When the energy crisis of the early 1970s was complemented by deep recession, Ramada Inns Inc. was forced to suffer hard times.
Ramada, based in Phoenix, got caught with too much short-term financing and too many weak hotel properties. It was unable to renovate and moved to the bottom of the industry in terms of keeping up with the competition.
Company morale naturally suffered as Ramada lagged behind industry volume leaders Sheraton and Holiday Inns, an upstart out of Washington called Marriott, and the burgeoning market for affluent conventions and travelers to which Hyatt and other companies catered.
Starting with a new corporate strategy three years ago, Ramada executives have been bringing their company back up through the lodging industry's ranks. And greater Washington is among the prime targets for a rejuvenated Ramada Inns.
Under construction in downtown D.C. is a new area "flagship" for Ramado, a 360-room luxury hotel at 1143 New Hampshire Ave. NW in the booming West End area and just across the street from the new Marriott-Blackie's hotel. Ramada currently has eight other hotels in the area, all of them with high annual average occupancy rates of more than 80 percent.
Juergen Bartells, president of the Ramada Inns hospitality group, said the new $25 million hotel will aim at the "upper limits of the midprice market," with room rates about 15 percent to 20 percent lower than luxury hotels here. A separate floor will have 24-hour maid and concierge service and an "honor bar" were guests can mix their own drinks and write their own bills.
The Phoenix company is calling the new unit a Ramada Renaissance hotel, one of 13 planned at a cost of about $425 million in an effort to capture some of the more affluent market. The first of these new hotels is due to open in mid-summer in Denver, and the Washington hotel will be the second if it opens as scheduled in October or November.
Development of these new Ramadas is designed to bring the company into the growing higher-priced hospitality market while maintaining a large share of the midpriced business. Quality Inns of Silver Spring recently announced a somewhat similar shift, establishing three levels of Quality hotel properties to appeal to different market segments.
More specifically, Bartels said in an interview that Ramada wants to compete directly with Marriott Corp., which is currently launched on the most rapid hotel expansion in the industry for a business that has been both successful and profitable.
"Marriott has done a beautiful job; it is an excellent operation," said Bartels, referring to the company in general as well as to the specific downtown Marriott hotel with which he will be in direct competition starting next winter.
The new Washington Ramada Renaissance will be operated by Ramada under a management contract with FCH Services Inc., a Washington developer of property FCH and New England Mutual Life Insurance Co. own the property, where the hotel is being constructed inside the shell of an older structure.
Three years ago, Ramada earmarked $130 million for renovation of existing properties. At the same time, 26 aging properties were sold and weaker franchised hotels were eliminated from the chain, to be replaced by better properties. The company dropped out of some unrelated ventures such as hospitals.
The strategy is starting to work: Over the past two years, as industry occupancy rates have declined under the impact of still another economic malaise, Ramada Inns occupancy levels have been increasing. In the first four months of 1981, Ramada occupancy rose 4.4 percent while other leading chains suffered setbacks, Bartels said.
With some 94,000 rooms in 635 hotels and 19 countries, Ramada today runs third in the international hotel industry. In the next five years, Bartels wants the company to grow to 850 hotels, 40 of which would be of the new Ramada Renaissance variety under construction here. No more than 5 percent of the business is planned for luxury units. Ramada also has entered the gaming business, acquiring a Las Vegas hotel and building a $350 million Atlantic City hotel scheduled to open this summer.
Ramada has increased spending for advertising and promotion by 59 percent and for repairs and maintenance by 68 percent over 1978 levels. "I call these investment categories," although short-term profits are hurt, Bartels emphasized. "Our focus is on 1983 to 1985, not the next quarterly earnings."
Ramada's executives have faced skepticism in recent years about their stated goals of profits gains and increased market share. "First we had to convince employes, then bankers, then [Wall Street] analysts," Bartels added. The price of Ramada stock on the New York Stock Exchange has increased from about $3 a share to more than $10 over the past three years.
And this time, when the economy recovers from the sickness of recent months, Bartels said Ramada won't have to take the back seat as it did a decade earlier. "We expect a pretty good 1982 and a very strong 1983," he asserted.