ALL IN A NAME

Ho­tel com­pa­nies con­tinue to ex­pand while busily launch­ing new brands. But is this a good thing for guests?

Business Traveler (USA) - - CONTENTS - WORDS TOM OTLEY

What does the launch of all these ho­tel brands re­ally mean for guests?

The big news in 2016 in the world of ho­tels was the merger of Mar­riott and Star­wood to cre­ate a com­pany with 30-plus ho­tel brands. Al­though there were many rea­sons for the merger, stream­lin­ing the num­ber of ho­tel brands wasn’t one of them. Sher­a­ton and Mar­riott, Four Points by Sher­a­ton and Court­yard by Mar­riott, Lux­ury Col­lec­tion with Au­to­graph Col­lec­tion all con­tinue as be­fore, with no amal­ga­ma­tion.

Roll on to 2018, and the num­ber of brands in­creases weekly. It’s fair to say that no busi­ness trav­eler wakes up in the morn­ing and says to them­selves, “I re­ally wish some­one would in­vent a new ho­tel brand.” How­ever, the ho­tel chains keep on cre­at­ing them apace.

At a re­cent Global CEO panel where the bosses of Wyn­d­ham Ho­tels Group, In­ter­con­ti­nen­tal Ho­tels Group (IHG), Ac­corho­tels, Hil­ton and Choice Ho­tels were rep­re­sented, they alone had more than 90 ho­tel brands be­tween them, and no one dis­agreed with the as­ser­tion that the num­ber would prob­a­bly grow to some­thing like 100 be­tween them within the next year.

Sébastien Bazin, the forth­right chair­man and CEO of Ac­corho-

tels, said that he had been “dead wrong” in be­liev­ing brands would be­come less im­por­tant. In fact, he thought they were “more im­por­tant than ever.”

The rea­son? “Brands are like a group of friends. For every oc­ca­sion you can count on them for a dif­fer­ent pur­pose, and that’s what peo­ple want. It’s a short­cut in a very crowded world. Brands mat­ter.” Bazin added, “You talk to the On­line Travel Agents and they will tell you that the con­ver­sion fac­tor is twice as much for a branded ho­tel than a non-branded ho­tel, be­cause it mat­ters to cus­tomers. They rec­og­nize it, they feel more com­fort­able, they know what to ex­pect. Whether you have too many brands isn’t the point, you just have to make sure you dif­fer­en­ti­ate the ex­pe­ri­ence, the prom­ise be­tween each of the brands, be­cause they have to be dif­fer­ent.”

This ap­proach seems to be spread­ing. For many years, IHG had com­par­a­tively few brands – Hol­i­day Inn and Hol­i­day Inn Ex­press, Crowne Plaza and In­ter­con­ti­nen­tal be­ing the best known. But IHG cur­rently has 15 brands, in­clud­ing the first Avid prop­erty which opened in Ok­la­homa City this sum­mer, buy­ing the Re­gent Ho­tels lux­ury brand in March and an­nounc­ing plans for voco, an up­scale “con­ver­sion brand.”

BRAND PO­SI­TION­ING

A con­ver­sion brand is typ­i­cally used to “re­flag” an ex­ist­ing ho­tel with a fresh look and feel — Dou­ble­tree by Hil­ton would be an ex­am­ple. IHG is pre­dict­ing great things for the voca brand along with a “devel­op­ment pipe­line” of lesser-known brands, such as Hualuxe (seven ho­tels opened so far, with 21 in that pipe­line) and Even ho­tels (eight so far, 12 in devel­op­ment).

Ken­neth Macpher­son, IHG’s chief ex­ec­u­tive of­fi­cer of Europe, Mid­dle East, Africa and Asia has nearly 1,000 ho­tels open in his re­gion alone. He says the ex­pan­sion wasn’t just about new brands. It was also about “strength­en­ing core brands” we’re al­ready fa­mil­iar with such as Crowne Plaza.

In the lat­est devel­op­ment, IHG has an­nounced that Crowne Plaza’s WorkLife Room, which rolled out in 2017, has re­ceived re­ceived ap­proval of its pa­tent ap­pli­ca­tion for the: gue­stroom de­sign. The WorkLife Room was de­vel­oped as part of the Crowne Plaza Ac­cel­er­ate pro­gram, IHG's $200 mil­lion, multi-year in­vest­ment to trans­form the Crowne Plaza brand in the Amer­i­cas re­gion.

As far as the new brands are con­cerned – like the “old” ones – “they are all tar­get­ing dif­fer­ent guests on dif­fer­ent oc­ca­sions. It’s not just about hav­ing lots of brands, it’s about hav­ing dis­tinc­tively po­si­tioned brands that meet a set of needs for guests,” Macpher­son says.

