Suddenly, it seems, everybody wants to be in the hotel business, and everyone in the hotel business wants to grab every available customer. Mergers are commonplace, brands are being traded back and forth, and new lodging chains are popping up all over the place.

Nine major mergers and acquisitions took place in each of the last two years, according to PricewaterhouseCoopers. Bjorn Hanson, PhD, PWC's hospitality and leisure analyst, predicts more of the same in 2006.

Why All the Changes?

Why the huge interest in hospitality? A good place to start is the economy.

As fallout from the September 11, 2001, terrorist attacks fades, U.S. businesses continue to recover, and as an increasing number of employees travel, more and more hotel rooms are filled each night. Revenue per available room, or RevPAR — a key indicator of a hotel's health — is expected to grow 7.7 percent this year (compared with a long-term average increase of 4 percent), and average operating income for U.S. hotels rose an incredible 20 percent last year. There's no question that hotels are a smart investment.

The changing priorities of hotel companies are the second major factor fueling these shifts in ownership. Casual observers may have scratched their heads when Host Marriott paid $3.4 billion for a portfolio of 38 hotels owned by competitor Starwood Hotels and Resorts Worldwide in fall 2005, but the deal made sense to those in the business. Through the transaction, Host Marriott — a real estate investment trust that was spun off from Marriott in the 1990s (and, since this acquisition, has changed its name to Host) — diversified so that Marriott-branded hotels represent only about half of its portfolio. Starwood will continue to collect fees for managing most of the hotels it sold for the next 40 years.

Starwood CEO Stephen J. Heyer said it would help the company to “transition from a real estate company with some hotel brands to a consumer lifestyle company with a branded hotel portfolio at its core.”

Since he joined Starwood in 2004, Heyer's strategy has been to shift emphasis from real estate to building brands, collecting fees for managing hotels, and franchising. As part of that strategy, last year Starwood agreed to buy Le Meridien, a well-regarded but financially struggling international chain of high-end hotels.

The shift in ownership of brands also reflects hotel companies' never-ending quest for bigger market share. “The goal, much like a tissue manufacturer, is to get as much market share as possible,” says Rick Swig, president of RSBA & Associates, a San Francisco consultant who specializes in hotel asset management and acquisitions. “Hotel companies do this by having each and every brand in as many markets as appropriate around the world.”

Acquiring new brands also helps lodging conglomerates to expand in markets that are saturated with their existing products. Can't build another Marriott in Orlando because the city already has a handful of Marriotts? Buy the Renaissance chain, or Ritz-Carlton, and the problem is solved.

In another example, Saudi Prince Alwaleed bin Talal and Colony Capital acquired the Fairmont Hotels chain early this year; now, the company plans to combine Fairmont's 87-property portfolio with its 33 existing Raffles hotels, but operate the brands separately. In this climate, longtime independent brands such as Four Seasons and Orient Express are considered targets for sales as well.

What Does It Mean for You?

All these shifts in ownership can affect planners. There are obvious advantages to having control of more hotel rooms in the hands of fewer operators.

The first is one-stop shopping: If you are planning a meeting and you need X number of hotel rooms, all you have to do is make one phone call or submit one RFP, and one of the hotel companies might have enough rooms in a single market to fill your needs.

Swig says narrowing control of more hotels into the hands of strong brand companies is a boon for meeting planners because of the consistent standards these operators impose on owners. “The only way they can differentiate themselves is to sustain and maintain those brand standards.”

And that bar is continually raised. “Whether it's the new bed, the custom amenities, the need for expanded spa and fitness facilities, the new restaurant concepts, or the new ways of checking people in, there are more and more aggressive brand standards,” he says.

The potential downside to concentrated ownership is that certain markets might become dominated by a single operator, allowing a single company effectively to dictate rates and leaving less room for negotiation.

Another problem is the confusion about what exactly a brand represents. Years ago, specific hotel brands carried reputations, ranging from very upscale to value-oriented, or something in between, says Paul M. Smith, president of Hakins Meetings & Incentives, Wyckoff, N.J. When he sees some hotel brands now, they don't mean anything to him.

Of course, ownership changes also result in personnel changes — but this is nothing new. “Sales reps have always changed frequently, but my impression is they change even more frequently in this environment,” says Smith. But he adds that it's usually not too difficult to determine whom to contact, especially at the national level (see “The Name Game,” below).

A bigger concern for meeting planners than who owns their chosen hotel should be the stellar performance of the hotel industry, says Robert Mandelbaum, director of research information services for PKF Consulting in Atlanta.

“The hotel business is doing extremely well, occupancies are rising, and room rates are rising — so the leverage in negotiations for the next few years is most likely to be in the hands of the hotel manager.”

The Next Generation of Hotel Brands

Hotel companies are tripping over themselves to develop new concepts such as Indigo, aloft, and NYLO — called lifestyle brands — designed to lure Generation X travelers. That's because this younger group is fast replacing baby boomers as the largest segment of business travelers.

Younger travelers, research has shown, seek hotels that reflect the look, feel, and comfort of their own homes, which generally means casual and tech-friendly. They want convenience, so 24-hour access to food and drinks is a priority. Meeting space generally is not.

Here's a sampling of some of the new lifestyle brands:

  • ALOFT is intended to “carry the DNA of W Hotels,” Starwood's trendy chain of boutique properties. The new brand, designed for secondary markets, will be newly constructed properties with 125 to 175 rooms and average daily rates of $100 to $125. Each will include a food and beverage center offering fresh bagels and fruits and drinks, an outdoor area serving light meals, a fitness center with swimming pool, wireless Internet access propertywide, and flexible meeting and function space. Guest rooms will be designed with 9-foot ceilings and oversized windows, a signature bed, a work space with an MP3 docking station, and a flat-panel TV. Bathrooms will have Bliss amenities and walk-in, oversized showers. Starwood is developing five alofts and plans to open the first one in early 2007; plans call for 500 to be open by 2012.

  • HOTEL INDIGO, which InterContinental Hotels Group debuted in 2004, is an “aspirational brand,” according to its creators, meant for guests who want to trade up to a higher level of quality and taste but who still want value. At Indigo, “color, space, and design converge to bring order and balance to an otherwise hurried world.” Guest rooms have signature murals, hardwood floors with area rugs, oversized beds with big pillows, and spa-style showers. A restaurant features health-conscious food and Starbucks coffee. A “Phitness” studio is outfitted with cardiovascular exercise equipment and a ballet bar for stretching. Three Indigos are open: one in Atlanta and two in the Chicago area.
  • Global Hyatt Corp. is retooling AmeriSuites, a chain it acquired last year, into a product called HYATT PLACE. Hyatt owns 102 units of the 146-property chain. The all-suite hotels will be outfitted with Hyatt's Grand Beds, and a “cozy corner,” where guests can relax on a soft sectional sofa. Control panels will allow guests to plug in MP3 players, DVD units, and computers, and network with the 42-inch plasma TV. Public areas will include a “third place”: a combination gathering spot, registration area, and food-and-beverage space. Breakfast foods, sandwiches, salads, and snacks will be available all day, and the front desk will have a coffee bar. The conversions will be completed late in 2006.