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 Accorhotels, 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.”
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.
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.”
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 gee-whiz 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.