Of course, this begs the ques­tion, “How many brands are too many?” The an­swer from the ho­tels is that the limit is less about what the cus­tomer can un­der­stand and more about the in­ter­nal re­sources the ho­tel chains have avail­able.

“The brands are a prom­ise to guests,” says Macpher­son. “So you’ve got to have the re­sources to in­vest in those brands so they pro­vide a re­turn to in­vestors – those peo­ple who put their cap­i­tal into them – and to meet the needs of guests.”

If brands are a prom­ise, why do we so of­ten feel let down by that prom­ise? Ac­cord­ing to the hote­liers, that’s more of a legacy is­sue, and one which brands are deal­ing with, first by ex­pelling prop­er­ties whose own­ers will not pay to keep up stan­dards, and sec­ondly by im­prov­ing brand­ing. The CEO of IHG, Keith Barr, says that the ho­tel in­dus­try has be­come bet­ter at brand­ing than it was ten years ago, thanks in part to tech­nol­ogy and the ways it ben­e­fits con­sumers.

“We have had to get bet­ter be­cause of the trans­parency brought on by so­cial me­dia, but also be­cause if we in­tro­duce a new brand, we work with own­ers and de­vel­op­ers to make sure we are of­fer­ing some­thing of in­ter­est to them.” IHG ex­ited a num­ber of con­tracts, Barr says, re­mov­ing more ho­tels than some chains cur­rently have in their en­tire port­fo­lio.

GROWTH IN­DUS­TRY

For Carl­son Rezi­dor, the im­por­tance of brand­ing was demon­strated by re­nam­ing it­self Radis­son Ho­tels, and also adding con­sis­tency across its brands. Its lux­ury “Col­lec­tion” brand, Quorvus, has now been re­named the Radis­son Col­lec­tion (with prop­er­ties such as the Strand Stock­holm in Swe­den, the Royal Copen­hagen in Den­mark and the Royal Mile Ed­in­burgh in Scot­land).

It also an­nounced an in­ten­tion to “re­brand or re­po­si­tion” some 500 prop­er­ties in the 1,400-strong group. Ac­cord­ing to Fed­erico J González, pres­i­dent and CEO, the group will in­crease its port­fo­lio “over the next five years from 80,000 to 100,000 ho­tel rooms, a net gain of 20,000. But ac­tu­ally we will see more than 10,000 exit if they are not in good shape, or the owner has no plans [to in­vest].”

Radis­son is the 11th largest ho­tel group in the world and has eight ho­tel brands, with more than 1,400 ho­tels in op­er­a­tion or un­der devel­op­ment. In the next five years, the group says it will ex­pand “only or­gan­i­cally,” mean­ing not by ac­quir­ing other ho­tel com­pa­nies. But that cre­ates the prospect that it will in turn be ac­quired, a prospect that doesn’t seem to worry Gon­za­les.

“We have a huge busi­ness po­ten­tial, we can grow sig­nif­i­cantly,

and, in par­al­lel, we will have time to see if some­one wants to buy us, but I can’t worry about it. With the five-year plan we have got at the mo­ment there is so much to get on with. I think the share­hold­ers will say ‘Show us what you can do’,” Gon­za­les says.

For all the talk of hav­ing brands for dif­fer­ent “guest oc­ca­sions,” they also help power the growth of the ho­tel com­pa­nies them­selves. That’s im­por­tant, ac­cord­ing to Ge­off Bal­lotti, CEO of Wyn­d­ham, the world’s largest ho­tel com­pany with 8,400 ho­tels across 20 brands, in­clud­ing Ra­mada and Days Inn.

“The cost of keep­ing up with tech­nol­ogy, or cy­ber se­cu­rity – the money you have to spend to make sure you have the best sys­tem, that’s why plat­form mat­ters and size mat­ters,” Bal­lotti says. “Size and scale helps in terms of how much lever­age you have when you are ne­go­ti­at­ing con­tracts, and your loy­alty pro­gram helps drive sav­ings for ev­ery­one. The ul­ti­mate mea­sure is your share of oc­cu­pancy that is com­ing through the loy­alty plat­form. It low­ers the cost of ac­quir­ing the guest for own­ers be­cause it’s not com­ing with a 10 or 20 per­cent com­mis­sion, and so you want the best tech­nol­ogy plat­form avail­able.”

