Someplace like home

In 1987, when Holiday Corporation ended its partnership in the Residence Inn hotel chain, it looked like the end of Holiday's involvement in the business traveler/extended stay lodging market. But it was only the beginning.

Soon after it sold its half interest in the all-suite chain as part of a recapitalization (Residence Inn was later purchased by Marriott Corp.), the lodging giant began developing Homewood Suites, its own concept for the all-suite/extended stay market-a niche which grew considerably in the latter half of the 1980's as the industry began responding to increasing market segmentation.

"We knew that the market was segmenting as early as 1978, and that Holiday Inn-although it was a product that was quite broad in scope-was clearly in the middle of the market. There were limits as to how far you could stretch it up or down, so we were looking for concepts that would round off our product offering at the high end and at the low end," says Bala Subramanian, director of market research, Holiday Corp.

Those needs were met by the introduction (in 1984) of the Embassy Suites line, an upscale all-suites product catering to business as well as vacation/pleasure travelers, and (also in 1984) the Hampton Inn line, a limited service economy chain positioned slightly below Holiday Inn. Then, in 1989, came Homewood Suites.

"We had the Residence Inn experience under our belt and we knew that the market existed. We wanted to come up with something that was different and, if possible, better than Residence Inn. We wanted to do it fast, and we wanted to make sure that the product was designed to appeal to key customer targets."

Specialized lodging needs

Using extensive research, Holiday designed Homewood Suites to meet the specialized lodging needs of extended stay business travelers such as consultants, salespeople, managers, auditors, those going through job relocation, and others attending training programs, seminars, or on field assignments.

The suites are designed with a long-term stay in mind. Cozy and functional, they provide plenty of space to work and relax in. Many feature wood-burning fireplaces, and in addition to a well-appointed living room and separate bedroom, all have a full-sized sleeper sofa, two remote controlled color TVs, and a kitchen stocked with a microwave oven, a refrigerator with an ice-maker, a dishwasher, coffee maker, and a wide array of pots, pans, dishes and flatware.

"Most of these people are traveling for their companies or businesses. They're affluent enough to require quality lodging; they want some comfort and quality and they're willing to pay for it. Recognizing that they're on a business trip for an extended period of time, we found that they need a home-like atmosphere, which is what sets this hotel concept apart from a traditional hotel. That's why we decided on a name like Homewood Suites."

As a springboard for determining the elements necessary to create that homelike atmosphere, Holiday used the services of HTI Custom Research, a division of The NPD Group.

Holiday maintains proprietary ownership of a tracking system it calls The Lodger Panel. The system uses InstaVue, HTI's monthly mail omnibus which is sent to large samples of the HTI Consumer Panel (a pool of 225,000 pre-recruited households). The Lodger Panel survey collects information on the travel habits of 10,000 households each month. HTI then codes and tabulates the data and stores it on a mainframe computer. Holiday connects with the mainframe via telephone and, using HTI's on-line data analysis software package called PREVIEW, performs its own tabulations from its office PC.

"We buy two cells a month from (HTI) and they mail questionnaires on our behalf to 10,000 individuals, asking them about every hotel stay they've experienced in the past 3 months. This has been done for several years."

Over time, Subramanian says, the Lodger Panel allows Holiday to accumulate many observations about people with a wide range of lodging experiences, keeping the company in touch with trends in the industry.

"We used the Lodger Panel to determine a lot of the critical answers that we were looking for. For example, what's the size of the market? What has its growth been? What customer targets are the most lucrative?"

Follow-up surveys

Using the contacts identified through the Lodger Panel, Holiday performed several research projects, including focus groups and follow-up telephone and mail surveys with panelists, to find out what features Homewood Suites should have to meet the specific needs of the target market. For example, respondents were asked about the lodging-related aspects that were important to them on business trips, and asked to provide examples of instances where their needs were met and where they weren't.

"One of the beauties of panel research is that we could screen potential customers from the panel who had exhibited extended stay behavior in the past few months, people in the upper income group who have purchased lodging and who have paid more than $65 (per night) and have stayed longer than five nights. We were able to get a thousand names of people who did that. We were then able to survey some of them to ask about various aspects of the product and determine exactly what the product composition should be.

