Refurbished Landmarks Offer Grand Alternative in Midlevel Lodging

The traditional hotel and motel categories have broken up into dozens of specialized lodging types, and some--such as apartment-style inns and better-maintained budget hotels--are growing fast.

A smaller niche now catering to cost-conscious business travelers is that of restored grand hotels that fell on hard times. These hotels help fill a space in the market between the midlevel business chains, such as Marriott and Hyatt, and luxury chains, such as Ritz Carlton, said Bill Burruss, president of Grand Heritage, one of the leaders in classic hotel rejuvenation.

Although it is a relative newcomer to the hospitality industry, Grand Heritage has already established a reputation for quick and profitable turnarounds of high-end hotels.

“It’s a good place to be,” said Mark Lomanno, executive vice president of Smith Travel Research, a Tennessee-based research firm that specializes in the hotel industry. “Luxury hotels are the best-performing hotels in the industry.”

“We have seen business travelers become a lot choosier,” Burruss said, adding that many want the conveniences and business services as well as character and a sense of place. Grand Heritage’s strategy is to go after classic hotels that have cultural or architectural significance in a city, then upgrade them to compete with the sophisticated business hotels.

The company looks for hotels, usually with 100 to 200 rooms, that are small enough to offer personal service but large enough to have some of the economies of scale enjoyed by chain hotels. Many of these hotels had never been marketed to the corporate traveler before, Burruss said. “They just let the big boys eat them up.”

“I consider us first and foremost a turnaround management company,” Burruss said of Grand Heritage, which started in 1989 by doing turnarounds for banks and insurance companies. But eventually it started buying properties itself. It has acquired 13 hotels in the United States and 48 in Europe, making it the 12th-largest hotel chain in the country. Its U.S. properties include the Clift House in San Francisco; the U.S. Grant in San Diego; the Tutwiler in Birmingham, Ala.; the Ambassador West in Chicago; and the Pontchartrain in New Orleans.

When the group took over the Tutwiler, for example, occupancy increased by 10 percentage points, and within a year the company had turned a deficit into a profit of more than $810,000.

“What makes them [Grand Heritage] a little unusual is their willingness to put money into some of these properties that have deteriorated,” Lomanno said.

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The luxury hotel market is the most profitable segment in the industry. The average occupancy rate at the high end is about 73%, compared with an industrywide average of 65.5%. The average hotel rate for the high-end segment is $118, compared with $67.50 for hotels in general.

But the supply of such rooms isn’t growing. “Right now, it’s still more expensive to build a new luxury hotel than to acquire an old one,” Lomanno said.

“There is a pent-up demand for these rooms.”

Grand Heritage has been snapping up the properties that need the most work, he said.

Five years ago, overbuilding in hotel markets and competition started putting pressure on some older classic hotels, especially those that had rested on their reputations for years without upgrading their facilities.

“A lot of people didn’t have the money to maintain these properties, so some did begin to deteriorate,” Lomanno said.

When Grand Heritage took over the Clift House, for example, the hotel was near bankruptcy. Its customer base was 75% leisure weekend travelers. Grand Heritage has been running an aggressive marketing campaign to reposition the hotel to appeal to business travelers. It has done 35 trade shows, launched a direct-mail campaign, begun a $1-million renovation and instituted a frequent-guest program. It has put in a business center, fax machines in some rooms and two-line phones and modem ports in all rooms.

“The days of overwhelming the traveler with toiletry amenities are gone,” Burruss said. Business travelers don’t want fancy soap, they want bigger desks, better lighting, more space, fast and flexible service. And they want to get their messages on time, all the time. That’s where the hotel is putting its efforts.

And it appears to be paying off. The customer mix at the Clift House is now 60% business and 40% leisure, Burruss said.

He thinks travelers are ready to get away from the chains.

“When you stay at the Clift, it looks like old San Francisco,” he said. “When you stay at the Ambassador West, you could only be in Chicago.”

Carol Smith is a freelance writer based in Seattle. If you have experiences to share or suggestions for Executive Travel, please write Executive Travel Editor, Business News, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053; fax (213) 237-7837 or e-mail to business@latimes.com