Le Saint Gervais Hotel & Spa, Handwritten Collection, Saint Gervais, France
In the ever-evolving landscape of hospitality, the economy and midscale hotel sector is experiencing a surge of attention and investment, driven by market dynamics, and forcing strategic moves from industry giants.
Accor’s significant push to expand Ibis Styles and their recently introduced midscale soft-brand, Handwritten Collection, Sonesta’s elevated midscale Sonesta Essentials brand and Hyatt Hotels unveiling a new upper-midscale, extended-stay offering – Hyatt Studios, mark notable steps towards a premiumization of the economy sector.
Is this an example of cross-industry innovation, with brands competing to emulate the success of the Emirates Airlines’ premium economy concept, one that offers an enhanced economy experience through added comfort and amenities for long-haul flights? Perhaps these industry-wide movements also come from a recognition of the changing preferences of today’s travellers, increasingly seeking value without compromising on quality and experience?
Furthermore, the economics of the hotel industry are driving owners & developers towards the midscale and economy sector. Grappling with high debt costs, expensive construction materials, and labour, cost-sensitive developers are increasingly favouring conversions over greenfield developments.
The industry’s answer arriving in the form of the Spark by Hilton brand, a conversion-only economy model, and Garner, an IHG hotel emphasizing their capital-efficient conversion strategy promising savings of 25% over their own Holiday Inn Express brand. Marriott’s StudioRes, a lodging concept targeting the midscale extended-stay market, comes in direct response to owners’ demands for a low-cost operating model arising from the current economic environment.
Recent CoStar data predicts midscale segment revenues to grow to $18 billion by 2030 in the U.S. alone, signifying the burgeoning market interest in this sector.
With shifting consumer preferences, economic realities, and market forecasts aligning, it’s no surprise that major players in the hospitality industry are capitalising on these trends through innovations in the economy and midscale segments. From premiumization efforts to cost-efficient strategies, industry players are navigating a complex landscape with an eye towards profitability and growth.
As brands vie for dominance in these sectors, maintaining a balance between cost efficiency and guest satisfaction will be paramount. Ultimately, success in this emerging landscape will hinge on the ability to deliver value while also creating meaningful and memorable experiences for travellers of all budgets.