ATLANTA—If you ask 10 different people what a “select-service” or limited-service hotel is, you may get various answers. But developers are finding these hotel models worthy of attention.
According to CBRE Hotels, using the broadest definition of select-service, this category comprised an estimated 89% of the total hotel projects under construction. That stat is in the December 2016 U.S. Hotel Pipeline report from STR.
GlobeSt.com caught up with Shawn Gracey, executive vice president of hospitality for Key International, to get more insight into this growing sector in part one of this exclusive interview. Stay tuned for part two, in which he will discuss some of the key factors to consider when purchasing a hotel property for development or redevelopment.
GlobeSt.com: What are the benefits of developing limited- and select-service hotel properties?
Gracey: Owning hotel properties in the limited- and select-service asset class comes with a relative ease of operations, in comparison to full-service hotels. By reducing the amount of food and beverage options available on site, as well as amenities, you increase efficiency and profit margins.
Employee salaries are one of the highest costs to hotel owners. Eliminating the need for a larger number of staff, such as those who would manage a restaurant or spa, is a crucial factor to successfully operating these assets.
This strategy allows us to offer more affordable room rates, which leads to an increase in traffic and demand. Limited- and select-service hotels serve as a balance in offering a quality stay experience for guests, while remaining operationally and financially effective.
(Find out why Ten-X adjusted its 2019-2020 hotel forecast).
GlobeSt.com: Why has this development formula proven successful?
Gracey: This development method has been successful because it combines brand credibility with strong design and service, while reducing unnecessary costs. We've chosen to work with brands like Marriott, Hilton, et cetera, that allow us to deliver a high-quality product that our guests trust and value by maintaining reasonable room rates. At Key International, we look for viable settings with a walkable locale that feature restaurants and shops to balance the fewer on-site offerings.
We've found that it is important to eliminate non-essential amenities, while still recognizing certain services that are important to today's traveler. For example, many of our properties attract business professionals, so we ensure there is high-speed Wi-Fi capabilities and meeting rooms available.
When acquiring and renovating a hotel, we upgrade as many of the property's areas as possible with leading offerings for that brand. This includes Hilton's Digital Key system, allowing guests to check-in, select a room and even open their door through an app, or TREATS, the convenient pop-up that sells snacks and toiletries.
(The hotel outlook is good barring any economic downturn.)
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