Page 10 - August 2022

TYPES OF HOTELS EXAMPLES OF RATE PREMIUMS
ACHIEVED ABOVE THE MARKET
Large Major-Branded Hotels
For large hotels affiliated with a major brand, demand In contrast, here are some examples of smaller, expe-
segmentation is driven primarily by their location in the riential hotels that achieve much higher rates than the
market area and their brand’s ability to generate room market would otherwise bear.
nights from the brand’s reservation systems. Most of Houston hotels with the highest Average Daily Rates
these hotels are first focused on either corporate individ- (ADR) are La Colombe d’Or Hotel, The Post Oak Hotel, The
ual demand or leisure demand, whichever is the major Lancaster, and Hotel ZaZa. All of these are independent
driver of their market. For example, a downtown market hotels and although some are larger than one hundred
in a major city will lend itself to corporate individual rooms, they are still able to capitalize on their unique
demand as the primary demand generator. A hotel located product offering. The Post Oak Hotel, even with 250
at a beach destination or near a leisure attraction may rooms, was priced well above established properties in
start by filling rooms with leisure demand. The major its first year of operation. The smaller La Colombe d’Or
national brands will tap into their reservation systems Hotel recently reopened in March 2021 and is delivering
to help draw loyal customers to the hotel. Once a larger ADR well beyond other hotels in the market, generating
hotel has filled as many rooms as it can with the major approximately $500 in ADR.
demand driver in their market, it will then use their Austin hotels with the highest ADR are The Commadore
meeting space to drive food and beverage revenue while Perry Estate, Saint Cecilia, Four Seasons, South Congress
providing discounted group rates for room blocks to help Hotel, and Hotel San Jose. Of the top ten performers, only
fill the remaining rooms in their hotel. Convention hotels the Four Seasons is a major brand. The Commadore Perry
may do this in reverse and start with advance group res- Estate and Saint Cecilia generate four times the rate of
ervations and then fill rooms with other types of demand the Hilton/Marriott/Hyatt properties in Austin. The Saint
for closer dates. Cecilia created a product that although limited in amenities
(no spa and fitness, no 24-hour room service and no valet
Small, Experiential Independent Hotels parking), it creates a wooded oasis that feels remote, despite
Small, experiential independent hotels are in a unique being adjacent to downtown Austin. The Commadore Perry
position to be able to drive rates higher than the market Estate brought a luxury level of product to Austin that did
rates because of the value proposition they provide, as well not exist prior to its arrival. Although the property is not
as the ratio of supply to demand in the market. Given that located in one of the city's hot hotel areas and the hotel
these hotels typically have less than one hundred rooms is new to the market, the performance since opening has
to fill, they are not dependent on discounting for large been stunning, significantly outperforming its competitive
group blocks or for corporate accounts that book multiple group of hotels by a factor of three to four times.
rooms. Instead, these hotels appeal to executives and San Antonio hotels with the highest ADR are Hotel
other business travelers that are willing to pay a premium Emma, Mokara (by Omni), and Hotel Havana. Hotel Emma
for a unique experience and/or a specific level of luxury. brought a luxury product and experience to San Antonio
These hotels often tell a unique story that appeals to the that did not exist prior to its arrival. The performance of the
leisure traveler that is seeking new experiences. Also, if property has been remarkable, drastically outperforming
the other major hotels in San Antonio by three to four times.
There are numerous other examples of small, experi-
ential hotels that provide guests with a destination rather
than simply being a place that you stay while visiting your
“Austin hotels with the highest ADR destination. Recently, I discovered Hotel Pivovar in Waco,
are The Commadore Perry Estate, Saint Texas, a new German themed hotel and restaurant with a
Cecilia, Four Seasons, South Congress brewery and bakery with a unique “beer spa” experience.
This hotel charges rates two to three times the other hotels
Hotel, and Hotel San Jose.” in the market because their small number of rooms are
consistently nearly sold out.
Of course, simply building a smaller hotel doesn’t guar-
these hotels have meeting space for small groups, they are antee higher ADRs. There are numerous factors to consider,
typically able to upcharge for the group rooms rather than from the location of the hotel and its proximity to demand
discounting. Instead of needing to fill empty rooms with a generators to the story the hotel is telling and how it
block like the larger hotels, a smaller hotel holds a major- provides a unique experience or destination for guests. It is
ity of their available rooms for these group bookings. It also critical to have good management at smaller hotels that
only makes sense to do this if they are able to charge more manage expenses while driving marketing to their demand
than they would get for their typical rates or to fill the generators since they do not have the reservation systems
rooms in an otherwise slow period. that major brands use. Each market and site lends itself to

10 NBIZ ■ August 2022