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A Room at the Top

How Hampton Inn broke into the Top 10 during one of the hotel industry's toughest years

It's not a pretty picture in the hospitality industry: Average occupancy is only 55 percent, down 8.2 percent from the year before. And as you'd suspect, people are paying less for those rooms too--revenue was expected to be down 39 percent for 2009, and at least 4 percent for 2010. It seems baffling that a hotel chain could make its debut in the Franchise 500® Top 10 in this climate, much less reach No. 4 on the list. But over the last year, Hampton Inn, the 25-year-old Hilton Worldwide brand, has bucked the trends that have hobbled its competitors.

"This brand is always a stable performer, especially in times of economic challenge," says Phil Cordell, global head of Hampton.

"Travel policies have changed, and some guests have had to trade down from full-service or luxury hotels. Commercial and business travelers don't have to be embarrassed to tell a client they're staying at a Hampton."

That boost from penny-pinching business folk allowed the company to add 150 properties last year, and it expects to expand by 120 more in 2010. And now leisure travelers are being lured by the services included in the room rates, which run from about $70 to $135 a night--something that helps Hampton compare well to higher-end hotels, which are often cutting services.

"We're not charging $10 for breakfast or $15 for the Internet. Local phone calls are included," Cordell says. "Travelers are factoring that into their decisions. We're usually 30 percent less, and the French toast is included."

The Franchise 500® also points up other exceptions in the dismal hospitality category, though the chains' strategies are very different. Days Inn hit No. 21 in the ranking by focusing efforts on opening new locations in China while the recession pummels the U.S., and sprucing up older properties here. Super 8, which ranked 36th, has launched an aggressive marketing campaign to grab market share from other value hotels.

"These mid-level hotels are designed to be efficient. You're going to get the same thing in 2009 as you got in 2008 and 2007," says Robert Mandelbaum, a hospitality researcher for PKF consulting in Atlanta. "At other hotels, they've had to cut staff, maybe the restaurants closed, or the room service is reduced. That personal level of service is affected."

This year, Hampton is celebrating the 20th anniversary of its "Satisfaction . Guaranteed" pledge, which has comped countless unhappy travelers, no questions asked, for problems as minor as a ladybug on the windowsill to complaints about UFOs. It sounds counterintuitive, but Cordell says the practice has made the company money by gaining immediate customer loyalty.

Even, it seems, if some of those customers are packing tinfoil hats.

Jason Daley lives and writes in Madison, Wisconsin. His work regularly appears in Popular Science, Outside and other magazines.

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This article was originally published in the January 2010 print edition of Entrepreneur with the headline: A Room at the Top.

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