As the midscale and upper-midscale hotel sectors continue to evolve, operators are facing a crucial challenge: how to remain competitive while addressing the shifting needs of today’s travellers. With an increasing demand for more than just basic accommodations, brands are innovating to strike a balance between affordability, experience and operational efficiency.
Quoting Fabian Zschweigert, head of M&A central & northern Europe of B&B Hotels, “The customer’s preferences have moved on, and we have to realize that we need to offer more than just the essentials. We’re focusing on improving our offering across our regions, from premium rooms with additional amenities to more convenient food and beverage options.”
Evolve and adapt
And with more brands entering the space and the demand for experiences growing, midscale operators need to evolve to meet both consumer and investor expectations and stay relevant.
At Marriott, Markus Lehnert, SVP international hotel development stresses the importance of creating brands that resonate with modern travellers as today’s guests are conditioned to expect all their needs catered for at every touchpoint.
“We need brands that inspire people, brands that people will see as adding value to their life. And you need to underpin that with great systems that work such as loyalty programs, reservation systems and tools that control costs,” he says.
This focus on cost is a very germane topic for B&B Hotels as the company focuses on balancing value with innovation, particularly as the brand looks to expand. “Spain and Italy are great markets which have seen good growth. I think they’re quite crowded right now with many players trying to grow there but we have been working with local advisors to come up with a target list that we can go after.”
Expansion
And as certain locations become increasingly flooded and expensive, midscale brands are looking further afield, hunting for opportunity in other markets with strong economic foundations but less saturation.
“Poland still has huge potential. It’s a very mature and resilient economy but it’s not really on the radar of many investors yet, so we’re very interested,” Zschweigert says.
But B&B is not the only one with eyes on the eastern European region. In comes Choice – Tobias Reinecke, head of investments & development EMEA at Choice Hotels International notes that while rent levels in Tier 1 markets are so high that it becomes to some degree unsustainable to operate it, more reasonable rent levels in Tier 2 and 3 locations means the business plan becomes much more sustainable in the long run from the operator and the tenant perspective.
“We’re looking to put a Clarion hotel in Slovakia. We’re also exploring places like Poland - we’re hopefully going to enter the Polish market later, and that has a couple of secondary destinations,” he adds.
Innovation in operations
Across the industry, there’s a concerted effort to balance cost-effective operational strategies with the addition of premium touches. This is not just about adding perks but about a strategic shift in how midscale brands operate, aiming to reduce costs while offering an attractive experience to customers.
Reinecke explains: “The combination of reception, bar, and breakfast areas into one space means you don't need three separate staff teams. In terms of F&B, if a hotel only offers breakfast, the breakfast room sits unused the rest of the day, generating no revenue despite still incurring rent. Renting that space out to a full-scale restaurant generates continuous revenue and helps minimize operational cost.”
This is also an area of focus for B&B Hotels, with Zschweigert noting the existence of unused real estate in its hotels. “We have a breakfast space but we don’t really provide all the dining - so we have a lot of unused real estate in our hotels to sell snacks for guest to grab and go. I think we've been a bit behind the curve on that. The grab and go and shop concept is something that we're going to develop soon.”
Marriott approaches F&B by dedicating a separate food and beverage department which consults and works on how to optimize the offering depending on what is available in the hotel’s surroundings.
“F&B is a different business and it needs a different marketing strategy,” Lehnert stresses.
Flexibility
For Choice, staying competitive also means creating flexibility for franchisees while maintaining brand standards and delivering a high-quality experience for the guest.”
Reinecke elaborates, “We don’t mandate specific suppliers. We offer franchisees flexibility within a framework. We give certain minimum standards in terms of what needs to be in the room and they can work with their own suppliers as long as the quality standards are met. This allows them to have cost control themselves.”
For Choice, it’s about streamlining operations, being flexible with its partners and thinking outside the box. This outside-the-box thinking is one of the reasons the company is moving away from the old school way of solely attracting businesses by going through travel managers towards a bigger focus on social media marketing.
While Reinecke jokes that he himself wouldn’t book a hotel based off the recommendation of a happening influencer, social media has the huge advantage of allowing direct communication with the guest.
“The company is doing big campaigns around social media, digital marketing, speaking and engaging more directly with customers and addressing different customer segments within the same marketing campaign,” he explains.
The future of midscale
Looking to the future, the prediction for the next five to ten years is for the midscale to continue to grow through soft branding as competition continues to explode and more players enter the segment. Independent hotels will increasingly seek the benefits of brand affiliation, such as enhanced distribution and marketing power.
As Tobias Reinecke of Choice Hotels explains, "I think we will see a lot more moving into the mid-scale segment simply because Europe has always been a very independent hotel market. In countries like France and Germany, there’s still a very big share of independent versus internationally branded. Oftentimes, by joining a brand - even if it's on a small on a soft collection brand - the lower commissions and the technical expertise hotels will get significantly offsets the franchise fees that they need to pay.”