SPECIAL REPORT
“ THE REALITY IS THAT THERE IS BRAND BLEED ACROSS MANY OF THE CURRENT BRANDS WITHIN THE LARGE HOTEL COMPANIES , POTENTIALLY DILUTING DEMAND FOR THEIR CORE BRANDS IN A MARKET .”
CRAIG MASON , CHMWARNICK
As a rule , says Craig Mason , executive vice president of CHMWarnick , a hotel asset management and advisory firm , “ the smaller the hotel and better the location , the more you can lean heavily on being independent or soft-branded . A larger hotel in a weaker location may need the support of a brand to help fill the rooms , relying heavily on loyalty programs .”
Location — not flag — arguably is the primary driver of demand , Mason adds . “ A well-located hotel next to a major demand generator has a unique advantage . If the hotel is not large — less than 250 rooms — the demand generator located nearby may be enough to fill the hotel , and there is no reason to pay the fees for a soft or hard brand .”
Loyalty is perhaps the most compelling reason to line up with a chain . But “ the point-collecting mentality in Asia is nowhere near what it is in North America ,” says Eric Levy , managing director of Tourism Solutions International in Singapore . But he thinks it will catch up eventually .
Some hotels demand a brand : Suburban , airport and roadside hotels and those with significant meeting facilities rely heavily on chain affiliation . Lenders and institutional
investors typically also prefer brands .
And not everyone wants a unique experience . “ Customers still love standards ,” Doizelet says . “ Especially when they are traveling for business , they ’ re not keen to go on an adventure . What they ’ re looking for is convenience .”
Hotels in secondary or emerging markets benefit from a brand as well , Mankarious argues . “ People visiting those markets don ’ t know them that well , so they put a lot of emphasis on feeling comfortable — and that means choosing a brand ,” he says .
Asian destinations are ripe for branding as they open up to more international travelers , MacIntosh notes , and “ brand recognition may be difficult for an independent to achieve unless offering a unique product .”
Is brand affiliation a plus during an economic downturn ? “ During downturns there is a sense of safety with a brand-managed property ,” Grigg says . Mason agrees . Even soft brands , he says , offer a safety net because of the reservation system and loyalty program supporting the asset . But Shah suspects that while branded hotels might do marginally better in a downturn , independents would recover more quickly .
But brand can ’ t make a silk purse from a sow ’ s ear , Levy says . “ Some properties just don ’ t have the facilities , the location , or whatever attribute is required to be competitive , and a brand is not a panacea .”
Mason says owners sometimes look to brands and managers as advisers , “ which can be a slippery slope ,” he notes . Bringing in a third party early in the process to help navigate development and negotiate the branding / management decision is a way to avoid surprises .
“ We tell clients , ‘ Don ’ t fall in love with a brand when you are developing a product ,’” Grigg agrees . “ Make sure you do your homework and request information . You need to understand that you can have the brands compete for your business .”
WHAT ’ S DOWN THE ROAD ? The greater availability of affiliation choices for owners opens up opportunity for global expansion among the major players , especially in markets with many independents and new development . But there ’ s a downside to all those bulky product lineups .
“ The reality is that there is brand bleed across many of the current brands within the large hotel companies , potentially diluting demand for their core brands in a market ,” Mason says . “ I think this , as well as the high cost to be affiliated with a brand , is driving more owners to consider the independent model and the flexibility it represents .”
One casualty of brand proliferation might be some of the consortia . All those soft , boutique or lifestyle brands theoretically are chasing many of the same properties that are aligned with traditional soft brands .
“ PEOPLE VISITING THOSE MARKETS DON ’ T KNOW THEM THAT WELL , SO THEY PUT A LOT OF EMPHASIS ON FEELING COMFORTABLE — AND THAT MEANS CHOOSING A BRAND .”
RAMSEY MANKARIOUS , CEDAR CAPITAL PARTNERS
Laurence Geller , chairman of Geller Capital Partners , a Chicago-based luxury hotel investment and management firm , suggests consortia may be best suited to making deals with one chain or another . He also predicts that more operators with small groups of branded independent hotels will join with industry giants , mainly to leverage scale in technology and distribution .
24 hotelsmag . com December 2018