The fact is it depends on several key factors . It is an asset by asset , owner by owner decision . If you are the owner of a beige-on-beige rectangular box in a B location without much supporting facilities , and you don ’ t intend to personally operate it , or your holding period is five to seven years , you are better off renting a chain brand than building your own brand . On the other hand , if you have an iconic hotel known to your target customer segments , located in the center of the demand generators , with all the supporting faculties in the hotel for your target customers and you intend to personally engage with the operations as it will stay in your family for generations to come , then why would you pay rent for 100 years .
Let ’ s start with the hotel asset . What kind of hotel is it ? 1,200 , 500 , or 125 rooms ? What quality segment is it in , luxury , upscale , or economy ? Where is it located , near demand generators ( where target customers want to be ) or off-center location ? What city is it in , downtown , suburb , beachfront or , mountain ? What are the seasonal climates ? What support facilities does the hotel have , function / meeting rooms , restaurants / bars , recreational facilities , and office / retail / residential spaces .
Once the asset is closely examined , next is to determine which customer segments this hotel creates the most value for ( their willingness to pay ) and is there a large enough demand from these target customer segments for the hotel to be successful . How will the hotel find these customers and present itself in their consideration set and ultimately book the hotel ? This is also the part to consider changes to the hotel asset which may lead to more profitable customer segments .
Finally , what are the owner ’ s objectives in terms of investment horizon , capital investments , operational engagement and risk preference . A highly leveraged asset without reserves needs consistent cash flow . Short holding periods won ’ t be enough time to build brand value into the asset . Lack of capital investment may limit the options to reposition the hotel to create greater value . Different owners may pursue different affiliation strategies for the same asset during the same investment period .
The order in which to assess the asset , customers and owner may vary . Sometimes it is better to start with the owner or the customer ( especially in the development of a new project as opposed to the acquisition of an existing asset ). This process is also very iterative until all three are aligned .
Hotels mostly accommodate demand rather than generate demand , with a few exceptions . Mostly , hotels can shift demand from other destinations , other hotels or other times in the future . Most of the sales and marketing efforts of a hotel is to shift demand .
Before considering any brand affiliations , figure out how much revenue the asset can generate on its own . Most owners underestimate the asset ’ s ability to accommodate demand available in the market . Once the asset-driven revenue is determined , this is the time to consider how much more revenue an affiliation can add to the base and the cost associated with the affiliation . Affiliation fees should be calculated based on the additional revenue created , not just what is booked through the system . System delivery often overstates the revenue the affiliation adds
88 ILHA