“Limited Service” hotel is a term often used to describe hotel properties that have limited food service, public areas, and facilities. They are often defined by “What they are not” rather than “What they are”. Some of the brands that exist in Canada, in this market category are Super 8, Motel 6, Comfort Inn, and Fairfield Inn by Marriott. “Focused Service” hotels such as the Hilton Garden Inn, Courtyard by Marriott, and Holiday Inn Express are a hybrid between the limited service and full service hotel concepts. They have been the focus of much of the new build hotel development across the country. Focused service hotels have raised the bar of guest expectations for limited service hotels.
Anyone keeping an eye on new hotel development throughout Canada is aware that these “limited service” hotels are not becoming extinct. Conversely, they are a growing part of the Canadian landscape. What is becoming extinct is the perception that their services and facilities are limited. With focused service properties represented in many primary and secondary markets in Canada, there is an increasing demand for limited service hotels to serve the less populated secondary and tertiary markets. Today many brands in the “limited service” segment have in their rooms a workspace containing an ergonomic chair, work desk, and wireless high-speed Internet connection. These improvements are not limited to new build limited service hotels. Existing limited service hotels are focusing their renovation programs on improving their facilities to compete with full service properties.
The business centres and fitness facilities have been vastly improved. Business centres are moving away from being a chair and computer terminal hidden at the side of a lobby. The level of quality has improved to offer the business traveller all the functions of a mobile office. The fitness facility in limited service properties is moving away from an all-in-one universal machine. Now there are cardio machines, free weights, and whirlpools.
As the line between limited service and full service hotels continues to blur, the in-room experience has been equalized. Maybe the more appropriate term should be “limited space”. Once you start comparing the size and scale of the public areas, the full service properties are still significantly superior.
Limited service properties across Canada have not been charging higher rates to recover the cost of their improved product. Prior to 2003, Canadian limited service properties on average charged $41-$42 less than full service properties. During 2003 when the industry was impacted by SARS and economic weakness, full service properties dropped their rates closing the gap to about $37. With the recovery of rates since 2003, Canadian full service properties have been trending back towards a $40 differential over the limited service properties. The movement of Central Canada’s average rates is mostly responsible for the return to historic equilibrium. The Canadian average rates are heavily weighted towards Central Canada because that is where the majority of hotel properties (especially full service) are located.
On a regional basis, Atlantic and Western Canada are not following Central Canada’s trend. Ignoring Central Canada, the gap between limited service and full service property rates in Atlantic Canada and Western Canada have both been declining annually by 1.1% from 2003 to 2005. In fact, Western Canada limited service properties have been closing the gap 3.3% annually, from achieving average rates of $37 less than full service properties in 2000, to only $31 less in 2005. This trend is continuing in the first quarter of 2006, with limited service Western Canada properties moving 3.7% closer to full service Western Canada average rates.
Going forward we expect to see continued hotel development within the “focused service” segment, however we expect to see more development growth in the “limited service” segment, as developers require more cost effective projects to enter into secondary and tertiary markets.
Andrew Garrett, CMC
PKF Consulting Toronto
