they share conference rooms, business and fitness centres and a swimming pool.
The new brand, Home2 Suites by Hilton, is about to open its first property in Fayetteville, N.C. Koenig says it’s a mid-tier extended stay hotel that will host 70 per cent business travellers and 30 per cent leisure guests. Among the groups the brand is targeting are consultants, trainers, government employees, people who are relocating and auditors. A second group would include those in the entertainment business (for example, those with theatrical groups in limited-run shows or people in town to make a movie) and airline employees.
Suites will have living and bedroom space separated by a curtain. Along one side of the suite will be a “working wall” that incorporates kitchen facilities and a flexible working and media space. The hotels will feature “the Oasis”, a community space that provides casual meeting space as well as individual work tables. It also includes the serving area for a complimentary continental breakfast that will feature some hot items.
Rates at Home2 Suites will be about $30 per night less than Homewood Suites. The buy-in for investors is also less. Under two acres of land are required for a Home2 Suites site, and the cost is about $75,000 per key excluding land costs, says Koenig. A Homewood Suites development requires three to four acres and ranges from $86,000 to $126,000 per key.
Another brand on the investor’s tour was Embassy Suites. Shawn McAteer, vice-president, brand performance support, says Embassy Suites offers “upper-upscale” accommodations. “We define and dominate our own market category,” says McAteer. “Embassy Suites represents about 70 per cent of the supply of rooms in this category.”
However, the brand has only two properties in Canada so it has lots of room for expansion. Its Niagara Falls, Ont. hotel is the largest in the 207-property chain, and capable of hosting up to 2,000 guests at a time. The other Embassy Suites is in Montreal in a converted condominium building.
All of the hotels in the chain include an atrium as a luxurious signature statement, but the company found that having that element as a central component made expansion and retrofitting existing space more difficult. It adopted a new design that moved the atrium to the entrance, which allows new hotels to be built on three acres and cut construction costs by $10,000 to $15,000 per key. The cost to investors is now in the $115,000 to $125,000 range.
McAteer says Embassy Suites hopes to have “12 to 15 properties approved and under construction within five to seven years” in Canada.
The largest chain represented on the investors tour and the only non-extended stay hotel was Hampton Inn. Scott Schrank, vice-president, brand performance support, says the chain has more than 1,700 locations around the world, with 34 in Canada and nine more to be completed by 2012.
Schrank says 77 per cent of all new properties are developed by existing franchisees. “Their loyalty is as important as the loyalty of our guests,” says Schrank.
