Limited-Service Hotels are Enjoying a Renaissance Among Travelers

Limited-service hotels are a hot commodity these days as investors view them as larger profit generators than full-service hotels, and their increasing popularity among U.S. travelers was reflected in a recent study.

In fact, a recently released MMGY and Harrison Group survey found that 31% of respondents, who were leisure travelers residing in the U.S., preferred limited-service hotels without restaurants to full-service hotels that have dining establishments.

While those travelers preferring limited-service hotels are still in the minority, their ranks grew 55% from 2012 to 2013, according to the survey, and was the fastest-growing trend among the categories about hotel preferences in the table below.

Leisure Travelers Hotel Type Preferences

Source: MMGY Global/Harrison Group, a YouGov Company • 2013 Portrait of American Travelers

Investors are certainly becoming enamored with limited-service hotels as margins at five-star properties face pressure.

Blackstone’s hoped-for IPO of Extended Stay America will gauge the durability of limited-service hotels as investments.

In a parallel trend, the Travel Channel’s Anthony Melchiorri sings the praises of 3.5-star hotels over 5-star lodging choices for hoteliers.

While far from a limited-service hotel, Hilton New York Midtown’s decision to eliminate room service is not unrelated.

The MMGY survey, which was conducted in February and covered leisure travelers in the U.S. with household incomes of $50,000 or more, also points to leisure travelers’ increased preference (75%) for hotels with less than 300 rooms. Their ranks grew 19% in 2013 year over year.