The former Holiday Inn Laguna Hills took the hint when another Holiday Inn opened practically across the street.
Last month, the 147-room hotel dropped the Holiday Inn flag and went boutique, renaming itself the Hills Hotel.
The hotel, off La Paz Road and the San Diego (I-5) Freeway, couldn’t compete with the fancier $22 million Holiday Inn that opened in October.
“When Holiday Inn decided to build another location down the street from us, we figured that’s not what we wanted to be with,” said Michael Mofid, general manager and part-owner of the Hills Hotel.
The new Holiday Inn sits on the freeway three exits from the Hills Hotel. It’s looking to appeal to the same business and family travelers making their way through South County.
“It was like having two Starbucks next to each other,” Mofid said. “Splitting the market in half would have killed both hotels in the process.”
The Hills went boutique not only to differentiate itself from its newer counterpart but to avoid the cost of renovating under the $1 billion relaunch of the Holiday Inn brand.
The Holiday Inn relaunch—headed by parent company InterContinental Hotels Group PLC of Britain—is one of the largest in the history of the hotel industry with more than 3,200 hotels being updated.
The renovations are part of an initiative
to standardize design and amenities, such as
bedding and lighting, in an attempt to revive
its reputation and bring in more business
travelers.
InterContinental is requiring its hotels to remodel cluttered lobbies and add new bed linens, pillows, curtains, shower heads, shower rods and bath soaps, among other improvements. Each hotel even has to install a machine in every lobby that sprays a fragrance approved by InterContinental.
Conflict
The renovations have created some conflict with franchisees.
Back in November, Holiday Inn told owners of more than 300 hotels—about 12% of the chain—to renovate or lose their licenses.
Mofid—like many other hotel owners—chose to let his franchise contract expire, allowing him to launch the Hills Hotel as an independent.
Dozens of other hotels also opted out of the brand due to the cost of the upgrades, believed to be $150,000 to $250,000 per hotel, most of which must be paid by owners.
“The cost of what they wanted to do under their direction was going to be counterproductive with a new facility just up the street,” Mofid said.
Other hotels, such as Costa Mesa’s 225-room Hotel Hanford, formerly the Holiday Inn Costa Mesa, also decided to forgo the brand image in favor of operating independently.
The move to break free from the chain model could be risky as the downturn has battered the hotel industry.
Revenue per available room, a key measure of hotel performance, has dropped by more than 20% in the past year—the steepest decline in more than 50 years, according to industry sources.
But the money hotels save on a franchise fee—one of the largest expenses after payroll—could offset the slump.
The Hills said it may lose some customers by dropping out of the Holiday Inn chain.
But the hotel has seen some positive bookings since it went independent in December, Mofid said.
The Hills has hired designers to help renovate the hotel’s lobby, front desk, rooms and exterior.
Plans also include expanding the 10,000-square-foot banquet hall to accommodate more social gatherings and weddings.
The hotel is hoping to get much of its plans finalized before the summer, when it has booked several events.
It wouldn’t disclose how much it is planning on spending on renovation.
Mofid said he has already overseen new landscaping and the renovation of the parking, which had fallen into some disrepair.
“Almost 45 trucks of debris were moved off the property,” he said.
Arcadia-based Lee’s Laguna Hills Resort LLC, led by Mofid and partner Dwight Chang, bought the hotel in July for $12 million, or about $82,000 per room.
Mofid ran the hotel under prior owner Laguna Hills Hotel Development Venture LP of San Mateo.
Mofid’s Laguna Hills-based Mofitel Hos-pitality Corp. manages the Hills.
Mofid also owns and runs San Clemente’s Holiday Inn San Clemente, which is under-going the planned renovations dictated by InterContinental.
