Select-service remains a strong growth engine

20-Aloft-Winchestercrop

Reviewing Lodging Econometrics’ third-quarter construction pipeline data confirms that the select-service segment remains one of the industry’s most dependable growth engines. An eclectic assortment of brands, the select-service category includes such stalwarts as Courtyard by Marriott and Hilton Garden Inn, recent additions like Starwood Hotels & Resorts Worldwide’s Aloft, Tryp by Wyndham and Choice Hotels International’s Cambria Hotels & Suites. Add to these even newer entrants like AC Hotels by Marriott and Best Western International’s Vib.

According to Lodging Econometrics, there were 3,056 select-service projects in the U.S. construction pipeline at the end of third-quarter, accounting for almost 360,000 guestrooms. Roughly 30 percent of these projects were already under construction, almost 50 percent were slated to start construction within 12 months, and the remainder were in what Lodging Econometrics terms “early planning.” The vast majority of the projects were branded with well-known premium brands.

Aloft marks a milestone

Launched in 2008, Starwood’s Aloft passed the 100-property milestone in late September and has a healthy pipeline going forward. It’s a good example of the segment’s positive growth trajectory overall. In the past two months, in fact, Starwood has opened six new Alofts in addition to announcing deals for another three.

Locations of the nine are a mix of primary destinations (Manhattan/Financial District), secondary destinations (Raleigh and Durham, N.C.; Louisville, Ky.; South Bend, Ind.) and even tertiary markets (Redmond, Wash.; Allen and College Station, Texas; Santa Clara, Calif.), evidence of the brand’s broad appeal.

Pictured is the Aloft in another tertiary destination, Winchester, Va., which opened in 2010.

The three hotel deals announced during the past few months are scheduled to open between early 2017 and mid-2018. Meanwhile, the size of the nine properties, measured by the number of keys, is fairly consistent, ranging from 105 to 183.

Appealing to millennials

Not surprisingly, considering the select-service segment’s moderate price point and the appeal of the Aloft brand, in particular, to a hip, millennial demographic, three of this new and upcoming hotels are located in—or in close proximity to—university markets, ensuring a level of built-in demand. Aloft South Bend is close to the University of Notre Dame, Aloft College Station is a mile from Texas A&M University and Aloft Raleigh is across the street from North Carolina State University.

These same millennial travelers tend to be serious users of technology, so Starwood was sure to position Aloft as especially tech friendly. With this in mind, it makes sense that the latest batch of hotels include Alofts in Redmond, Microsoft’s world headquarters, and in Santa Clara in a mixed-use development that includes the headquarters of Yahoo.

Similarly, convention centers are another powerful demand generator, attracting business travelers to the destination. Accordingly, three of the new Alofts—those in Louisville, Allen and South Bend—are near their local convention facility.

When Aloft was first launched, Starwood’s intention was that the brand would be exclusively new construction. Most of the 100 hotels in the portfolio today are, in fact, new builds, but the company subsequently began allowing conversions and adaptive reuse projects. One such exception is the Aloft coming to South Bend. Along with a residential component, it’s being included in the conversion of a 25-story former office tower that is the city’s tallest building.

While targeting expansion for the brand throughout North America, the three deals negotiated in the past couple of months as well as the new Aloft openings happen to be in the U.S., simply reflecting the current strength of the domestic market. However, in Mexico, for example, Starwood already has Aloft hotels open in Cancun and Guadalajara and has announced plans for Alofts in Tijuana, Coatzacoalos and Poza Rica. Openings are scheduled to start in 2017.

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