HENDERSONVILLE, Tennessee—The merits of interior versus exterior-corridor properties have been debated among economy chain hotel operators for some time. Exterior-corridor hotels offer convenience, value and a more like-home atmosphere, their proponents argue. Interior-corridor operators stress their properties’ greater guest security, value and more up-to-date product offering. Both product configurations have unique advantages.
Let’s look at some facts that can provide better insights to this discussion.
On average, economy chain exterior-corridor hotels are significantly older than interior-corridor properties. Seventy percent of existing exterior-corridor hotel rooms are 20 years old or older; about 40 percent of interior-corridor hotel rooms fall into this age category. Only 6 percent of exterior-corridor supply is 10 years old or newer, while 25 percent of interior-corridor rooms are in this group.
Forty-three percent of exterior-corridor rooms are located in just five states—California, Texas, Florida, Georgia and Virginia. Interior-corridor hotels are dispersed more widely, with the top five interior-corridor hotel states accounting for only 26 percent of room supply.
Recent economy chain hotel development has been basically all interior-corridor properties. The five-year average annual supply growth for interior-corridor hotels was 1.3 percent, while exterior-corridor supply growth was flat. During the same time period, demand (rooms sold) growth at interior-corridor properties averaged 1.5 percent. Demand growth at exterior-corridor hotels declined 0.7 percent annually during the past five years.
Interior-corridor hotels enjoy consistent occupancy and average daily rate premiums versus exterior-corridor hotels. During the past four years, interior-corridor annual occupancy averaged 1.8 percentage points higher than exterior-corridor hotels. The ADR picture is even more compelling, with interior-corridor hotels holding an average premium of more than $7.00 during the past four years. Importantly, the ADR premium interior-corridor hotels enjoy increased more than 34 percent from 2005 to 2008 because interior-corridor hotels have been able to increase rates faster and add new hotels in higher-rated locations than their exterior-corridor cousins.
Exterior-corridor hotels dominated the early days of interstate and secondary market hotel development. Today, a segment of hotel guests remains that prefers the convenience and feel of exterior-corridor properties. However, most studies and feedback indicate consumer preference for interior-corridor properties, driven largely by a greater sense of security the hotels offer and, in general, a more contemporary product offering. Consumer preference is reflected in the new economy chain scale supply that has entered the market and the performance premiums interior-corridor hotels enjoy.
While exterior-corridor properties will continue to thrive in selected locations, economy chain interior-corridor hotel supply will continue to grow and gain share in the segment.
The guest has spoken!