National Report—Hotel franchisors have built their reputations on their signature brands. Brands are recognizable to loyal guests, offer the benefits of critical mass to owners and managers, and keep the growth process efficient.
But as big-name franchisors and membership companies recognize the changing nature of guests and the opportunities that creates, they often turn to soft branding--it’s an affiliation-type arrangement wherein a hotel is allowed to keep its independence in name and simultaneously plug into the robust systems and purchasing power of a large branded company, and it’s a trend that is only expanding.
Exciting future
Choice Hotels International identified the opportunity five years ago when it had the Clarion Collection, a sub-brand of Clarion. The company noticed it was getting some independent hotels, but wasn’t able to keep them because Clarion is considered midscale and has a rate cap. They came up with the Ascend Hotel Collection, which launched with 17 mostly boutique upscale hotels. “We said, ‘let’s launch a soft brand, something totally by itself with no affiliation with our brands,’” said Stacy Ragland, VP of operations for Ascend Hotel Collection.
When Ascend first launched, not a lot of money was put behind it, Ragland said. That’s changed. “They see there’s legs behind it,” she said. In that five-year span, Ascend has ballooned to include 100 hotels, with 35 properties already signed in 2013. That’s significant growth considering the company’s goal was to have 100 hotels by 2015. Ascend recently added the Hotel Elan in Calgary, a hotel in Napa Valley, Calif., one in New Orleans and three in Baltimore—the Inn at Henderson’s Wharf, Pier 5 and Admiral Fell Inn.
Executives behind soft brands agree guests aren’t always looking for the cookie-cutter experience some traditional brands have historically delivered. At the same time, owners, particularly of historic or unique properties, want to retain a property’s reputation but tap into some distribution strength.
“In today’s world, with all the distribution channels and social media, what a single hotel needs to do is not realistic financially,” said Roger Bloss, president and CEO of Vantage Hospitality Group, which launched its own soft brand, Lexington Legacy, this year. “Now you can take the power of the operator, the resources and the cost savings to a property that has a legacy, is iconic and is unique. They maintain their independence, but still use the resources of a global company.”
In most instances, soft brands are also void of the stricter standards that many franchisors require of franchisees.
“It’s looser than normal,” Ragland said. “Our operators are entrepreneurs. They don’t want someone telling them how to run their hotel. They want to operate it their way, but know they need some help.”
Lexington Legacy already has three hotels, including an international property in Indonesia, one in Las Vegas—the D Las Vegas—and the Lions Gate Hotel and Conference Center in Sacramento, Calif. Bloss said he expects to add a dozen properties over the next two years. He’s doing so by offering an à la carte to owners: “The hotels tell us what they are looking for, what their weaknesses are, and we give them a menu of what we can do and they pick and choose what they want,” Bloss said.
More hotel operators are indicating they may be exploring the space as well. For example, Hyatt Hotels Corp. acquired Austin’s The Driskill Hotel in March, and while Sara Kearney, SVP of brands for Hyatt, said the company “plans to announce the brand representation [for The Driskill] that makes the most sense for Hyatt,” it’s marketing the hotel under its recognizable name for now. Still, Kearney hinted that Hyatt is “positioning ourselves to be able to include these kinds of properties in our brand portfolio.”
Potential challenges
While soft brands, including Marriott International’s Autograph Collection and Starwood Hotels and Resorts’ Luxury Collection, are slowly becoming ways for branded hotel operators to source new business, they are not totally a new concept. The Leading Hotels of the World has been doing it for years, and as its CEO Ted Teng related, soft brands will continue to be an attractive option for hotel operators. “Chain brands are seeing a space that they aren’t playing in and saying, ‘Let’s get into it,’ ” he said.
Leading’s hotels are all luxury and mostly outside the U.S., and there’s a reason for that, Teng said. “Seventy-five percent of hotels are chain branded in the U.S.; in Europe, independents are 75 percent” of the total, he said.
Teng sees collections such as Autograph and Ascend as trying to take a chain brand franchising approach and apply it to independent hotels.