Young RAMADA

Midscale hotel brands are dealing with strong revenue, high occupancy rates and continued consumer demand, and executives see more strong growth—but at a moderated level—in the next two years. They also are making major changes in their food-and-beverage businesses.

"The hotel business is a good business to be in now right now," said Mark Young, brand vice president for Ramada. "Folks are building, purchasing and upgrading to different flags. While there is still some good performance, it will not be quite as healthy a growth as it has been."

Wyndham Hotel Group, the parent company of Ramada, said its revenue-per-available-room gains increased 5.1 percent in the second quarter while lodging earnings before interest, taxes, depreciation and amortization grew 11 percent to $59 million over the same quarter in 2006.

Young said that for the first time, Ramada has seen "occupancy slip a little."

A Holiday Inn in Dallas features InterContinental Hotels Group's branded restaurant concept, The Sporting News Grill. The company plans to open several more of the restaurants at Holiday Inns that have 200 or more guestrooms. (INTERCONTINENTAL HOTELS GROUP)

Even so, InterContinental Hotels Group, based in Atlanta, estimates the hotel industry still will need 1 million new rooms over the next five years. It plans to open three new Holiday Inn hotels a week. For the first half of the year, Holiday Inn outperformed its market segment with RevPAR up 4.9 percent, according to the company.

IHG and the other brands are attributing occupancy gains to higher travel spending totaling $86 billion this year, lower airline rates and a stronger economy.

John Taffin, executive vice president for hotel operations for Spokane, Wash.-based Red Lion Hotels, said that business and leisure travelers are willing to pay higher rates for hotel rooms.

"The first half of 2007 RevPAR increased more than 14 percent in our owned and leased portfolio," he said. "On a trailing 12-month basis through June, occupancy for the industry was at 63 percent and [average daily rate] at $100. This is a gain in RevPAR over the prior year of about 5.8 percent."

Taffin expects continued strong growth over the next couple of years.

"We know that there is not an excessive amount of new supply being built in our areas," he said. "We expect to continue to grow our presence in the western states in the upscale full service [segment]."

These brands also see themselves gaining ground in the food-and-beverage area by partnering with established brand-name restaurants.

Revenue per available room increased more than 14 percent at hotels in Red Lion Hotel's portfolio. The company's hotels include the Red Lion Hotel Denver Center. (RED LION HOTELS)

Other hotels are finding success by creating their own restaurant brand or partnering with a company that will provide a unique dining experience.

Nearly 20 Ramada franchisees have opted to partner with national brands such as Bennigan's, Hooters and Chicago Pizza.

"[The restaurants] have been very selective about where they are going," Young said. "[The franchise owners] want to work the rooms because the margin is so slim on food. That is why they are reaching out to nationally recognized brands so they don't have to deal with it."

IHG is wrapping up on testing on its own brand, The Sporting News Grill at a Holiday Inn in Dallas. It plans to open several more at Holiday Inns that have 200 or more rooms.

The concept, according to Sue Morgan, vice president, franchise food and beverage for IHG, is to create a very unique brand with separate signage and easy separate access to a restaurant that has a "fun and engaging environment."