Brands Remain Backbone Of Most Portfolios

NEW YORK— If anyone thinks the lodging industry couldn’t possibly cram more brands into the public consciousness or that developers are getting fed up with ever-thinner niches being carved, they would be wrong. Branding has become the consumer bellwether, giving credibility and cachet to everything from beans to boutique properties. Savvy hotel companies have seized on “the power of the brand” to attract owners and developers to their folds, and despite increased consolidation, continue to create interest by adding new product. Witness InterContinental Hotels Group’s new lifestyle brand, Indigo. Or Choice Hotels International’s just launched Cambria Suites, positioned as “lower upscale” to interest developers but touted as “upscale” in terms of what it will deliver to guests [see separate story in this issue]. Going back to the drawing board has become a good thing. In its annual brands report, HOTEL BUSINESS® took the pulse of where brands sit right now in the industry’s outlook. “Over the next few years it’s likely that there will be more consolidation and probably more extensions versus outright new brands. Launching a new brand is prohibitively expensive and, unless a company has deep resources and staying power, I think it’s very, very difficult to succeed,” observed Bobby Bowers, vp of Smith Travel Research. “The bigger, well-managed companies probably will continue to grow while many smaller companies will have to fight for resources and will find the going tough against the 800-pound gorillas.” While brands have distinct advantages in terms of leveraging a global CRS or national sales team, owners consider a raft of characteristics when making a choice. With 95% of his 20 properties branded, Barry Lall, president/CEO of San Diego, CA-based Pinnacle Hotels USA, cut to the chase. “The brand needs to help produce financial results for the hotel: name recognition by the guest and a well-defined product that is easy for the guest to identify with is critical. At the end of the day— although as an operator I am also responsible— I need the power of the brand to generate reservations, especially when demand in the area is low. In essence, the power of the brand should allow me to cannibalize from other weaker brands.” Lall believes, ultimately, it’s still a hotel’s location, along with curb appeal, structural and interior design that help determine its advantages. Thomas Parrington, president/CEO of Atlanta, GA-based Lodgian, looks for consumer recognition and loyalty, and the brand’s ability to combine that with strong technology, to drive substantial business to the hotel. “Improved RevPAR and RevPAR index premiums are a critical factor for all franchisees,” he added. Of Lodgian’s 86 properties, 97% are branded. Among the key reasons the company maintains that course, indicated Parrington, is a level of confidence in the product. “As a company without its own brand, we are dependent upon the existing brands for consumer recognition to drive revenues. By acquiring or converting a hotel to an established brand, we have a much better handle on what we can afford to pay for the acquisition and how it will perform in the future.” Noble Investment Group’s President/CEO, Mitesh Shah, turns to “quantifiable customer preference drivers” when considering brands for the Atlanta-based company. Vijay Dandapani, COO of New York’s Apple Core Hotels, termed reservation contribution for the market in question (not necessarily national averages) most important. “A logical corollary is the number of hotels and their nationwide (if not international) presence. The least important is development incentives; there’s no point in getting a ‘freebie’ that gets you into a rut in terms of poor reservations contributions.” Issues All of Apple Core’s six properties are branded, and although the portfolio is small right now, the company decided to reflag one hotel when Dandapani. felt he was competing against the franchise compan