SPECIAL REPORT
TO BRAND , or
NOT TO BRAND ...
HOW THE EXPLOSION OF AFFILIATION OPTIONS IS CHANGING THE HOTEL LANDSCAPE .
Contributed by MEGAN ROWE
In the past decade , hotel owners have faced a barrage of new brands , new choices for independent hotels seeking the shelter of a larger organization , and newly defined segments . For an owner or investor , it can be daunting . Go with a traditional brand ? Sign on with a consortium ? Fly solo ? Bet on a not-quite-proven soft brand ?
Figuring out which model aligns best with a property is not simple , although the end game seems pretty straightforward . “ We look at what is going to maximize the value of the real estate ,” says Ramsey Mankarious , CEO of London-based Cedar Capital Partners . Cedar ’ s holdings include high-profile luxury independent hotels and brand-managed properties .
Independents dominate in Europe , in large part because the existing inventory often doesn ’ t fit well into brands ’ standards . Because of that , soft brands and consortia are appealing options for many owners . But with bigger properties , “ banks want to see a professional international brand running the hotel , which is what they are used to ,” Mankarious says .
Branding is making inroads in Europe , particularly France , Spain and the U . K ., says Phillippe Doizelet , managing partner at Horwath HTL in France . The shift started when companies like IHG and AccorHotels moved from ownership toward franchising , and was nudged along by the rise of OTAs .
Soft brands are especially well-suited to the current environment . “ All those hotels that have capitalized on some lifestyle flair now have the guarantee offered by a brand name and strong distribution ,” Doizelet says . “ You end up being endorsed by a major group but you don ’ t have to develop based on a very rigid concept .”
Jay Shah , CEO of Philadelphia-based REIT Hersha Hospitality Trust , looks at four factors when deciding which model fits best : the ability to create real brand equity , market conditions , location and size . He thinks soft brands make sense for many owners .
“ It allows the guest to enjoy the independent experience with a certain quality assurance , and it allows them to participate in the loyalty programs , which remains a driver ,” Shah says . “ Owners , in turn , get the comfort of knowing there are some traditional hard-brand drivers in place .”
Shah adds , “ As an independent , you will have more costs around marketing , branding and sales ; with a soft brand some of that will be supported by the brand . You have to decide whether the amount you pay for that will drive incremental EBITDA .”
Going it alone is not an option for many owners who lack the expertise and staff to survive against better-equipped competition . “ You have to be better , more focused and more effective in your sales and marketing to make up for what the brands do ,” says John Hamilton , senior vice president of development at Pyramid Hotel Group , a Boston-based asset and property management company .
In parts of Asia Pacific , where a building boom has stretched the capacity of architects , interior designers , engineers and other experts , “ appointing a major brand with a good technical services team can be of great assistance ,” says Robert MacIntosh , executive director at CBRE Hotels Asia Pacific . Developers are turning to franchise agreements and management agreements to tap their specialized services , he adds . Yet another factor to settle before
December 2018 hotelsmag . com 21