Lodging landscape: business and rivalry brisk
Chicago — If you're looking for the quintessential big-city hotel, it would be hard to find one more quintessential than the Palmer House. When I arrived there, a uniformed doorman stepped up to open the door and give me his arm as I alighted from my carriage.
Well, the carriage was a green and yellow Checker cab, and I was too burdened with my traveling reporter's paraphernalia of notebooks, city map, etc., to take full advantage of the doorman's proffered arm.
But you get the picture. Red velvet and crystal chandeliers and ceiling paintings and wood paneling and mirrors, and in one of the ballrooms, real gold leaf on the moldings. Columnist George Will once called its lobby ''the essence of lobbiness.''
If you ever get paged at the Palmer House, fear not that your name will be bellowed forth in unseemly fashion. Instead, a bellman will parade around the lobby bearing your name discreetly on a artist's pad; he will invite attention to the pad by means of a tintinnabulary triangle.
The hotel opened Sept. 26, 1871, and was closed just 13 days later by the Great Chicago Fire. It was rebuilt and reopened in 1873, then completely rebuilt , in phases, in the 1920s. In 1945, it was acquired by the Hilton chain, and today it is in the final phases of a $50 million renovation.
The tastefully low-key hum of activity of the Palmer House is typical of the prosperity at the upper end of the hotel industry.
The basic health of the industry as a whole has been ''fairly strong since last October, and getting stronger,'' says Michael Mueller, a hotel industry analyst at Montgomery Securities in San Francisco. Supply is growing with demand , he adds, about 2 to 3 percent annually.
''There's been a rapid expansion at both extremes,'' the upper and lower ends of the market, says Randy Smith, director of research at Laventhol & Horwath, a Philadelphia accounting and consulting firm.
It's the mid-price chains that are getting squeezed, hurt by lack of a clear market image. Ironically, the same chains that are so often condemned for their depressing sameness seem simultaneously to have problems with consistency.
Also, a number of the names that grace quite prestigious hotels in big cities also adorn some quite modest lodgings along the nation's highways and in smaller towns. When is a Sheraton not a Sheraton, or a Hilton not a Hilton?
It's not only differences of scale but of management. Some are corporate-owned and managed; others are investor-owned and corporate-managed; and some are franchise operations. Franchisees can be mom-and-pop teams or major companies in their own right, and their hotels may be better run than those under corporate management - or worse.
Given the high costs of building sites, construction, staffing, and overhead like restaurants, a developer wanting a put up a full-service downtown hotel may as well go for the brass ring and get into the luxury market. This has been especially true since the surge in interest rates began in 1979.
But by seeking out low-cost roadside sites and cutting back on dining rooms and other public spaces, a developer can put up a budget inn with rooms under $ 30 a night and still have what one analyst calls ''terrific margins'' because of low operating costs.
The mid-price chains can't really follow either of these paths. They are taking action on the consistency issue, though.
Mr. Mueller says, ''The major chains are trying to rectify the problems'' of inconsistent quality. Many of the ''properties,'' as they are known in the trade, put up during the go-go years had 20-year franchise agreements that are now coming up for renewal.
Mueller says franchisers are using the occasion to put the screws on operators who are not upholding standards of the company name; he mentions the 300,000-room Holiday Inns chain in particular. But the process is likely to take several years.
''It's hard to get them all at once,'' Mueller goes on; ''but if they get rid of 5,000 or 10,000 franchise rooms a year, they can ratchet quality standards up.
''Basically,'' he adds, ''the industry developed with a lot of construction and real estate people in the '60s, the years of high growth. Subsequent to that time, companies underwent a change - as the growth curve has slowed, they've become more marketing oriented.''
Aggressive marketing - ''educating the consumer'' - is the name of the hotelkeeper's game. But it's going to be tough, as the lodging companies themselves admit. Almost every news article one sees on the lodging industry discusses this chain's or that one's attempt to project ''a new image.''
Like itchy motorists continually switching lanes - to the consternation of the cars following them - some chains are moving upscale while others are moving down.
The whole issue is complicated by the relatively new practice of ''tiering,'' or market segmentation - that is, offering two or more kinds of inns differentiated according to service and price.
Holiday Inns, for example, has recently launched its budget Hampton Inns chain and also the upscale Crowne Plaza hotels.
Whether tiering is a sensible division of the market or an unwise scattering of a chain's marketing fire is open to debate.
Quality Inns International, based in Silver Spring, Md., claims to have pioneered tiering, which it launched in 1981, with its Comfort Inns, Quality Inns, and Quality Royale Hotels, to list them in ascending order of poshness. ''The Quality choice'' is the chain's slogan.
Lynn O'Rourke Hayes, Quality's marketing director, explains that she and two of Quality's top management are veterans of the Best Western International chain , whose properties range from quite modest roadside motels to more upscale hotels. ''We'd work out marketing programs for the low-end properties, and then they wouldn't fit the upscale ones,'' she says.
Thus, at Quality, the three different logos, three different toll-free reservations lines, and one slogan - ''the Quality choice.''
''But we think all those things are invisible to the consumer,'' says Larry Pelegrin, vice-president for marketing at the 3,000-inn Best Western chain, in Phoenix, Ariz. Tiered chains are just ''diluting their advertising budget.'' He suggests that the recognition value of a single brand name is of overriding importance.
''We're not into segmentation,'' says Jim Evans, vice-president for sales and marketing at the upscale Hyatt chain, which directly manages all the hotels with its name. He adds, ''We have no franchises whatever. We want to maintain the image we set out to establish.''