What started as a budget solution has become a mainstay in the hotel market – select-service hotels are now one of the most attractive and profitable types of property out there today.
Marriott’s four select-service hotels – Aloft, AC, Moxy and Element – are growing at an astonishing rate, and Tru by Hilton is the industry’s fastest-expanding brand, with 62 new properties since its launch in 2017 and 400 more in the pipeline at various stages of development.
But it’s not just the big brands benefitting from select-service. Hundreds of smaller-scale hotel groups and independent properties also thrive in the select-service space. “Oaks is currently building towards select service entirely,” explains Craig Hooley, of Oaks Hotels and Resorts in Australia.
“We believe select-service is home away from home, and we’ve built our brand and evolved it around that philosophy.”
What is select-service?
Select-service properties are essentially a scaled-back hotel, though they aren’t necessarily economy hotels. By cutting many of the services and amenities full-service properties provide, such as multiple restaurants, fitness facilities and turndown services, they become a streamlined operation. Ultimately, it bridges the gap between full-service and limited-service hotels and can be flexible around which facilities are included.
Brown Hotels – based out of Tel Aviv but with properties all over the world – has been able to grow incredibly quickly thanks to its style of select-service. It currently has 12 properties, but will have 45 by the end of 2020. “When my partner and I founded Brown Hotels a decade ago,” explains Leon Avigad, the groups founder, “we wanted to offer very warm and soulful hospitality. We didn’t want to be big and pompous.”
It’s for this reason all of Brown’s properties are select-service. “I think select-service isn’t limited,” says Avigad. “When you check into any of the Brown Hotels, you’ll still have everything you want or need.” Avigad says that by targeting a specific kind of consumer with each brand under the Brown umbrella, it is able to create a select-service offering that provides everything the guest will want.
“When it’s a Beach House, we try to do a great spa – bigger than usual – and a better restaurant or better café. When we do a Brown, it’s more of a vintage, corporate hotel and the boardrooms are important. We have bicycles and a great concierge and all the other amenities a big hotel can offer, but it’s so much more pinpointed at our kind of guest. We don’t necessarily aim at everybody. We’re trying to target our efforts – we try to know who our market is and we build our hotel around it.”
Hooley is of a similar mindset. “There are three things we’ve found are really important. Guests want safety and security. They want customised services – they want good service but they want it in their style. And thirdly, they want high-speed internet. They want to check-in and have everything at their fingertips.
“At the same time, that does vary by location. In a wine region for example, a hotel might have better connections to local activities like wine tours and vineyards. In a city it might be the best local restaurants.”
What’s behind the success of select-service?
When asked what’s driving this trend forward, Avigad has some strong opinions: “I think everybody is sick and tired of big old hotels that offer everything and nothing at the same time. I’ve just been to a beautiful hotel in Athens with an amazing rooftop and a lot of marble. They really tried with all the best intentions, but it’s boring to death. The music on the rooftop is 60s elevator music; the views are stunning but there’s no vibe at all.”
Avigad refers to the success of Brown’s Poli House in Tel Aviv. Despite its relatively small pool, they have non-guests queueing up to hang out on their rooftop. “When you build it precisely,” he says, “and to the niche and need of that niche, it’s a hit. When you try to target everybody, it’s trying to do too much.”
But it’s also profitability. Within select-service, operations can be streamlined and there’s greater opportunity for better profit margins compared with full service. In a 2015 study by CBRE Hotels which examined 233 hotel brands, the select-service properties had a 44.2% gross operating profit (GOP) margin – almost 7% higher than the average for all properties in the research.
What is the future of select-service?
With the rise of select-service, it’s valid to question the role of full-service hotels in the modern travel industry. Are they still relevant to today’s traveller?
“There’s a defined role for [full-service] hotels and a defined role for select-service,” says Hooley. He believes select-service is most useful for the long-stay market, which Oaks is seeing growth in across its properties in Australia.
As a result of this, it offers dining, taxi and shopping services like a full-service hotel would, but it will use local third parties to facilitate them, such as Uber Eats or grocery deliveries by Woolworth or Coles. In some of its city-centre hotels it even has charge-back deals with top local restaurants. “[Guests] want to be in a what feels like home, but offers them all the convenience of a typical hotel,” explains Hooley. “That’s where we see select service is going. It’s not about reducing service – it’s about putting the right services in place.”
- Select-service bridges a gap consumers are hungry for – sitting between full-service and limited-service hotels
- Huge brands are investing in select-service: Marriott has four select-service chains and one of Hilton’s latest select-service brands is now the fastest-growing in the industry
- Select-service isn’t about reducing service, it’s about putting the right services in place, says COO of Oaks Hotels and Resorts
- Studies say select-service properties tend to be more profitable than other types of hotel
- Personalisation of services and niche targeting are the key to successful select-service properties