MRP hotels - Hoteldevelopment

Focused Service Hotels

02/10/2013 Vienna
Growing investment and operating costs as well as many markets saturated with full service brands make focused service hotels an attractive alternative for guests, investors and hotel owners. How does this kind of hotel work?

Popular European city destinations such as Vienna and Berlin are seeing stagnating room occupancy rates. These markets are saturated with established full service brands in the four- and five-star categories.

Focused service hotels (also referred to as selected service hotels) are developing with positive aspects from both the low budget as well as the full service segments. Only specially chosen services important for guests are offered in such hotels. Certain important components from full service hotels are selected for the target group - the "smart, practical guest" - hence the name "selected service". These hotels are generally mid- to up-scale establishments and are difficult to categorise in the standard star classification. Products are usually highly standardised, international brands allow little variation - and those are dependent on location.

A high-quality, attractive and modern room product is normally the focus of this concept - concentration on the basic necessities is what counts - working, showering, sleeping. Unnecessary amenities such as large restaurants, spas and meeting rooms are reduced or excluded altogether. About 10 - 15% of a focused service hotel’s profit comes from non-room departments such as breakfast (in comparison to 30 - 40% in full service hotels).

Hotel operators worldwide are currently rolling out these brands at a high pace. According to STR, these hotels account for 85% of new developments in the USA. Franchise agreements are frequently made and, when properly structured, can lead to a win-win-win situation (owner, franchiser, franchisee).

"Profit efficient" focused service hotels are also attractive to investors. Returns are higher than with comparable full service products because operative costs can be kept low and investment costs sink because of a smaller built-up space. Additionally, these establishments do not need to produce a compulsory triple-A location meaning lower real estate costs. The time required for development can also be shortened as development is less complicated thanks to pre-defined brand standards. The third argument: the necessary property for the same number of rooms is smaller since the space needed for common areas can be significantly reduced compared to what is needed in a full service hotel. Experience shows that compared to full service hotels, investment costs are up to 25% less.

Here is a list of focused service brands:
  • Hilton Garden Inn
  • Hampton by Hilton
  • Courtyard Marriott
  • Hyatt Place
  • Indigo
  • Aloft
  • Four Points by Sheraton

The table linked here provides an overview of the most important information from focused service hotels compared to full service hotels in the mid- and up-scale segment: (empirical values from MRP hotels for western Europe)

MRP hotels consults clients on development, planning and realisation in this segment.
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