FEWER BUT BET­TER

How­ever, not ev­ery­one be­lieves a pro­lif­er­a­tion of brands is best. Scan­dic Ho­tels has only two brands – Scan­dic and Down­town Cam­per by Scan­dic – yet it is the largest op­er­a­tor of ho­tels in the Scan­di­na­vian and Nordic re­gion with 280 ho­tels (55,000 rooms) in six coun­tries. CEO and pres­i­dent Even Fry­den­berg, who pre­vi­ously worked at Star­wood Ho­tels and Re­sorts, knows all about the power of brands. Yet while toy­ing with the idea of a fur­ther brand, he cer­tainly doesn’t plan to head for dou­ble fig­ures. Why should he?

“We are very big in one re­gion, but that re­gion is made up of sev­eral coun­tries with dif­fer­ent eco­nomic driv­ers. It gives us a bet­ter base to stand on. Our suc­cess is be­ing con­cen­trated on cer­tain mar­kets, so we can quickly get the ben­e­fits of scale.” In­stead Scan­dic is con­tin­u­ing its ex­pan­sion in Ger­many and Poland us­ing the Scan­dic brand, though even here Fry­den­berg doesn’t rule out in­tro­duc­ing a new brand.

It’s also true for other global brands that big­gest isn’t al­ways best. Peter Nor­man, Hy­att’s se­nior vice pres­i­dent of ac­qui­si­tions and devel­op­ment, ad­mits that Hy­att “is never go­ing to be the size of the oth­ers, and that’s not our strat­egy.” In­stead, Hy­att con­cen­trates on “grow­ing re­spon­si­bly and sus­tain­ably,” an ap­proach that has seen it reach 700 prop­er­ties in more than 50 coun­tries across six con­ti­nents, yet it is still only one-tenth the size of Mar­riott.

“We can show that our ho­tels out­per­form the com­pe­ti­tion in many of the mar­kets, and that’s be­cause guests love the ho­tels,” says Nor­man. Hy­att’s growth is com­ing through ex­ist­ing and new-ish brands such as the Hy­att Re­gency in Dus­sel­dorf, the Hy­att Cen­tric Gran Via in Madrid, the Hy­att Place at Frank­furt Air­port and An­daz (a Mu­nich prop­erty will open at the end of 2018). It also has the in­evitable col­lec­tion brand (called the Un­bound Col­lec­tion) with fa­mous prop­er­ties such as the Mar­tinez in Cannes join­ing it and, at the end of 2018, a new cen­tral Lon­don prop­erty in the for­mer home of the Met­ro­pol­i­tan po­lice called (in full) The Un­bound Col­lec­tion by Hy­att, Great Scot­land Yard Ho­tel, Lon­don.

It’s not just large ho­tel com­pa­nies cre­at­ing (or ac­quir­ing) new brands. There are smaller com­pa­nies cre­at­ing in­no­va­tive chains. How­ever, as Sébastien Bazin points out, “These in­ter­est­ing funky trendy brands, they are sexy from year one to year five, and they maybe grow to 25 prop­er­ties, and then they aren’t as trendy as they once were,” he says. “Then they start to look for an um­brella and they come to talk to the big op­er­a­tors.”

BET­TER TECH­NOL­OGY

The other big push by ho­tels is in tech­nol­ogy, though un­like the con­sen­sus on brands, here opin­ions dif­fer. Ho­tels have be­come far more so­phis­ti­cated at cap­tur­ing our busi­ness di­rectly by us­ing ho­tel loy­alty pro­grams to of­fer ben­e­fits such as points and free WiFi. Once they have our per­sonal data through the pro­gram, it al­lows them to mar­ket di­rectly to us and also to “per­son­al­ize” our ex­pe­ri­ence, some­thing of a buzz­word in re­cent years.

We are also see­ing bet­ter tech­nol­ogy in the rooms, though it’s cer­tainly taken long enough. Most busi­ness trav­el­ers of a cer­tain age will re­mem­ber how ho­tel rooms – even in lux­ury ho­tels – only of­fered a cou­ple of wall sock­ets for power. The good news is that the new de­signs have fi­nally caught up with our need for power, and even the de­mand for free WiFi.

But what should ho­tels be do­ing on the tech­nol­ogy front to sat­isfy not only the busi­ness trav­el­ers of to­day but those of to­mor­row, “fu­ture-proof­ing” the rooms so they do not quickly be­come ob­so­lete? Al­though a lot of in­no­va­tion has come from trendy smaller brands such as Ci­ti­zen M, the larger brands such as Ac­corho­tels, Mar­riott and Hil­ton have all set up their own in­no­va­tion labs to test new tech­nol­ogy, pro­duc­ing such gee­whiz gad­gets as shower cu­bi­cles which al­low you to sketch out your morn­ing ideas on the steamy glass. And that’s only the be­gin­ning of the rev­o­lu­tion.

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