Hospitality Market Update - May 2011

By Jessica Chevalier

Slowly but surely the hospitality market is rebounding, say the designers and flooring manufacturers who service the sector. Remodels account for most all of the current activity, and, since some brands relaxed standards during the recession to help struggling owners, many within the industry believe that there is a lot more renovation work to come, as brands move back to their standard requirements, fueling pent-up demand.

Maintaining a fresh, clean look is a key competitive edge in the hotel business, so brands and owners that delay renovations too long are at risk of doing harm to their image and losing their market position. Kay Lang of Kay Lang and Associates, whose Los Angeles-based design firm specializes in four and five star hospitality design worldwide, reports that guest room flooring in hotels is generally replaced every five years, and ten to 15 years is the turnaround time for public areas. She adds that many facilities were on the verge of needing replacement even before the recession.

With a trend toward cautious and more deliberate spending across the sector, hotels are choosing their projects wisely—focusing on those that will make the greatest positive impact to the bottom line. The age of one-upping the competition with cool but rarely used amenities—like costly spa treatments or lavish decor—has passed. The hospitality market is now a lifestyle business, catering to the customer’s practical needs.

THE MARKET
Lang believes that the U.S. hospitality market is rebounding and will see robust growth by the end of 2012. Foreman Rogers of TVS Design in Atlanta agrees. “There are more projects on the board—not as many as you would hope—but lots of renovations. Pieces and parts will be redone,” he explains.

At Lang’s firm, renovation is 100% of the business slated for 2011. This is in sharp contrast to 2009 when 80% of her jobs were new builds—however, 60% of the projects never got built because of funding. Some of her current projects include foreclosures that were snatched up by banks or investment firms that will renovate and rebrand them.

Jan Freitag of STR, the firm formerly known as Smith Travel Research that tracks and analyzes the hospitality market, notes that currently there is some new development of smaller hospitality properties being funded by local banks. Some private partnerships are subsidizing building as well. But the lack of availability of financing on a large scale is a hindrance to development. Before the recession, many hospitality projects were funded by commercial mortgage-backed securities—which are now hard to come by because of the recession.

The silver lining to this news is that, with fewer hotels opening their doors, room demand in established hotels is up. In 2010, occupancy increased by 5.7% and revenue per available room rose 5.5%. But average daily rates decreased by 0.1%, according to STR’s research. While room demand is rebounding, room rates have yet to show the improvements STR had hoped for. “Room rates are doing better than in 2009 and 2010, possibly better than in 2008, but not better than in 2007,” Freitag explains.

But real recovery does seem to be on the horizon, according to Freitag. As room demand continues to increase, it will translate into occupancy increases and give hotels the strength to increase room rates. STR expects rates to rise through 2012, though not at a pace that will make up for the recession. At present, luxury properties are seeing strong increases in room demand and average daily rate. Says Freitag. “We are seeing recovery from the top down.”

As demand for luxury rooms increases, these facilities will raise their rates, pushing some consumers downstream. Eventually, the next tier of rooms will be in high enough demand that these hotels will be able to increase their rates as well. And, of course, when the segment is in a full upswing, building and renovation will come back as well. Some chains that relaxed brand standards in 2008 and 2009 are now demanding that franchisees comply. While it will likely take some time for this to trickle down to the flooring industry, pent up demand should kick in.

Keisha Banks—account manager at Spartan Surfaces (a sales and marketing company that specializes in commercial flooring), interior designer, and former owner of Freelance Interiors—reports that some facilities in her D.C. area market are starting on small renovations, like redesigning a lobby or restaurant, to band-aid a problem area until a more complete overhaul can be made.

TVS’ Rogers has noticed this trend as well and believes this slower, more deliberate approach isn’t just the outcome of sluggish funding. “Hotels are repositioning, not renovating,” he says. “They aren’t just sticking a pretty picture on the wall; they’re figuring out how that picture can make money. They pick and choose what projects will move the hotel ahead to make them more profitable.”

Lang notes that, across the industry, the recession has necessitated adaptation. Hotel management has had to learn how to entice customers with fewer dollars to spend on marketing. Designers have had to get better and more efficient at specifying. Vendors have had to trim their stocks to include only those items that will get specified.

