LONDON—At Wednesday’s first day of the Hotel Investment Conference Europe, executives from leading industry organisations met to discuss the value proposition of hotel brands.
Raj Chandnani, VP of strategy at hospitality design company WATG and moderator of the panel, introduced the discussion by saying these are interesting times for both new and established brands.
“There’s a lot of mainstream luxury brands now, we have a lot of emerging luxury hotel brands from around the world trying to make their mark either in a boutique setting or coming out of Asia, and with the proliferation of lifestyle brands as well there is a lot of brand opportunity for independent hotels and those affiliated with larger hotel companies”.
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Bart Carnahan, |
Carmen Hui, senior VP of acquisitions, Europe, with hotel real estate company Host Hotels Limited, also talked about branding opportunities.
“Most of the hotels that we look at are generally encumbered by long-term management contracts. If there is a branding opportunity, then we will go out and talk to different operators who will have a view depending on what is in the market. … At the end of the day, it’s how the hotel can best fit with the brand, what the brand will look like, what they’re demanding”.
Kingsley Seevaratnam, executive VP, Europe, at Westmont Hospitality Group—one of the largest franchisees and owners of InterContinental Hotels Group and Hilton Worldwide hotels globally, said when acquiring a new asset and potentially branding it, “considerations are driven by location and where you want to be as far as your idea is concerned, which product, and invariably you look at the market and how much money needs to be put into the asset. … Clearly for us a huge incentive would be for us to get a brand in as opposed to run it ourselves”.
Branded vs. independent
Bart Carnahan, senior VP for acquisitions and development of Starwood Hotels & Resorts Worldwide talked about the pros and cons of hard branding versus soft branding: “St. Regis for us is hard-branded—you know what you’re getting. Luxury Collection is getting close to these white brands, it has some core consistencies throughout those brands, but it gives more breadth to owner developers, so it’s not so rigid.
“When you talk about the Sheraton, it’s rigid—you need x, y and z. If you look at Luxury Collection or a W the DNA is different, the design concept is there and it’s a little bit easier. I think the market’s getting to a point where people are design-led, the customers don’t necessarily need a 35- or 40-square-meter room any more, they need the design, food and beverages and something that’s fun. And that’s going to lean more towards the people who have brands that have more breadth”.
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Seevaratnam offered a franchisee’s point of view.
“About 15 years ago we took on a couple of those boutique brands,” Seevaratnam said. “At that time, we found it made an awful lot of sense to stay with the brand. One of the big problems now is that (boutique and lifestyle) space is getting a bit overcrowded and our experience has been that to fill some of these hotels the costs associated with things like commissions are exorbitant. Given the choice, the international branding option seems to be over time a lot more tempting for a prospective owner like ourselves”.
CFO of EMEA and head of development for Europe for IHG, Paul Edgecliffe-Johnson, talked about the success of Hotel Indigo as an IHG brand. “A good brand is one that does a lot of research into what consumers want and designs something around that,” he said. “You get the brand right and you should attract a lot of demand. … For us, Hotel Indigo is our nearest to a non-hard brand in that we have to keep to certain standards. Put the name above the door, we will tell you what to do and most of the business will come through the channels”.
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Paul Edgecliffe-Johnson |
Host Hotels’ Hui said the positive aspects of being part of a larger brand are clear. “The value that the brand brings, which is driven by this distribution system, is that in the worst of times, and that’s really what people care about nowadays, you will still have that powerful network that brings in the loyalty and the customers and really provides you with that base. That’s why we’re seeing so many independents make that switch now to be affiliated with the soft brands and even a core brand if they can.
“In this environment, it is virtually impossible to go to investors with a name nobody has ever heard of. It has to be bankable and financeable”.
Carnahan at Starwood added that with nine brands now under the Starwood umbrella, brand conversion can be a challenge.
For example, with acquisition of Le Méridien in 2005: “When we converted X number of hotels, we went backwards and we had to clean that brand up. That’s one of the key things with the brand integrity—if you don’t clean a brand up then it is not going to be on brand and it’s going to have a very short life”.
Keeping big brands local
Whether it is possible and indeed preferable to incorporate a local flavour within a large brand was another key topic of discussion.
“With Indigo, we want them all to be different,” Edgecliffe-Johnson said. “In Liverpool, we focus on the music scene, in Shanghai it will be very Chinese-feeling and all across Europe we want hotels to bring in the feeling of the locale”.
Carnahan said Starwood’s upscale brands have to have local designs to get that eclectic local feeling and the company wants some of the luxury brands to be indigenous.