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Inn Favor With the Hip Crowd

An open-air retail center will debut next year near California's Ontario International Airport with a decidedly non-retail tenant in tow: a chic new 120-room, select-service hotel concept called Cambria Suites. Instead of simply feeding traffic to the center's steakhouse, shops and other tenants, as hotel neighbors do, Cambria will set up as the centerpiece of the planned Airport Gateway Center — a strategy that's catching on among new boutique hotel brands.

“A center can capture dinner, movie tickets and shopping with a Cambria,” explains William Edmundson, vice president of brand management for the chain, the newest brand in the Choice Hotels International stable. “The end user loves it, the franchise company loves it and guests are willing to pay a little higher rate to be there.”

Cambria is just one of three sleek, contemporary select-service brands rolling out nationally into retail and mixed-use sites, responding to a changing guest demographic that finds younger, more experientially-driven travelers slowly supplanting aging baby boomers as bigger hospitality spenders.

“When you look at trends in this price range and see how Generations X and Y are starting to outspend baby boomers in travel, you'll see there's a big need to not be your father's hotel,” says Edmundson.

Starwood Hotels' newest brand, aloft, which it describes as a “spirited neighborhood outpost with ‘W’ DNA,” and InterContinental Hotels' slightly higher-end boutique flag, Indigo, are also gearing up to draw more young professionals in their 20s and 30s. All three concepts are designed with lively social engagement in mind in their bar and common areas.

Indigo got the jump on the other two and has four hotels on the ground, including its first, a retrofit on Peachtree Street in Atlanta. Two Indigos in the Chicago area and one in Houston also are open. After sites in Dallas, Nashville and Sarasota, Fla., are developed, about a dozen more wait in the pipeline with 150 to 200 locations possible, according to company officials. Cambria has been a little closer to the vest on its rollout plans but has 25 properties currently in the works, including its first unit in Boise, Idaho, scheduled to open in December.

The aloft brand, which Starwood is positioning as a moderately priced select-service product, will open as many as 500 global properties over the next seven years, reports Erika Gable, a company spokeswoman. Diane Clarkson, a travel analyst at JupiterResearch, says aloft will be built in cities that don't already have Starwood's equally trendy, but larger, “W” brand. “It's an interesting way for them to be able to expand a new brand while still maintaining the integrity of the existing brand,” she says.

Matt Quinn, an analyst with Zacks Equity Research, noted in a July report that Starwood is hoping that the popularity of its W Hotel chain will translate into the success of aloft at a lower price point. Cambria, he wrote, “will focus more attention to details and design than other select-service hotels and hopes to primarily attract business customers to its commercial, airport and leisure destination locations.” Indigo's focus is more on style-conscious business travelers and is a clear differentiation from its Holiday Inn and Express brands, according to Quinn.

Fresh inventory

Siavash Barmand, a San Francisco-based developer who is building the Cambria product in Ontario, looked at several all-suite brands but found most of them “dated and tired.” Barmand's confidence in Cambria is apparently long term. He will build another five in the next five years, mostly in mixed-use developments with strong retail and restaurant components, he says.

Cambria suites are 25% larger than standard upscale rooms and include separate sleeping and living areas, each equipped with a flat-panel TV. Every suite has a lounge chair, pullout sleeper sofa, refrigerator, microwave and mobile desk, mp3 jacks and free wireless Internet access.

Cambria's two-story lobby has a lounge, called Reflect, club-lounge seating and a media wall with 60-inch plasma TV, a 24-hour convenience store and a hot-and-cold breakfast buffet, plus some healthy non-traditional food items and an evening menu with soups, salads, sandwiches and entrees. Public space includes Refresh, a fitness center and swimming pool.

About 40% of the Cambria locations will be in lifestyle retail centers or mixed-use developments, says Brad LeBlanc, vice president of franchise sales for the Cambria Suites brand. “City planners are driving more dense development,” he says. “What developers are forced to do is create more dense projects and squeeze as many components in them as possible. That's what makes this a good fit.” In short, the placement of retail shops and restaurants near hotels creates synergies that should drive repeat traffic, he believes.

Lenders, which have included Capmark Financial Group (formerly GMAC) and Redwood Capital, have gravitated to Cambria because upscale hotels have performed well in recent years and they're confident the large Choice system, which franchises more than 5,200 hotels worldwide, takes the risk element out of the equation, Leblanc says. “All major lenders support our brand, in part because they are familiar with the bigger picture of Choice.”

Sanket Patel, president of SBP Development, is developing three Cambria Suites properties in the Baltimore area. “I think this is the future of lodging,” Patel explains. “Everyone wants to see how this prototype will do because it is fresh and new and something that guests seem to really want.” The healthy but limited grab-and-go food offerings at Cambria prevent a major distraction, he adds. “We are in the hotel business, we are not interested in running a restaurant.”

By the numbers

Estimated construction costs per room for Cambria's 129-room brick-and-concrete prototype are $60,000 to $65,000 and $55,000 to $60,000 per room for a wooden structure, not including land, furniture and soft costs. That compares to an industry average of $58,000 for a mid-scale hotel, according to HVS International, a San Francisco-based hospitality consultant. Total construction costs will reach about $90,000 per room for Cambria, aloft and Indigo, although Indigo's conversion costs average about $30,000 per room, company officials say.