Manufacturers have had to adapt as well. Says Sam Burger, vice president of sales for Lexmark Carpet Mills, “When business breaks loose, it will be fast and furious. Whoever can turn an order and has the best pricing will reap the benefits.” To this end, Lexmark has made significant investments to ramp up operation over the past two years, including adding twisting and heatsetting machinery, adding two new tufting machines, and doubling the size of its extrusion capability. Lexmark has traditionally targeted the middle of the market, but it recently put focus on working with specifiers and moving into the higher end as well.

Rogers adds, “Before the recession, everyone was trying to come up with the next coolest thing. Now, it doesn’t make financial sense to do that. People are cautious, thoughtful. They’re searching for a smarter way to do things.” He notes that many architecture and design firms—TVS included—have built themselves to handle the load of projects once the market returns and have used to downturn to build their libraries and educate themselves about new products and materials.

LUXURY VS. LIFESTYLE
There have been some interesting developments in the hotel market over the past few years. To start, famed boutique hotel designer Ian Schrager partnered with Marriott International to launch Edition Hotels. The company’s website says that Edition “will combine the personal, intimate, individualized and unique lodging experience that Ian Schrager is known for, with the global reach, operational expertise and scale of Marriott.” Edition currently has locations in Waikiki, Hawaii and Istanbul, Turkey and plans to expand to at least five other cities across the world. The Waikiki location, Edition’s first, has a colorful cluster of broken surfboards behind the front desk that puts a uniquely Hawaiian signature on the space.

Starwood Hotels and Resorts launched Aloft in 2005 and Element in 2008. Aloft is a modern-styled hotel that caters to the young crowd with social media opportunities aplenty. In fact, Aloft’s xyz bars host music events by up and coming artists and broadcasts these events across YouTube. Aloft features a hot pink and slate logo with an electric-looking font that speaks of the contemporary, smart-phone-using world.

At the other end of the spectrum design-wise, Starwood introduced Element, a hotel that caters to the whole living experience. According to the Element website, the hotel incorporates eco-friendly materials wherever possible, including in its flooring, which features carpet with high recycled content. In addition, all Element Hotels will pursue LEED certification.

Frietag says that this trend toward uniqueness and personalization originated with Barry Sternlicht, Starwood’s founder and former CEO, who conceptualized the W Hotels brand in the late ’90s. W was the first chain-ification of the boutique concept and proved that the front of the house can be cool while the back of the house runs like a chain, powered by a guest loyalty program. Often these chains have lobbies that are designed to look distinct from one another—further emphasizing the location’s unique feel.

Interestingly, Freitag believes the market is moving from the boutique concept—in which hotels are unique, sexy spots that convey a feeling of exclusivity—to lifestyle hotels, which instead seek to cater to the consumer’s lifestyle and needs. In the past, the guest used to come to the hotel and say, Wouldn’t it be cool if I had that at home? Now, the hotel is taking cues from the home front, offering ample, tech-friendly office space, healthy food options, and comfortable beds.

Lang believes that the notion of lifestyle can apply to a fancy five star resort or a value location because the concept is simply about providing what the customer wants today. She agrees with Freitag that the notion of luxury is changing. Prior to the recession, customers thought of luxury as over-the-top opulence, today it is more about having carefully thought out and well-selected materials that cater to the customer’s needs.

MATERIALS
Whether it’s luxury or lifestyle, the opportunity to bring high design to the masses is more of a possibility now than ever before, says Rogers. “Good design is more affordable due to the Asian markets. We can produce nicer goods for cheaper,” he reports.

Ceramics have advanced by leaps and bounds, he notes, asserting that they, more than anything, have changed hospitality design. “You can get a stone look for a lot less; it’s maintenance free; and no one knows the difference.” Rogers is fond of using faux wood ceramics as well, especially in high traffic areas. He recently used faux wood in the entry and guest room baths at Hilton McLean in McLean, Virginia. The Hilton McLean, located next to the Hilton’s corporate offices, carries the new look that the company will roll out across the brand.

In addition to its high design quotient and durability, Lang notes that porcelain tile is sustainable, allergy free and can contribute to LEED points. She adds that hospitality flooring is becoming more monolithic and cleaner style-wise with fewer grout lines and larger scale patterns. All of this, she adds, is made possible because of advances in technology among the producers.

Both Rogers and Banks note a trend toward the use of reclaimed wood—which communicates a cozy feel and a commitment to environmentalism. Much to her dismay as a flooring rep, Banks has noticed a lot of polished concrete being specified as well.

