Why are there so many hotel brands?

Alongside hotel companies’ reporting on financial year performances came a wave of announcements about new brands, expanded footprints and new markets. The consumer is literally spoilt for choice.

Hotel companies are using new brands to fill their portfolios’ gaps between pricing and service levels. They also are trying to create brands that will attract Millennials but won’t alienate previous generations.

Since the Starwood-Marriott merger, hotel companies have sought to compete not just on price and service but also on travelers’ tastes, say for unique rather than prototype properties, he said. That goes for the property owners’ tastes, too. A hotel company might ask itself, “Is there a way of coming up with a new brand that is at the same price and service level but is more like a collection or soft brand that may appeal in a different way to different developers, not just guests?”

Still, all of that is classic supply and demand profiling. Something new is going on here, as well. STR SVP of lodging insights Jan Freitag said offering something for everyone casts a wide net from which a hotel company can “try to hook them with [its] loyalty program.” Then, when those people travel again, “they don’t need to leave the fold of that loyalty system because the hotel company offers them [a property] for every occasion and for every price point.”

At the end of the day, I’m a Marriott customer. … I don’t care if I stay at a Residence Inn or a Spring Hill; I care about my points.” Or is it really all about “loyalty points”?

Big hotel chains are becoming less hotel companies and more booking/reservation platforms, making money through franchised brands rather than directly managing hotels. If a hotel company’s combined portfolio offers enough choice, the company’s direct booking channel can become a one-stop-shop for bookers. Brand proliferation could be a function of the stock market and how investors value growth.

As brands proliferate, hotel companies seem to be trading in hotel brand recognition for parent company recognition. It’s worth noting that Marriott, the biggest hotel company of them all, aired a commercial during the Oscars geared toward name recognition. It wasn’t for St. Regis or W Hotels or Aloft, though, but rather for its rebranded loyalty program, Marriott Bonvoy.

There are a couple of trends driving the plethora of hotel brands.

  1. Launching New Brands: InterContinental Hotels Group’s midscale brand Avid has signed more than 170 hotels since its launch in September 2017, and its upscale brand Voco has added 16 since it launched in June. The company expects to open at least 200 Vocos worldwide over the next 10 years. IHG has enough rooms in its pipeline to surpass the 1 million mark, and it’s still going. It plans an upper-midscale all-suites brand, a segment IHG said boasts demand from both guests and owners. Last fall, meanwhile, Best Western Hotels & Resorts added two brands, Sadie in the upscale segment and Aiden for the upper-midscale, complementing its relatively new Vib and Glo boutique brands.

2. Developing Super-Niche Brands: As hotel companies search for underserved segments to mold themselves into, STR SVP of lodging insights Jan Freitag said they may target subgroups. Hilton is following this model with the recently announced Signia, which will serve the meetings and events market with upper-upscale properties, advanced tech throughout each property and flexible meeting spaces for various sizes. And last fall, Hilton announced Motto, a moderately priced microhotel brand that provides a hostel-type experience with private accommodations.

3. Purchasing Competitors—& Their Loyalty Members: When Wyndham Worldwide Corp purchased La Quinta last year, it gained 900 hotels and 13 million new loyalty members. Wyndham CEO Geoff Ballotti said at the time that the midscale La Quinta would be a flagship brand. Indeed, La Quinta’s 25,000-room pipeline makes up nearly 14 percent of the 180,000 rooms on the way across Wyndham’s 19-brand portfolio.

4. Buying & Expanding Another Brand: This follows suit with Wyndham. Choice Hotels purchased extended-stay brand WoodSpring Suites last year. The brand won 75 franchise agreements and introduced 14 properties in 2018, and it just scored agreements for 14 properties in the Western U.S., where the brand is underrepresented, plus another 27 properties elsewhere the country. Choice’s domestic pipeline shot up to 1,026 rooms in 2018, a 20 percent increase from a year prior and Choice’s largest pipeline ever. IHG, meanwhile, bought luxury brand Six Senses and plans to grow it from 16 resorts to 60 over the next decade.

5. Building Pipelines from Scratch: At the beginning of last year, Extended Stay America had zero hotels in its pipeline. A year later, it has 6,972 rooms. ESA also is shifting to an asset-light model, and 42 of the 57 properties coming will be franchised. The number of rooms in ESA’s system has remained at 68,780 rooms, while the number the company owns has fallen to 61,486.

6. Entering New Markets: Hyatt is expanding into China to reach an underserved domestic travel segment. It has partnered with Homeinns Hotel Group to create an upper-midscale brand that will target young travelers in China. It also recently acquired Two Roads Hospitality, adding more than 85 lifestyle hotels and resorts to its global portfolio. Hilton also is expanding its geographic reach, planning to expand into an additional 35 countries and territories. Best Western, meanwhile, bought Sweden Hotels and its 135 properties there in 2017.

7. Climbing the Chainscale: Best Western also has leapt into the luxury segment. Last month, it bought the marketing consortium WorldHotels, which represents about 300 mostly independent luxury properties.

8. Creating Soft Brands/Collections: AccorHotels just announced that it will partner with SBE Entertainment Group to create a soft brand, The House of Originals, expanding Accor’s lifestyle luxury portfolio with properties in London, Miami and Istanbul. The House of Originals has five more hotels in its pipeline.

Check out my related post: How to design a public hotel?

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