industry is cutting out the mid-tier hotels

At the present, many hotels around the world are under intense pressure for profits. No single factor can account for this, but the broad response has been a tightening of budgets as well as a proliferation of new brands with a focus on lifestyle to target the emerging millennial audience.

While it’s laudable to see a bolstering of the full-service spectrum of hospitality, this move lacks strategic substance because it fails to address the two key considerations of most hotel purchases – location and price. Instead, we are going to witness a depletion of hotels in mid-tiers with luxury properties thriving on emotional drivers and true branding while all others slowly shift towards a no-frills model.

The airlines faced a similar situation several decades ago. For those old enough to remember, mainstream airlines were rocked by upstart no-frills carriers such as Southwest Airlines that found an underserviced niche. By eliminating food services, built-in checked baggage charges and guaranteed seating assignments as well as through narrowing seat pitch and reducing legroom, these novel-at-the-time discount airlines were able to pass considerable savings on to their customers.

The focus was on conveying the lowest possible price to consumers at the start of the sales process with everything nonessential tacked on extra in an a la carte fashion. The model was an astonishing success as there was clearly a market for passengers who simply wanted to get from A to B in as a hassle-free a manner as possible. For many cases, coach travelers were more than prepared to put up with a non-negligible level of discomfort for substantial cost savings.

Thus, the airline industry bifurcated: first class with exorbitantly high prices and almost no discounts, and economy class where price was a yield affair. It was no-frills even before the verbiage of ‘no frills’ existed. (For reference, the trending category name is ‘low cost carrier’.)

Read rest of the article at eHotelier