ALL INANAME
Hotel brands are proliferating. But does this signal boom or bust?
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 traveller 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. 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 there would probably be 100 between them within the next year.
Sébastien Bazin, the forthright and sometimes outspoken chairman and CEO of Accorhotels, said that he had been “dead wrong” in believing brands would gradually 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 (OTAs) 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 recognise
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, Intercontinental Hotel Group (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, having launched Avid last year in the US (75 newly built hotels have signed up to join), buying the Regent Hotels luxury brand in March 2018 and announcing plans for what hoteliers call a "conversion brand".
BRAND POSITIONING
A conversion brand is typically a brand that can be used to “reflag” an existing hotel – Doubletree by Hilton would be an example. IHG has yet to announce the name of this new brand, but it is coming, and great things are predicted for it 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 told me the expansion wasn’t just about new brands. It was also about “strengthening core brands” we know well, such as Crowne Plaza.
“We’ve been working very hard with leading designers such as Conran [Design Group] to create a Crowne Plaza to meet the needs of modern business and leisure travellers. When people travel, their down time is so important. They don’t want a stuffy hotel, they want it to be engaging, to allow them to live when travelling and to have a flexibility for when they want to work,” Macpherson says.
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 of the hotel chains.
“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, firstly 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, and that part of the reason is technology and the benefits it has brought 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. With Avid we had an advisory committee [helping establish] what are the core issues we are trying to solve [such as] how is the room going to be cleaned, how is it going to be maintained?” Barr says. IHG exited a number of contracts, with Barr saying the company had removed more hotels from its portfolio 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
If brands are a promise, why do we so often feel let down by that promise?
announced an intention to “rebrand or reposition” some 500 properties in the 1,400-strong group. Federico J González, president and CEO, told me that “over the next five years [we will increase] 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 then creates a suspicion that it will in turn be acquired. The prospect doesn’t seem to worry Gonzales.
“It’s very good in life to be a moving target. We need to play with certainties. 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 fiveyear 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