BETHESDA, Maryland—Since its launch in 1975, Residence Inn by Marriott has become an iconic symbol in the extended-stay hotel segment. With a portfolio of 617 hotels comprising nearly 75,000 guestrooms—the largest lineup in the upper extended-stay category—the brand’s roster includes properties of all ages and continues on its quest for its own fountain of youth via freshness and consistency.
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Diane Mayer
VP and global brand manager for Residence Inn
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Couple that with a five-year growth plan in Europe, a global pipeline that includes 135 properties and the roll out of a new room design called “Possibilities,” and Residence Inn is doing anything but remaining stationary, said Diane Mayer, VP and global brand manager for the brand.
“From a consumer perspective, as a brand we have to deliver a consistent experience,” Mayer said. “We have to make sure we are keeping the product fresh so even an older hotel has the same offerings as a new one.”
The company is on a major push to expand around the globe. It has five hotels open outside of the United States: two in Munich; one in Edinburgh Scotland; one in San Jose, Costa Rica; and one that opened this month in Bahrain. All the hotels were new-build properties with the exception of Edinburgh.
“That speaks to the power of the Marriott brand, the power of the Residence Inn brand and the power of extended stay,” Mayer said. “There is extended-stay demand all over the world and not enough product to serve it.”
Mayer said there’s no ceiling on the potential for the brand around the globe.
“I can’t say we have an ultimate goal as for a number of properties,” she said. “Between 30 and 40% of all business travel roomnights are part of extended stay. That’s a lot of roomnights, and when you get out of the United States, there’s no product to serve that. Even in the U.S. there’s little purpose-built product to fill the demand.”
The brand’s system-wide average daily rate is about US$5 higher than its competitive set in upper extended-stay segment, according to Mayer.
“It’s a great value proposition,” she said. “We have continued to grow our brand with the most consumer-focused product in the market. Our pipeline will grow as fast as the capital markets will enable it.”
Experience counts in extended-stay segment
Mayer said the typical Residence Inn franchisee is not a newbie to the hotel industry. The footprint for an extended-stay hotel often costs more to build than a traditional transient hotel. Mayer declined to reveal the average cost to build a Residence Inn property, but she said she expects the costs to build its prototype to be cut about one-half of one percent as the company continues to tweak it.
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| The 227-room Residence Inn Munich City East opened in October—the brand’s first property in Europe. |
Mayer said developers are attracted to Residence Inn, and the extended-stay segment in general, because of the healthy profit margins they produce. She declined to talk specifically about Marriott’s return.
“Margins are high because it’s a really efficient business model,” she said. “It’s particularly efficient when it comes to labor, and we all know how tough that is to find. … There’s a lot more to it than margins. It means associates on property are able to deliver even better guest service.”
The brand focuses on its EXOCC—extended-stay occupancy rate for guests staying five or more nights—as a key indicator for success. Mayer declined to reveal the brand’s EXOCC, but when asked if it was in the 70% range that many extended-stay operators shoot for, she said “it was in that range. But we have hotels that run 90%—it varies by market. We have seen our EXOCC grow significantly in the last year.”
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Rooms with a new look
Residence Inn also is rolling out its new room design to enhance its efforts for consistency. Being unveiled during the first quarter of 2012, the new room design, “Possibilities,” will be implemented over the next five years. Three hundred of the brand’s properties already are scheduled to complete the room upgrade. A sample room currently is under construction at Marriott’s Bethesda headquarters in Maryland.
The renovation package is an extension of the brand’s focus on the guestroom work space and bathroom that it rolled out about a month ago, according to Mayer.
“Having a good cadence of renovation packages is essential for consistency,” Mayer said. “A lot of what we learned and developed while doing renovations was applied to the new guest suite package.”
The key to the “Possibilities” room design will be flexible wall placement, she said. “The layout with the suite will change somewhat significantly,” Mayer said. “It raises the bar, and it is more reflective of consumer lifestyles and more responsive to what customers have told us they want.”
New leader knows the brand well
Mayer might be new to the position of leading Residence Inn, but she is no stranger to the brand. With a background in consumer research, she has worked with the Residence Inn team on and off during the past dozen years.
“I’ve been working on the entire Marriott select-service portfolio for 12 years, and Residence Inn was the first one I worked with,” Mayer said. “None more exemplifies the category than Residence Inn. It’s fun to work on a brand that’s so clearly positioned.”
Leading a large legacy brand has its challenges, but Mayer said “that’s part of the fun.”
Mayer’s specialties include analyzing guest demographics and behavior, and extended-stay gives her plenty of fodder for analysis.
“From a consumer perspective, that length of stay really changes customers’ needs,” she said. “Any good brand is trying to find out what the consumer needs and do the best it can to fulfill those needs.”
Mayer added that the long-term extended-stay guest is Residence Inn’s bread and butter.
That’s why having amenities such as a full kitchen in a home environment is essential to the segment’s success. Year-to-date data through October showed an overall occupancy rate of 74% for the extended-stay segment and a year-over-year revenue-per-available-room increase of 7.8%, according to STR, the parent company of HotelNewsNow.com.
“It’s all about having a home environment—places to bake lasagna if they want or to store leftovers from dinner out,” she said. “It’s about really unpacking their suitcase and having the proper drawers and storage help them do that.”
