LOS ANGELES — The value of a brand on a luxury hotel depends on various factors, largely driven by market and what a specific brand can deliver to a project.
During the "On the Hunt for Greater Profit: Development and Repositioning" session at the 2024 Meet the Money Conference, Manhattan Hospitality Advisors founder and Managing Director Jack Westergom said investors have to "really analyze the market."
"One size doesn't fit all," he said. "There's some markets — suburban markets — where you almost have to have a brand to survive. In urban markets, you don't necessarily have to."
Westergom said the value of a particular brand also must be weighed against the overall objectives of an investment.
"It's what brands are available to you and what type of returns are you looking for and what your hold time is," he said. "If you're looking for three years, maybe you don't want to sign a 30-year, no-cut management agreement. If you're looking for three to five years to build a hotel, develop it and sell it, you can probably get by without" a brand.
Westergom and other panelists raised concerns of a value dilution for brands with Westergom noting "there's a brand for every star in the sky."
Ross Greenman, vice president and general counsel for KSL Resorts, said the number of brands available can undercut the "authenticity and the ability to give guests something that's really unique and special."
"The results that are the most successful are the ones that bring something to the table that is really unique and special to the market that they're in," he said. "Those are assets that can be successful with or without a flag."
With that being the case, Greenman said it's incumbent on hotel owners to weigh the added franchise or management fees that come with a brand against the "extra benefits and marketing" they provide.
Amy King, vice president and luxury, lifestyle and corporate development for Hilton, said it's incumbent on the brand to see a project from both its own point of view and the point of view of owners to maximize value and performance.
"The best projects are those where those [points of view] converge, meet and align," she said.
King said understanding owners have objectives for their investments and brands have a vested interest in pleasing their customers and getting into destinations is key.
"You're providing a great experience for guests that are going to pay a premium to stay in a hotel that they are loyal to the brand and all the attributes that brand can bring to a project. That is driving profitability for the owner," she said.
There's "no magic formula" to make sure you're picking the right brand for a market or destination, King said, but it comes down to understanding what demand hoteliers want to lure to a property. She added one key indicator for that from a brand perspective is "turn down" data, which shows what markets potential guests have been looking to stay in but the brand doesn't have "the product to offer in that market, whether it's rooms or meeting space."
"That can be a really compelling or illustrative indicator of how successful our hotel will be in the market under one of our brands," she said.
Scott Lockwood, regional vice president of development for Choice Hotels International's Cambria Hotels brand, said it can also help when brands are willing to put capital into a project to know their interests are aligned with other investors.
"You've got to put on the developers' mindset," he said, adding Choice has spent $750 million in key money and capital support over the past eight years to get projects off the ground.
Greenman said KSL prefers to work with brands that will allow them to keep a more local element to a specific property, pointing to the Fairmont Grand Del Market operated by Accor as one of its most successful brand partnerships.
"It's about finding those local elements because that's the key for us in so many ways," he said.