From the June 5, 2006 issue of Business Travel News.
As the hotel industry reaps potentially record profits in 2006, properties likely will reinvest their revenues in construction and renovations. Executive board meeting space is at the top of the list for many properties, and hoteliers said they are luring high-end corporate groups with cutting-edge technology, facilities and amenities, and giving their boardroom space a more modern look.
Major chains last month announced their first-quarter earnings (BTN, May 15), posting strong gains in revenue per available room. PricewaterhouseCoopers predicted that profits for the hotel industry could reach $25.6 billion this year, surpassing a record of $22.5 billion reached six years ago.
The increased revenue is fueling a surge of capital investment, according to PricewaterhouseCoopers. A record $4.8 billion was invested in the U.S. lodging industry in 2005, 50 percent more than in 2004. This year, capital investment is expected to increase to $5 billion.
While much of the investment is slated for sleeping room enhancements, technology is a major area of investmentespecially in the form of Internet connectivityas well as design enhancements "meant to appeal to 'Gen X-ers' and 'Millennials,' " according to PwC.
A survey released in late March by Washington D.C.-based Krisam Group, a national sales company for independent hotel properties, showed that 75 percent of the 90 domestic member hotels that participated in the survey plan major renovations or upgrades. Boardroom renovations are focused both on implementing the latest technology and amenities, and also providing the seclusion and privacy these groups need, said Krisam Group president Jim Schultenover.
"The major theme of the survey is that we have to reinvest in our facilities," Schultenover said. "When you see the explosion of boutique hotels, it's speaking toward that generational switch."
One Krisam member, the InterContinental Toronto Centre, has invested "a fortune" in its boardroom space, he said, as part of an overall $30 million renovation.
"They have created an oasis away from the regular meeting space complete with concierge service. They really wanted to go after this business," he said.
The property has separately branded its executive meeting space as "Next Generation Boardrooms," that is within its executive conference center space certified by the International Association of Conference Centers. The two rooms seat 22 and 20.
The renovated boardrooms feature soundproofed walls, private entrances, remote conferencing tools, updated audiovisual and Internet connectivity capabilities and a multitude of other features designed to increase productivity.
The InterContinental Toronto Centre is an "extreme example" of where technology needs were blended with atmospheric needs, according to Krisam's Schultenover. The renovation also created small breakout areas both inside the boardrooms and in nearby reception areas.
Though the vast majority of hotels could not possibly be expected to match the InterContinental's investment into technology and design of executive boardrooms, the majority of boardroom renovations follow the same priorities of creating a secluded, private area for executive groups, he said.
"You have to be careful when you're pitching into this market," Schultenover said.
Property renovations generally are scheduled about every five to seven years, he added.
In 2003, Crowne Plaza Hotels & Resorts introduced a marketing campaign aimed directly at the small- to midsize corporate meetings segment. As part of the campaign, one of the chain's properties in Atlanta held a design contest to renovate a boardroom at the property. Four local design student contestants were given a budget of $12,000 and 12 criteria for the space based on the chain's research of trends for executive board meetings.
"At Crowne Plaza, our primary focus and marketing initiative is geared and directed toward the small meetings market and we wanted to create a 'wow factor' there," said Hugh Anderson, general manager of the Crowne Plaza Atlanta-Perimeter NW.
Executive meetings account for half of the corporate group business at the hotel, he said. Many local businesses that use the property for large conferences also use the boardroom space for executive-level events.
Though the property generally follows a traditional style, Anderson said officials wanted a new, updated look for the boardroom. The winning design incorporated colors and light that he said increase productivity and focus.
"We wanted to create a space that was different," Anderson said. "It is very bright and fresh and is a great environment for working."
The winning design also used such environmentally friendly products as bamboo flooring, which Anderson said reflects the growing demands of the new generation of Earth-conscious and health-conscious executives. This younger generation of executives also wants "something different," he said, and appreciates a unique design. The room also was given wireless capabilities.
"We now have the room fully wired," he said. "We've added permanent speakerphones and a 42-inch plasma monitor. It comes with the room and we think it's a great selling feature."
Internet connectivity was optional as recently as three years ago, Anderson said, but now corporate executive groups have come to demand the amenity as a standard service. Video- and Webconferencing facilities also are in high demand.
"The connectivity is absolutely key," according to Anderson. "Also, we didn't anticipate that our food and beverage revenue in that room is tremendous because people enjoy the space and have working lunches and breaks throughout the meeting."
Since the renovation, availability for the room has tightened as some corporate groups have insisted that they will only use that space at the property.
"After a client meets in there, they are only willing to use that space going forward," Crowne Plaza's Anderson said. "Hopefully, they'll wait."
Anderson said the hotel is considering the extension of the design to other meeting spaces when another renovation project begins this summer.
Perhaps the city with the most renovations during the past six months has been New Orleans, still recovering from Hurricane Katrina last year. Though New Orleans previously focused on attracting large conventions and association events, future growth will be centered on smaller executive meetings and incentives, said J. Stephen Perry, president and CEO of the city's convention and visitors bureau. The CVB has launched a marketing campaigned aimed at the high-end, corporate meeting industry and is working with the city's boutique hotels to offer incentives to corporate buyers.
Smaller corporate meetings were identified as a growth area after Hurricane Katrina decimated much of the city (BTN, Sept. 5, 2005), Perry said. In the months that followed the disaster, the city saw a bump in small corporate meetings from construction, real estate and other types of companies who had come to aid in the reconstruction. Area hotel properties are hoping to continue attracting these groups, and have made the renovation of their boardroom space a priority during repairs.
Hotel Monteleone, located in New Orleans, completed a $70 million renovation in September 2004 and is the final stages of another renovation following last year's hurricane, said Andrea Thornton, director of sales and marketing for the property.
"Our corporate group business has tripled since Katrina," Thornton said. "With our renovation, that was really the market that we started going after heavily. We started that before the renovation was complete because we knew with all the upgrades that we were doing that corporate groups would be a huge basis for us. So, in one sense, Katrina kind of helped us along."
Technology was a key feature of the renovation, and the entire property now has wireless capabilities. The technological capabilities of the boardrooms were upgraded and the hotel conducted customer and competitive research before starting the renovation project.
"I think that's the hot button for everybody," she said.
As local businesses reopen, they are holding more high-level meetings and training meetings for their staffs, Thornton said. The property also has offered a new pricing structure for corporate groups to capitalize on the growing market.
"We've created a complete meeting package with three levels that's an all-inclusive price," she said. "It's targeted at board and small corporate meetings."