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SQUEEZING OUT A LITTLE ELBOW ROOM PARASITE MARKETING HELPS CHAIN PACK PUNCH INTO 192 SQUARE FEET

By Published on .

Microtel is hoping to redefine the super-budget hotel concept by playing host and parasite at the same time.

The East Coast motel chain features smaller than average rooms and has no pools, no fitness centers, no restaurants, no meeting rooms-and no consumer advertising.

What it does offer, in most cases, is the lowest price in the markets in which it operates-usually right next door to the more well-publicized highway hostelries.

"There's been growth at the low end of the spectrum for the past several years; in fact, the only [hospitality industry] growth has been at the lower end of the spectrum," says Jeff Marvel, director, Horwath Hospitality Consulting.

Growth has come because low-end market "deals are smaller and therefore easier to finance and the properties are simpler to operate," Mr. Marvel says.

These properties "enjoy higher occupancy compared to full-service counterparts, although the original budget properties-Days Inn, Motel 6 and Super 8-are softening a bit of late," he says. "They had been strong, and because of that they are now overbuilt. The product is dated and vulnerable to new concepts such as Sleep Inns and Microtel."

Microtel's construction stresses standardization-all properties in all markets are almost identical. Rooms measure 192 square feet, as opposed to the industry average of 275 square feet, and have one queen-size bed, built-in furnishings, cable TV, air conditioning and bath.

The chain is banking on the notion that many travelers want clean, secure accommodations without having to pay for fitness centers and meeting rooms-the so-called "amenity creep."

"We have an upscale product at below-market cost. We are competing against Sleep Inns, Super 8, Motel 6. But all of our buildings are brand new, very uniform," says E. Anthony Wilson, chairman-CEO of Microtel. "It's lodging of the '90s where people don't want a lot of amenities."

Microtel's first property opened in 1989. There are now 17 in markets such as Lexington, Ky.; 26 more are in various stages of development, Mr. Wilson says.

Chainwide, for properties open more than one year, the occupany rate averages 78%. The average daily rate is about $33 or $34.

"I think Microtel has a tremendously bright future. The most important factor is consumer acceptance. They enjoy the highest occupancy level in their market. They do it without the power of advertising. They do it with parasitic marketing," says Sal Cannatella, financial consultant at investment banker Investor Associates.

Parasitic marketing uses a competitor's ad budget to draw customers. Microtel, through signage, tells consumers that rates are up to 30% lower than competitors, Mr. Wilson says.

"We don't have [an ad] budget large enough to be effective or competitive on a national basis. [Parasite marketing] is an effective way for us to play in their ballpark without having to buy, say, a national team," he says.

Lack of brand awareness "hasn't been a problem so far or we wouldn't be doing the occupancy rates we are doing," Mr. Wilson says. "We're fostering product awareness through the use of parasite marketing rather than spending money to build product awareness through national [ads] ...

"We piggyback on our competition. They spend the money and we park next door to them," he says.

While some big players have entered the low-budget market-Holiday Inn has Holiday Express, Marriott has Marriott Courtyards and Ramada has Ramada Limited-Choice Hotels International's Sleep Inns is probably the most similar to Microtel.

Sleep Inns' rooms measure 240 square feet and they also maximize space with built-in furniture. Room rates are $35-$45 per night.

There are 89 Sleep Inns open or under development in such markets as Tuscaloosa, Ala. and Boise, Idaho.

Sleep Inns advertising is folded into Choice's ad campaign. That campaign, via Gray Kirk/Van Sant, Baltimore, advertises all four brands-Clarion, Quality, Comfort and Sleep Inns.

While the size of Microtel's rooms evoke comparisons to Japanese "snooze cubes," Mr. Wilson bristles at the analogy. "They are nothing like that. The room is pretty much the size of a normal bedroom at home," he says. "I don't think [anyone would] build smaller rooms a la the Japanese. We don't feel the American market will stand for that."

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