Planning a trip? Looking to invest in a hotel brand? If you answered yes to either of these questions, then the following information is imperative.
The American Customer Satisfaction Index rated 24 hotel chains in 2013 based on ratings from 4,500 travelers for reservations, check-in process, front desk staff, room quality, food quality, in-room entertainment, and other amenities. Note: travelers felt as though room cleanliness, comfort, food services, and hotel amenities trumped all other factors.
This article will cover the most popular hospitality companies and their hotel brands, including Marriott International (NASDAQ:MAR), Hilton Worldwide (NYSE:HLT), Hyatt (NYSE:H), Wyndham Worldwide (NYSE:WYN), Starwood Hotels & Resorts Worldwide (NYSE:HOT), and Choice Hotels International.
The customer satisfaction scores range from 0 to 100, with 100 being the highest. The average score in the hotel industry is 77. From an investing standpoint, hospitality companies that take care of their customers are also more likely to take care of their shareholders. Positive word of mouth (including via social media) leads to new and repeat business. Therefore, if a hotel brand scores higher than 77, consider making a note of that hotel chain's parent company.
Also take note that these hotel brands are categorized as: Luxury, Upper-Upscale, Upscale, Midscale, and Economy. Therefore, if a Midscale or Economy hotel brand scores higher than the industry average (77), it's exceeding customer expectations. If a Luxury, Upper-Upscale, or Upscale hotel brand scores below the industry average, it's not meeting customer expectations. Investors should pay careful attention to these numbers since customer satisfaction plays a major role for the success of hospitality companies.
Below are the top scores across all categories:
No. 1: Marriott's Fairfield Inn & Suites (84). This score indicates that Fairfield Inn & Suites offers the best value across all major hotel brands, which should lead to sustainable demand. And sustainable demand is a positive catalyst for Marriott. Also note that it's a Midscale brand scoring higher than any Luxury, Upper-Upscale, and Upscale hotel brands. That's impressive.
No. 2: Marriott's JW Marriott (83). This is a Luxury hotel brand. Therefore, higher scores are expected, but once again, Marriott finds itself toward the top of the list. Investors should notice that Marriott should take note of this impressive performance.
No. 3 (Tie): Hilton's Embassy Suites Hotel (82), Hyatt Regency (82), Marriott Hotels & Resorts (82). All three hotel brands are Upper-Upscale.
None of the information above should be shocking, but now let's take a look at the bottom five scorers.
Not meeting expectations
Below are the bottom five scorers for guest satisfaction:
Bottom scorer overall: Choice Hotel's Econo Lodge (59). Since Econo Lodge is an Economy hotel brand, this is somewhat expected.
Second worst: Wyndham's Super 8 (66) -- also an Economy hotel brand.
Third worst: Wyndham's Ramada Inn (69) -- low score for a Midscale hotel brand.
Fourth worst: Wyndham's Days Inn and Suites (74). It's not good that Wyndham finds itself in the bottom five three times, but this is another Economy hotel brand, and a score of 74 isn't that far south of the industry average of 77. It's also the highest-scoring hotel brand in the Economy category.
Fifth worst: Starwood's Sheraton (76). This is the biggest disappointment since Sheraton is an Upper-Upscale hotel that fails to score as high as the industry average.
For a different perspective....
Below are the highest scoring hotel brands for each category:
Luxury: Marriott's JW Marriott (83). Grand Hyatt is a distant second with a score of 77.
Upper-Upscale: Hilton's Embassy Suites Hotel (82). Starwood's Sheraton is a distant second with a score of 76.
Upscale: Hyatt Place (79). Hilton Garden Inn is a close second with a score of 77.
Midscale: Hilton's Hampton Inn & Suites (81). Wyndham's Ramada Inn is a distant second with a score of 69.
Economy: Wyndham's Days Inn and Suites (74). Wyndham's Super 8 is a distant second with a score of 66.
What about growth?
Improvements across the board
Travelers seemed to be more impressed with their hotel stays in 2013 than they were in 2012. Below are overall hotel brand portfolio year-over-year changes for customer satisfaction:
Marriott: Up 5% to 82.
Hilton: Unchanged at 80.
Hyatt: Up 4% to 80.
Wyndham: Up 3% to 72.
The American Customer Satisfaction Index doesn't provide information on year-over-year changes for Starwood or Choice Hotels. The takeaway here is that not only does Marriott score the highest overall, as well as in the Luxury category, but it has shown the most improvement. This should lead to continued demand and market-share sustainability, with the potential for market-share gains going forward.
The bottom line
If you're going to invest in a hospitality company, then you might want to consider Marriott. If guests are impressed with their stays at Marriott properties, then they're likely to return. They're also likely to share their positive experiences with friends and family, which leads to the potential for increased demand.
While expectations for Wyndham aren't as high, results still aren't as impressive, and investors might want to see how the company performs in the future prior to getting involved.
All hospitality companies rely partially on discretionary spending and are not resilient to economic downturns. Please do your own due diligence prior to making any investment decisions.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Hyatt Hotels. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.