REPORT FROM THE U.S.—The first few times executives from Marriott International reached out to Richard Kessler in 2009 to talk about affiliating some of his properties with the yet-to-be-launched Autograph Collection, he said “thanks but no thanks.”
So-called “soft brands” were relatively new on the scene. Though Starwood Hotels & Resorts Worldwide’s The Luxury Collection was an established player, Choice Hotel International’s Ascend Hotel Collection was still hitting its stride. And entrants from Hilton Worldwide Holdings, Best Western International and a growing number of other chains were still years away.
But after some convincing and a lot of negotiation, Kessler, who is president, CEO and COO of The Kessler Enterprise, took a leap of faith and became the first hotelier to affiliate with the burgeoning soft brand when he signed on seven of his 10 boutique hotels. (Today nine Kessler Collection properties belong to the Autograph Collection.)
The story was a little different for Colin DeMers, managing partner at the Century House Hotel & Restaurant in Latham, New York. The family-owned hotel and restaurant had a loyal local following, driven particularly by its restaurant. His challenges included keeping the elements that define the hotel and its brand while creating sales-and-marketing efficiencies. His property joined the Ascend Hotel Collection last year.
And for Edward Walls, GM of the Diplomat Resort & Spa in Hollywood, Florida, the process of aligning with Hilton’s Curio soft brand meant going from a hard-branded hotel—a Westin, managed by Starwood Hotels—to an independent hotel with a soft-brand affiliation.
In all three cases, the hoteliers made sure to evaluate both the benefits and the obstacles inherent in the soft-brand space. Here are the five questions they said every hotelier should ask before making the jump.
1. Just how much of my independence can I really hang on to?
“We develop independent, boutique properties because we believe there is a big market for uniqueness, and we didn’t want anyone to take that away,” Kessler said. “Generally, people who run independents are independent-minded people and don’t want big corporations telling them what they want to do.”
Kessler said he made it clear from the start of negotiations that some points had wiggle room and others were non-negotiable. What made the difference, he said, was that Marriott “made it clear theirs would be a very light touch,” he said.
For DeMers, retaining the loyalty of the Century House’s long-time customers was paramount. “If I so much as paint the sign out front, much less change the name on it, people will notice,” he said. “I had to be able to explain to my guests exactly what this affiliation meant.”
In the end, DeMers said his guests barely noticed a change. “They didn’t see any typical changes that would come with a franchise change and that comforted them,” he said. “The things they loved about us were still there, and none of the changes were in-their-face types of changes.”
2. What sort of brand standards will I need to implement?
For Walls, the switch to Curio and Hilton Worldwide represented a move to a lot more flexibility when it came to brand standards compared to its previous flagging as a Westin. That makes for exciting decisions, he said, because the brand’s history always has been one centered on individuality.
“The Diplomat has been around since the late 1950s, and it’s always been known as that—the Diplomat,” he said. “Whether a hotel is a Westin or a Marriott or a Hyatt or whatever, there’s a very specific formula for what that brand is about, but with Curio we have a lot of flexibility.”
The hotel was acquired last fall by Thayer Lodging Group, which moved to terminate the Westin affiliation.
He said that certain standards of guest satisfaction, quality assurance and cleanliness are of course part of the new affiliation. But owners now can have flexibility in choosing the design, food-and-beverage outposts, uniforms and amenities.
At the Century House, DeMers said the “brand standard” of utmost importance to parent company Choice Hotels International was guest experience.
“In the beginning they did a walk-through of the property and they suggested some (capital improvements) they thought we should do, but everything they suggested came back to guest satisfaction in some way,” he said. “They wouldn’t have wavered on any suggestion that had a guest satisfaction issue attached to it, and I wouldn’t have wanted them to. If they came in and said, ‘Hey, do whatever you want,’ then I wouldn’t have wanted to be part of this.”
Keeping tight control over design was paramount for Kessler as he went through negotiations with Marriott, and holding fast to his ideals on the topic worked to his advantage.
“If you give up control over product design, big corporations will vanilla-ize your product very quickly,” he said.
His tip: Make the important elements non-negotiable.
3. I could use some distribution help. How does it all work?
One of DeMers biggest areas of need before making the switch was in distribution.
“Getting distribution much beyond word of mouth was tough,” he said. “I was doing a little bit with Expedia, but a lot of my strategy was using my sales team to just go after companies directly.”
That approach was time- and labor-intensive, not to mention costly, he said, even for his six-person sales team. Affiliating with Choice’s distribution system has led to increased bookings, even for local business.
Kessler said that even though his hotels weren’t struggling from a distribution standpoint, he did notice cost savings after aligning with Marriott.
“It really reduced the cost of third-party (online travel agencies),” he said. “As an independent, I might be paying 25% or 30% to OTAs, but Marriott can go in and negotiate their (lower) corporate rate.”
For Walls, the distribution shift has been more challenging because the Diplomat went from a Starwood platform to a Hilton platform, which has created some lags when it comes to loyalty points redemption.
His solution: “Have all hands on deck and make sure you’re doing everything you can to ramp up quickly. You can’t wait for a month and think the transition will just happen.”
As a result of hard work, he said the property has been able to make up most of the Starwood Preferred Guest loyalty business it lost, some with Hilton HHonors business.
4. What if my market already has a lot of branded hotels?
All three hoteliers said that concerns about market oversaturation were worrisome at the beginning of the process, but they have worked through them.
Kessler said the key is having a good sense of what kind of business your hotel might need before you affiliate.
“These big brands definitely can generate business for a hotel, and if your market is saturated, then you will get less of that business,” he said.
However, being in a market that is popular for your new parent company’s guests can have its advantages, he said, citing Savannah, Georgia. “It was a busy market with a lot of Marriott customers swarming in already, and when they found they could use their points, it enabled us to push some rates.”
5. What will all of this cost, and what’s the ROI?
Click here to download a PDF list of soft brands and their associated costs.
“Any independent hotelier just gulps when confronted with any new cost,” DeMers said. “I had to know what our return on investment would be, and I had to work out the worst-case scenario.”
Part of what helped him through that ROI process was talking to other owners who had affiliated with Ascend. “In the end, it’s about the ROI, not just the dollar amount you’re spending,” he said.
Kessler said that while he wishes the royalty fees associated with Autograph could be scaled up over a five-year period, the ROI has come through the reservations and distribution benefits his hotels have realized, particularly when it comes to negotiating with OTAs and pushing rates.