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Why Holiday Inn Express and Hampton Inn are the fastest-growing limited-services brands.
A building boom is under way in the limited-service hotel sector, also known as midscale without food or beverage. Approximately 25,800 rooms are under construction - and another 17,898 rooms are in the planning stages.
Despite the growing supply of midscale rooms - 661,895 as of September 2005 - the final chapter has yet to be written. oil prices, a potential shortage of building materials resulting from a record hurricane season and consumer confidence could waylay projects in the construction pipeline.
So, what's the main attraction? For starters, midscale hotels are less costly to build, yet typically reap higher returns than their full-service hotel cousins.
According to Smith Travel Research, the midscale sector encompasses 32 brands. The crowded playing field includes Hilton hotels' Hampton Inn, InterContinental's Holiday Inn Express, Marriott's Fairfield Inn, La Quinta, and Choice hotel's Comfort Inn. With so many brands to choose from, developers gravitate toward the chains that offer strong consumer appeal.
This is partly why Holiday Inn Express and Hampton Inn stand out as the fastest growing brands in this segment, say industry experts. Both have poured resources and money into upgrading the mainly franchised chains, enabling the properties to grab higher occupancy and room rates than some of their competitors. Strong toll-free reservation systems and frequent traveler clubs also serve to entice travelers, and hence, developers.
"Developers look at a lot of things [when deciding what brand to build]. Ultimately, they look at profits and how much they are going to take to the bank," says Phil Cordell, senior vice president of Hampton Brand Management.
Kerry Ranson, vice president of operations at Birmingham, Ala.-based HP hotels, agrees. "We build hotels which are going to give us a high return on our investment." HP operates 26 hotels, including five Holiday Inn Expresses and five Hampton Inns, which they own. And the company plans to open three Holiday Inn Express hotels and one Hampton Inn between now and August 2006.
A typical Holiday Inn Express with 75 to 80 rooms costs about $50,000 to $60,000 per key to build, says Verchele Mills, vice president of brand management for Holiday Inn Express. Similarly, an average Hampton Inn with 80...