Executive suites: after all the hype, are suite hotels performing as predicted?

Back in the mid-1980's, you didn't have to be an executive traveler or a hospitality industry insider to know that something new was happening in hotels. Consumer publications were full of reports about a late-breaking phenomenon: suite hotels. The rooms, which are ideal for small business meetings, are comprised of two-room suites and include complimentary breakfast and cocktails.

Was the development of suite hotels a fluke in the history of the industry, or did their emergence mark the birth of a hospitality market segment that's with us to stay?

"There have been suites forever," says Jim Burba, head of UCLA Extension's Real Estate Center, referring to the very expensive--often penthouse--units that have long graced the world's most elegant hotels.

"But it wasn't until the 1980's that all-suite hotels took off as a concept and were offered at all price levels," he adds. "At first, it was a strategy to reach certain mid-market niches through product segmentation, then suites were introduced at all budget levels so that everyone could have a suite product available to them."

Burba helps to oversee a new program in hospitality management launched this quarter at UCLA Extension. Among the instructors is Bruce Baltin, director of the Los Angeles branch of PKF Consulting. Baltin, who teaches "Managing Your Hotel Real Estate Investment," says suite hotels are indeed here to stay.

"Suite hotels now represent approximately four percent of total hotel rooms in the U.S.," he explains. "In the last year, they've been outperforming competitors in each price range by up to 15 percent. It's a niche product that's done very well--it's proven that it has staying power."

The largest suite hotel chain is Embassy Suites, Inc., founded in 1983 and now featuring 103 hotels containing a total of 26,000 suites. According to CEO Clyde Culp, the success of Embassy Suites and suite hotels in general will pay off for the executive traveler through ever-greater levels of customer service in years to come.

"Right now," he explains, "most of our hotels have two phones lines, and all have computer jacks. We're going to be ever more computer-friendly, and we're expanding our language support services and communications systems in our hotels for customers doing business in the international market."

Although the original suite hotel concept often excluded large meeting rooms or catering facilities, Embassy Suites is "...working out ways to support video teleconferencing in our hotels to make it easier for people to have meetings long distance," explains Culp. "Large conventions are increasingly being replaced by regional meetings, which are mutually beneficial for hotels like ours." In the Los Angeles area, rates range from $79 to $179.

The next level up is most likely to be found at high-end luxury hostelries that have either been built with a select number of suites for the executive traveler or have converted a portion of existing space into suites.

An example of the former is Beverly Hills' beautiful Peninsula Hotel, whose resident manager, Ali Kasikci, teaches "Front Office Procedures" at UCLA Extension's hospitality program. "Our 32 suites include three phones with two lines each, and a FAX and CD player in each room," says Kasikci. "Many of the suites have patios or verandas for receptions, and a weight room and swimming pool are in easy reach of each suite.

"We have a high ratio of employees to guests: there are 200 rooms and 300 employees. We're trying to convert guests who are already familiar with other local hotels and who will go back to them if we don't meet their high standards."

Rates for the Peninsula Hotel's suites start at $395. A 2550 square foot Presidential Suite, which features a living room, dining room, kitchen and baby grand piano, is also available for $2,500.

In the suites industry, discounting room rates to entice customers isn't necessarily the norm. As Woody Bihler of Embassy's West Coast office puts it, "In Southern California and elsewhere, we're capturing a disproportionate number of customers and getting more dollars per room than other competitors, which speaks to the value of the suite concept and reinforces our strategy of not discounting...since 1990, Embassy Suites as a stand-alone has been profitable since the day it started."

According to Culp, Embassy's rise has been aided in part by the last decade's roller coaster economy. As he explains it, just as Embassy's success began to inspire developers of the late 1980's to plan suite hotels, "we got into this crazy financing climate from 1990 to today, in which financing of new hotels has gone from a lot to none. The hotels that are being built today were projects that were started and financed four years ago.

He adds, "I think the hotel industry in general has to have a slowdown of supply, because it is overbuilt. I think it's good for the industry to catch up with the supply growth..."

As everyone who follows the hospitality industry knows, during the last 10 years there has been a major restructuring and refinancing of hotel chains. Many suite hotels have been sold and resold, often at inflated prices that left new owners holding the bag.

But many industry insiders view the current period of consolidation as the stepping stone to a new period of dynamic growth of the hospitality industry.

"Part of the reason why we've just established a hospitality program is that there are numerous indicators of future growth in the industry in Southern California in years to come," Burba says. "Suite hotels are one of the most vibrant segments, holding particular promise for growth in the next five to 10 years."