One of the more interesting bits of industry news to emerge this week was the announcement of a franchise agreement between Hilton and Yotel. The structure of it seems somewhat unique to me, although these sort of partnerships to tap into the network power of large brand companies definitely are growing in prevalence.
Essentially, Yotel will continue to operate just as it always has, as a small brand of 23 hotels across 10 countries that manages and licenses, but now those hotels will also be part of a new secondary brand, Select by Hilton.
Hilton officials were careful to note that "Yotel will be the first brand" for Select, which obviously indicates they fully expect there to be more.
The financial benefits of tapping into Hilton's distribution systems are likely evident to everyone reading this. But I wonder if most people are also wondering the same thing I initially did, which is some variety of "Does that mean owners will be paying for two brands on a single asset?"
To be crystal clear, I have no particular insights into the financial structure of the Yotel-Select by Hilton structure, and it very well could be a massive win for the owners of those hotels. But from a purely philosophical level, I'm sure a lot of owners will be pretty resistant to the idea of double dipping on franchise fees.
I understand this is an industry that is constantly turning over new rocks in the quest for growth, and this is only even more true of the fee-hungry C-corps such as Hilton, Marriott, Hyatt and the rest. The idea of layering a brand on top of another brand — ignoring the fact that is kind of what they're already doing with their loyalty programs — does potentially give them a new avenue for significant growth.
But it's not hard to imagine people taking the idea of adding more layers to the middle too far and ultimately hurting the two ends of the spectrum that a lot of people view as the important outcomes of this industry: owner returns and customer experience.
All of that said, it's not hard to look at this and see why it's an obvious win for both Yotel and Hilton. Hilton gets a unique type of hotel experience on their platform. Yotel gets the network benefit of the massive Hilton Honors loyalty platform and the booking heft that comes with that.
But if the typical structure of the hotel industry changes from owner-manager-brand to owner-manager-multiple brands, that will have to mean more fees paid out to those brands in order to secure better distribution. And if that's the case, why did the industry spend so much time hand-wringing about the costs of third parties like online travel agencies?
Let me know what you think on LinkedIn or via email.
The opinions expressed in this column do not necessarily reflect the opinions of CoStar News or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.