Three-star fightback

01 January 2000
Three-star fightback

Rumours of the death of the three-star hotel appear to have been greatly exaggerated. Despite the prediction made last year by Whitbread Hotel Group managing director Alan Parker that three-star hotels were set to enter the twilight zone, the opposite appears to be the happening.

Recent weeks have marked a period of furious activity in the mid-market sector of the hotel industry. The Regal Hotel Group has acquired Forte's White Hart division from Granada, and Friendly Hotels has been appointed the master franchisee for the US Choice brand. At the same time, Jarvis is paving the way for a stock-market flotation.

Announcing Regal's offer for White Hart, the hotel group's chief executive Charles Vere Nicoll described the three-star sector as a "sound and growing market".

But this is not to say that everything in the sector is rosy. Many hotels in the UK operating with a three-star rating may have the necessary facilities to get the grade, but nevertheless look worn, old-fashioned and in need of an overhaul.

And they look particularly tired when compared with the modern, budget lodges operated chiefly by Granada and Whitbread, which are springing up across the UK at a frenetic pace.

Kleinwort Benson analyst Greg Feehely believes that the tired-looking three-star has much to fear from its "no frills" rival. "If you are the wrong side of three star, then you are going to come under pressure from budget lodges, especially as they move into town and city centres."

Despite this, Friendly Hotels chairman Henry Edwards is bullish about the future. "Three-star hotels meet the needs of the traveller who doesn't want a four- or five-star hotel that is more expensive and provides more services than they are looking for. On other hand, they are not satisfied with a budget hotel that has an excellently equipped bedroom but nothing else."

As well as offering good facilities, the mid-market hotel must also have "personality", according to Jarvis Hotels chairman and chief executive John Jarvis. His group has a policy of putting original works by young artists on display at its 62 UK hotels.

But Jarvis stresses the need for hoteliers in the mid-market to control costs. "You never give the customer goods and services they haven't paid for."

At the same time, Jarvis says there are occasions when it is foolish to count the pennies for the sake of it. He cites the case of the ubiquitous sewing kit, which turns up in many hotel bedrooms but is unusable other than in the hands of a particularly dextrous brain surgeon. The company now buys in more expensive pre-threaded needles.

Looking to the future, mid-market hotels will have to ensure they keep pace with the increasing demands of business travellers, believes Stephen Broome, group general manager of Croft Hotels, sister company to leading short-break operator Rainbow Holidays.

In its 10 hotels, Croft has been introducing Sky TV and installing a telephone point in bedrooms at properties with a lot of commercial business. The aim is to enable the increasing number of executives travelling with a laptop computer to plug in a modem.

Broome says the hotel group is aware that, further down the line, the television set within bedrooms will have to be transformed into a "communications centre", acting also as a PC with access to the Internet. But Broome believes this will not prove a big expense. "Some of the services on the TV would be chargeable, so a TV that is currently a cost to a hotel could become a profit centre in its own right," he says.

Broome believes that three-star hotels are in a prime position to cater for the corporate market, as many firms state in their business travel policies which category of hotel each grade of employee can stay in.

"Top executives get the four- and five-star hotels and middle management get three star. There are a lot more middle managers so we get a larger slice of the cake," he says.

He is backed up by Russell Allen, managing director of Kent-based Signature Hotels, which operates two three-star hotels at present but is seeking to buy more. "Although the lodge market is going to expand, I don't feel it hits the mark as far as the corporates are concerned. The lodges expanded in a time of recession when a lot of companies decided to cut back on all expenditure.

"However, now you are getting the situation where companies are very aware that what they do for their employees indicates how much they value them. If you start telling your sales force they have to stay in a lodge, I don't think they will be with you for very long."

As well as demand from the corporate market, Allen cites increased demand for short breaks from couples who want to supplement their annual fortnight's holiday overseas with a few shorter trips closer to home. But he believes that dated-looking hotels have little chance of picking up this business, so the group intends to position itself as offering a fresh, modern product.

"Our philosophy is that all hotels we buy - even if they were refurbished four years ago - we will probably refurbish in a contemporary way that appeals to the 30-45 age group. When they go away they don't want twee horse brasses and chintz curtains," says Allen.

One year on, does Whitbread Hotel Group's managing director Alan Parker stand by his gloomy prediction for three-star hotels? His answer is both "yes" and "no". "There will always be an opportunity for well-located three-star hotels that are well run and offer modern facilities," says Parker, pointing out that Whitbread is in the three-star market with its Country Club Hotel Group and Courtyard by Marriott chain.

He adds: "Unfortunately, there are a large number of hotels that don't fulfil this criteria." Why, he asks, was Forte and then Granada so keen to off-load White Hart?

Parker is also quick to defend budget lodges against the criticism that they do not provide adequate facilities for corporate travellers. Whitbread's Travel Inns may not have telephones in bedrooms, but Parker maintains that executives are happy to use their mobile phones.

"Our occupancies are higher than ever. The whole chain operates at 82% occupancy."

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