"If you were designing a study that you wanted to administer to a group like that, and you were starting cold by making random phone calls, it would take you forever to get a thousand names. And even if you did that, it would be very difficult to get a national representation. Having the panel was a boon in that we were able to do it fast and do it at a fairly reasonable cost."

Concept tests

To gauge the popularity of two concepts-one was a fully loaded version of the suites with a host of extras, the other was a more stripped down model, concept tests were conducted with respondents pulled from the Lodger Panel.

A brochure describing each concept, with floor plans, schematics and a brief write-up, was sent to over 300 Lodger Panelists who indicated they had recently made long-term and short-term hotel stays. A week or so later, they were recontacted by telephone to participate in an in-depth interview.

As expected, the participants favored a version of the suites somewhere between the two extremes. "We got enough feedback based on that to take those two concepts apart and build one that seemed to fit," Subramanian says.

Wide variety

Holiday's research uncovered a wide variety of business traveler needs. For example, many said they wanted their suite to be a functioning office, with a large desk or work surface in a well-lighted space. ("Spreading blueprints across a king-sized bed isn't great on the back!" Subramanian says.) They also wanted computer jacks and multiple phone jacks so that a modem could be used without tying up phone lines, and the telephones had to have long cords for ease of mobility around the room.

The furniture had to be comfortable, especially the chairs. "We kept hearing in the research, 'Hotel chairs are awful to sit on and work from."

The suites had to be open and spacious, and designed so that the bedroom was separate from the main living area. "Some of them told us they liked to meet with clients in their rooms and that they wanted to be able to have the clutter of the bedroom out of sight. So we knew that having a separate bedroom was important."

This was a change from the Residence Inn concept, Subramanian says, which had many rooms designed in a studio layout. Designing the kitchen also afforded Holiday a chance to modify its previous experience.

"Based on the Residence Inn experience, we felt going in that the kitchen was an important signifier of the home-like atmosphere, but outfitting each room with a full kitchen could cost a great deal of money. Through research we were able to scale back the kitchen area, which allowed us to price the product very competitively."

Other amenities

Beyond in-room features, the research also identified other amenities the Homewood Suites locations should provide to serve the needs of the long-term guest.

Each hotel lobby has a central area called the Lodge, which combines the usual front desk arrangement with a large, comfortable meeting space. A self-service convenience store located in the Lodge offers microwaveable foods and a variety of necessities. An exercise room is also available. An executive center provides access to PCs, a fax machine, a copier, and a typewriter beyond normal business hours.

"Many of these people are with clients from 9 to 5 and they come back with homework, so they may need to use a fax machine or a computer," Subramanian says.

Service is an important part of the Homewood Suites package. "We're trying to differentiate ourselves from a service culture standpoint. Service quality and personal recognition were rated quite high in the research. Employees are trained to recognize the guests and be very personable. We want to make them feel at home. "

Research instrumental

Subramanian says that research was instrumental in Holiday's ability to move Homewood Suites quickly from its development stages to the construction of the first site.

"It was one of the few times in our industry that customer input was sought fairly heavily in the design stages of a product. The lodging industry is still a business that is run by developers, who build according to what feels good. And they're right a lot of times, but it's getting increasingly competitive and customer input and research is playing a bigger and bigger role up front in the product development cycle."

Currently, there are four Homewood Suites open in the U.S., in Memphis (a parent company-owned location which will be used as a training ground), Dayton, Ohio, Omaha, and suburban Dallas. Subramanian says that 25 locations should be open within a year, and over 175 are planned in the coming years.

Though the chain has much ground to gain on Residence Inns (according to Lodging Hospitality magazine, Marriott has over 130 Residence Inns located in 38 states, and the company plans to spend $1 billion in the next five years to build an additional 150+ sites), Subramanian says Homewood Suites is prepared for what lies ahead.

"Residence Inn is the industry leader in this segment, but Homewood Suites has got a lot of development going on. We're poised to challenge Residence Inn."