“My costs aren't much more than a Hilton Garden Inn, but when you see the room it just blows you away,” explains Patel, who anticipates his return on investment to range between 17% and 20% on Cambria. “You just get so much more room for your money.” Patel steers clear of conversion concepts because of consistency issues.

The expected opening date for Patel's three Cambria hotels, which include sites in Baltimore's Inner Harbor mixed-use development, at Baltimore Washington International Airport and in Kent Island, Md., is mid-2008. The Inner Harbor location will have either a retail or restaurant tenant directly below it, Patel says.

Corporate support was a key factor in Patel's decision to build Cambria hotels. The developer, who will receive a $75,000 marketing credit to help launch the brand, appreciates the fact that architects must attend a special orientation session and visit each Cambria site a minimum of four times during the construction process.

“It keeps the developer from not having to spend a lot of money on change orders,” explains Edmundson of Choice Hotels. “We have the responsiveness of a small company, so developers won't have to go through the bureaucratic maze. They can have one of us on the phone in a matter of minutes.”

Choice's enthusiasm for its new concept is evident elsewhere. A camera at the brand's first hotel site in Boise offers live construction updates at Cambria tentatively plans a display at the Boise Airport to attract travelers, Patel says. “They'll be able to touch and feel the rooms, and the rooms will sell themselves.”

Other Cambria locations are planned for Green Bay, Appleton, Oak Creek and Madison, Wis.; Savannah, Ga.; Ft. Myers, Fla.; Akron/Canton, Ohio; metro Phoenix; and Bloomington, Minn., near the Mall of America.

Boutique blueprints

In contrast to Cambria's ground-up strategy, Indigo locations have been mostly conversions thus far, although the chain recently unveiled plans for a new-construction model. Rooms feature oversized beds stacked with oversized pillows, hardwood floors with area rugs, spa-style showers and wide-open foyers.

Common areas stress balance and nature and sport an abundance of indigo blues and muted colors, as well as fresh flowers. There are a half-dozen different core designs for Indigo, and each hotel is tailored to its marketplace, says James Anhut, senior vice president of development for InterContinental Hotels Group. “Guests will have different experiences in every Indigo they visit.”

While Indigo gravitates toward Gen Xers, it crosses other segments with its lifestyle orientation and is focusing more on densely developed urban midtown areas around higher-end retail centers, says Anhut. “We had a lot of dialogue with lifestyle retail developers to incorporate our brand there. We like the vibrant streetscape and human scale.” Indigo is positioned as a select-service brand “but delivers everything an upscale hotel does, while delivering higher margins,” adds Anhut.

Aloft also has a communal lobby, plus a destination bar and grab-and-go food service that features gourmet food. Guest rooms feature 9-foot ceilings and full-height windows to create a loft-like feel. The first of aloft's 500 planned hotels include locations in Cherry Creek, Colo., Montreal, Toronto, San Francisco and Philadelphia. Architect David Rockwell, designer of Los Angeles' Kodak Theatre and New York's W Union Square, collaborated with Starwood on aloft's design.

“The new brands are not only highly visible priorities in these companies, they have captured the imagination of the developers and lending community as well,” says Pat Ford, president of Lodging Econometrics, a research firm based in Portsmouth, N.H. “Everything the industry has learned about being contemporary in the high-end market, it is now attempting to [infuse] in its mid-scale market concepts.”

Cambria's room rates will be around $100 per night compared with Indigo's higher rates ranging between $130 and $200, depending on the market. Officials with aloft will not quote room rates but say they will be similar to Courtyard by Marriott and Hilton Garden Inn, which range from about $100 to $160 per night.

Percolating pipeline

The rollout of the three concepts comes as industry occupancy rates and revenue per available room (RevPAR) have spiked to five-year highs. The hotel occupancy rate industrywide is expected to reach 64.3% in 2006, up significantly from the 9/11-induced low of 59.7 % in 2001, while RevPAR is expected to rise 8.4% this year compared with a negative 7% in 2001, according to PricewaterhouseCoopers. In fact, RevPAR forecasts in all categories are expected to see double-digit, or near double-digit growth.

More new brands are in the offing. Global Hyatt is converting 140-plus AmeriSuites to Hyatt Place, a new lifestyle brand. Fledgling brand NYLO (New York + loft) Hotels, which recently enlisted Lehman Brothers as a strategic partner and equity investor to bankroll its first half-dozen properties, will feature 11-foot ceilings and 6-by-5-foot windows to convey its loft aesthetic.

Starwood, meanwhile, is working on an upscale extended-stay product it refers to only as “Project ESW,” which is expected to result in construction agreements for 25 new hotels annually over the next five years as an extension of its Westin brand, Quinn says.

While the hotel pipeline is not quite at full throttle, the pace of hotel construction is breathtaking compared with the post 9/11 period. Lodging Econometrics estimates that 85,747 rooms in 809 new hotels will come on line in 2006, a 1.9 % increase in gross supply, followed by 119,426 rooms (1,082 hotels) in 2007, a 2.6 % increase, and 131,517 rooms (1,079 hotels) in 2008, a 2.8% increase.

“We expect select-service development, in particular, to continue strong through the rest of the decade,” emphasizes Ford of Lodging Econometrics. “These brands are all being developed and announced at the right time.”

Steve McLinden is a Dallas-based writer.

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