Because carpet tile is versatile, easy to install and easy to replace (piece by piece), the designers that we spoke with report that they are seeing it used in hospitality more frequently. Rogers uses a lot of carpet tile in the flex halls (mixed use spaces) of convention centers, and Lang reports that she is starting to see it within guest rooms as well. Steve Hillis, vice president of hospitality at J+J/Invision, which sells both broadloom and carpet tile, says, “Carpet tile will take less material to do the job in almost every case, and installation cost is less.” He is seeing carpet tile used in guest rooms, corridors and public spaces.

However, Rogers believes that Axminsters will continue to dominate in public spaces, corridors, ballrooms and meeting rooms, and he doesn’t see broadloom’s hold on guest rooms loosening anytime soon.

Lexmark’s Burger reports that advancements in tufting technologies over the last six years have enabled manufacturers to create a more sophisticated looking broadloom—with greater design, texture and pattern capabilities. He is seeing more large scale patterns used, even within guestrooms.

Hillis says that texture is popular in guestroom broadloom, like multi-level cut loop and enhanced loop tip sheared styles. In corridors and public spaces, he sees a lot of activity in computerized yarn placement.

Banks predicts that we will soon see hotels moving to allergen-free environments. While this is popular in European countries, the U.S. is just at the cusp of this change. Lang agrees that allergen-free facilities will be a big deal in years to come. Since hard surface flooring is perceived to hold fewer allergens than soft surface flooring (a belief that is heavily disputed by soft surface manufacturers), concerns about allergens may give hard surfaces a bump in the hospitality market. In anticipation of this trend, Lexmark has been applying LexShield—an odor-, mold-, mildew- and bacteria-inhibiting treatment—to all its carpets for the last four years.

STYLE & SUSTAINABILITY
Natural earth tones with big pops of color are the current trend in the hospitality market, according to Lang. “In the past, you wouldn’t catch men in a pink or purple shirt; now the most conservative of men will wear those. And design follows fashion.” In addition, designers are pairing colors that weren’t seen previously: yellow with red and lilac with green.

On Banks’ end of the world, the trends are a bit different, “Everything is based on stability,” she reports. The colors and materials used reflect sturdy elements like steel and earth. And patterning reflects men’s suit collections with nubby textures and pinstripes. Banks believes that as we pull out of the recession, patterns will get more organic and amorphous, and color will shift a bit brighter.

Burger too reports that grey—a color not formerly seen in the hospitality market—is a hot ticket in the segment right now. Browns and blues are popular as well.

Interestingly, the recession may have made a permanent impact on how designers specify flooring for hospitality facilities. Rogers reports that today’s style is all about durable, timeless design. “We try not to follow trends,” he says. “We want to be able to give a hotel a look that will last longer than in the past.” As a designer, he plans to have the soft flooring goods replaced on a regular cycle, but the hard goods should have a classic look that will endure.

Lang and Rogers both say that creating a sense of place is an important goal in hospitality design. “Designers need to know the area in which they’re building,” says Rogers. Creating a cultural authenticity is important to connect the guest to their location. Lang reports that she has used Amtico’s Zebrano vinyl flooring, which has the look of zebrawood, to create a cultural context in exotic resort areas.

In conceptualizing a facility’s design, Lang considers the facility’s intent, safety issues and environmental concerns to be equally important. She and her team—her firm employs 20 designers—seek to get as close to a zero carbon footprint as possible. And, rather than just taking green claims at face value, they question vendors about where their products are manufactured and dig in deeply to each product’s eco story.

Rogers believes that the hospitality market has been the slowest of the vertical segments to embrace environmentalism, but he does believe that most everyone is trying to do better. “No one wants to throw anything in the garbage anymore,” he says. Many vinyl wallcovering suppliers will bring a trailer and haul off the used product for recycling; Rogers notes that he would like to see more of that in flooring.

In the highly competitive hospitality market, lifecycle cost is less of a consideration than upfront cost, according to Banks. “It’s hard for clients to see beyond upfront investments,” she says, because hospitality design must, above all, stay fresh looking, no matter what its style. In Banks’ opinion, performance, slip resistance and time-tested functionality also play a big role in hospitality flooring. Very often, she notes, the hospitality decision makers want to stick with the familiar, like durable wool Axminster carpet.

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