The hospitality industry has recently undergone a brand explosion with over 110 distinct brands overseen by seven top corporate hospitality groups. The fastest growing segment within the hotel franchise universe are “soft brands” which allow hotels to be a part of the parent brand family, while keeping their original name.
These quasi-brands are aimed at converting the considerable number of independent hotels and resorts. But what is the true value that a soft brand brings to an independent hotel or resort and can a soft brand really improve the performance of a property?
No matter what any brand officially says, their marketing teams know that all brands under a corporate umbrella are competing against each other. For example, now that Marriott Hotels and Sheraton are more or less under the same loyalty program, do they really offer a unique selling proposition to the guest?
Independent hoteliers represent roughly half of the global hotel industry. Soft brands, such as Marriott’s Autograph, Hyatt’s Unbound Collection and Hilton’s Curio, have been conceived to penetrate this market and increase unit growth.
Starwood believed many of their preferred guests also wanted to stay at independent hotels. To counter the renaissance of the independent hotel, major chains have taken the unique approach of accepting independents into the brand family. By doing so, chains are making the case that independents can perform well — all they need is excellent marketing skills, hotel management expertise and possibly access to a loyalty program.
Inevitably, when participating in any brand loyalty programs, there are additional costs that are above and beyond the usual marketing fees associated with brand affiliation.
The fact that Four Seasons performs strongly in guest satisfaction surveys compared with its luxury hotel segment peers while never offering its guests a brand loyalty program shows there is little correlation between a brand with a well-respected loyalty program and overall guest satisfaction.
Jerry Cataldo, president and CEO of Hostmark Hospitality Group, a US-based hotel management company that has Hilton, Marriott, and Choice among its various flagged properties said in an interview recently that resorts especially operate more profitably as independents then when they are flagged.
“You can’t justify the expenses of the brand. It’s a very seasonal marketplace, Memorial Day to Labor Day…You just can’t overcome the fees that are associated with it.”
Rating the difference
In fact, studies confirm this and show that non-branded hotels and resorts will, on average, have higher daily rates and, more importantly, produce higher RevPAR than branded counterparts.
Hotel owners really need to understand whether they will see the benefit of being in a branded family. Hotels with bespoke amenities, architecture and especially unique locations normally offer enough of an identity that any value in branding is lost. One could even make the argument that large convention properties with exceptional marketing and management are also wasting money by being branded.
The popularity of online reviews has also contributed to the renaissance of independent hotels. Word-of-mouth testimonials help to ensure predictability and have allowed travelers to be more comfortable in trying out new experiences. Prior to online reviews, guests valued the insurance of the sameness and consistency of brands with no surprises on beds, furniture, furnishings, and even menus. Effective operations, accounting, staffing, and training now, more than ever, dictate the success of hotels —not brands.
Bellstar Hotels & Resorts, a Canadian-based hotel management company which specializes in managing independent hotels, recently broke down the reservation costs of a top soft brand to confirm what previous studies have stated: that net revenue is much lower with a soft branded hotel. A recent Cornell University study found that a brand conversion is expected to increase occupancy by an average of 6 percent.
Bellstar has introduced a calculator on its website to allow hotel owners to weigh whether an average increase of 6 percent in occupancy through a brand is enough to offset a significant difference in RevPAR for their own properties. For example, a Bellstar-managed independent property saw a 38 percent positive difference in RevPAR when compared to a soft brand.
The proliferation of the mega-brands in the hotel sector, with specific brands aimed at converting independent properties,s being fueled with the mistaken assumption that access to both a brand’s distribution system and loyalty program guarantees success. However technological changes mean it is now possible for specialists of independent hotel management to offer state-of-the-art tools to drive just as effective messaging without significant cost outlays.
Now more than ever hotel owners need to weigh whether the slight increase in occupancy that brands may bring is enough “heads in beds” to offset the very large sacrifice in net daily rates that brands force onto their owners. Hotel management companies that represent independent hotels offer owners a terrific alternative in this new age and can drive much more significant returns for their hotel investment.