When every major hotel chain has a plethora of brands—and new ones being announced all the time—it can feel overwhelming for hoteliers determining which one to choose for their assets. That’s why it’s best to tap into experts to help aid in the decision-making process. Read on for helpful insights from three industry experts.
Owner
For hotel owner David Tart, managing partner of Raines, knowing the market is a must to choosing the right brand partner—and there are two parts to the equation.
First, he said spending time in the market and understanding the inherent need is critical. “What is the current market segmentation and booking patterns, and what is in the pipeline? This knowledge can be a simple guide to finding what brand will produce,” Tart said.
Second, hoteliers need to understand the market’s growth plan in five, 10, 20 years. “Meet with city and county council, the convention and visitors’ bureau, economic development and the chamber, and select a brand driven by the needs of the future rather than solely relying on historical and current data,” Tart said. “If you understand a market’s growth potential, you may discover a relevant brand that current data does not support.”
Additionally, he said development costs must be considered in today’s unpredictable construction environment. “Depending on a particular brand’s requirements, you could see significant cost differences per key between two brands of the same segment and chain scale,” Tart said. “Also, in this world of the next ‘new brand’ launch, approach carefully when considering if there is a need in the market you are working in.”
At the end of the day, Tart said it’s best to work with the brand most willing to work with you—and don’t be afraid to speak up. “Pick apart and evaluate every intricacy of each brand. Do not be afraid to challenge the brand design to meet your guests’ needs and the market you are working in,” he said. “While the consistencies of the brand play a significant role in a hotel’s success, it’s the unique touch points that drive the experience and differentiate from the competition.”
Operator
When it comes to choosing the right brand, Kerry Ranson, CEO of HP Hotels, said it always starts with relationships. Make sure you and the brand partner are on the same page with things such as: expectations for the projected business model, which can include costs to build or remodel; the brand’s reservation system and other technology contributions; the loyalty program; and the basic franchise fees.
“The brand partner should also be able to help with assessing specific market dynamics, including the competition, and what would be the appropriate chain scale and platform within that chain scale, whether we are talking about a new build or conversion, which seems to be an increasingly important strategy these days as a means to enhancing asset value,” Ranson said. “In short, is the property type and operating model appropriate for a given location and the guest demographic we expect to attract to it? Last, but not least, will there be someone at the brand who will be reachable and who will work with us after the deal is signed, including for the critical ramp-up phase?”
Ranson said the brand must be able to deliver reservations at rates that will fit the company’s investment model. “In our experience, that often comes down to the brand loyalty program and the demographic and the number of guests within that demographic that the program can deliver to a given property,” he said.
And in an industry where new brands are always being launched, Ranson noted that “they can’t be seeded in all markets at once.”
“That desired guest may find you in a secondary or tertiary market, but the brand, at least in its earlier days, may not be able to deliver a location in larger markets that the same guest would like to visit. Pioneering a brand can get expensive on our dollar,” he added.
Franchisor
“Choosing the right brand partner requires an early emphasis on alignment between the owner and brand as well as a broad understanding of multiple market dynamics,” said Tiffany Cooper, head of development at Kimpton Hotels & Restaurants.
“Additionally, identifying a brand that can lower the cost of guest acquisition via sophisticated global distribution systems and robust loyalty programs has become even more critical to compete successfully.”
Cooper noted a few essentials for hoteliers to keep in mind when choosing a brand:
- What already exists within the market? Is a specific brand available? What is the potential white space within the market for a given brand?
- How is performance trending? How have the specific hotels within a brand performed from an occupancy and average daily rate perspective? What factors are driving—or are expected to drive—business and revenues?
- What’s in the pipeline? Is there a need for more extended-stay, transient or conference group hotels in a given area? Likewise, is there a potential risk for oversaturation within a given market?
“It’s also important to take the health and strength of the parent company in relation to specific markets into consideration,” Cooper said. “Underbranding a hotel in a thriving market could sacrifice top-line ADRs, while overbranding an asset could impact bottom-line numbers.”
Cooper said partnership, communication and collaboration are crucial. “Ideally someone who likewise is willing to collaborate, listen and respond to the needs of owners and guests alike. Leveraging your relationships and networks—especially trusted experts, advisors and owners who have experience developing and overseeing properties within specific brands—can inspire more guided and effective decisions,” she said.