NATIONAL REPORT— It’s all well and good that the major hotel brand companies are creating and recreating brands in order to fulfill the needs and desires of today’s increasingly distinctive travelers. But without the hotel owners and developers that will build or adopt these new franchises, the brand companies will be left without the bricks and mortar means by which they can turn those travelers into guests. Thus far, roughly two-plus years into this most recent brand proliferation phase, the overall response from the major owners appears to be ambiguously mixed, with some signing on as new chain trailblazers and many others remaining on the brand investment sidelines with a cautious yet curious eye. And the reasons behind partnering with a new brand or taking the wait-and-see approach are even more disparate in nature. For one, there is New Castle Hotels & Resorts, which is already moving forward in forming development agreements for Starwood Hotels & Resorts Worldwide, Inc.’s aloft brand in what could eventually be New York and Halifax, Nova Scotia. Furthermore, according to Gerry Chase, the Shelton, CT-based company’s president and COO, the company is also interested in the soon-to-be-renamed Extended Stay by Westin product as well Hyatt Place, Summerfield Suites and Wyndham Hotels & Resorts among other new or recently acquired and rejuvenated brands. “We started out back in the day with Hilton Garden Inn in its early stages and that ended up being very successful for us,” Chase said. “Now, you’ve got aloft and Extended Stay by Westin, which are very creative and we hope to participate in their growth. Basically, you have all the brand companies right now able to test customers on what they really like because the industry is doing well. And they’re looking not just at the usual Baby Boomers, but Generation X and Y and coming up with product for those particular groups. They’ve also found that the Baby Boomers would like a fresh and innovative product. Of course, all of this does create more competition and more expense for owners in development, but it appears the customers in the end will pay more for better designed hotels.” Despite the lure of greater ADR potential, some owners remain strategically on the fence when it comes to making a commitment to the new and improved brands. Included in that group is New York-based Tishman Realty Corp., which more often than not selects a brand by identifying which one is simply not in the geographic market that is under acquisition or development consideration. With respect to new brands that are obviously not in any markets yet, Robert Snyder, Tishman’s executive vp, explained it “depends on what the brand company can show us in terms of its five-year plan and commitment to promote and market a new brand. Also, we would need to understand, at the targeted price point, if there’s room in the market for another brand and how the brand will differentiate itself.” Snyder added that aloft, for example, fills much of the company’s new brand criteria because it is filling a new market niche that’s focused on Generation X. It is also notable that Tishman already owns several Starwood-branded hotels. While it appears that firms like New Castle and Tishman can be sold on some of the new brands, other major owners appear to have their reservations about the newcomers. Equity Inns, Inc., for example, is concerned about how the lack of initial mass will affect new brands out of the gate. “The problem is that until you have enough mass as a brand to be known to travelers, you suffer,” noted Howard Silver, the president and CEO of Germantown, TN-based Equity Inns. “And the question also becomes, is the flag name or the reservation system strong enough for the new guys to make it worth my while as a developer to build those brands as opposed to known product?” With such concerns in hand, Equity Inns is nevertheless investing in a “new” brand. However, that brand— the soon-to-be-former AmeriSuites— happens to already have about 150 properties on the map and is now under the umbrella of Global Hyatt Corp. Consequently, it will soon be completely reborn as Hyatt Place. “We already own 18 AmeriSuites and between us, Hospitality Properties Trust and Hyatt, we own 104 of the 150 AmeriSuites out there and all of ours are converting to Hyatt Place,” Silver said. “So if half of the remaining franchisees do the same, then you have a brand starting next year with about 130 hotels that are brand new. Now if you’re asking me as an owner of real estate would I rather own a Hyatt Place or one of the completely new brands, I would say I’m not going to invest in the one that does not have a hotel open. We want something with some kind of mass. The Starwood name is not attractive enough yet to travelers to make them stay at an aloft. Now, if we move four years from now and there are 150 alofts or Cambria Suites, then I’d say I’d buy into it.” Heavy Competition As Silver mentioned, Hospitality Properties Trust of Newtown, MA, is the other big believer in Hyatt Place, which will be a “home run,” according to HPT’s president and COO, John Murray. He further noted that the fact that there will be about 150 Hyatt Places off the bat will give the brand a “quantum leap” over such competitors as Aloft, which he described, along with Extended Stay by Westin, as having significantly higher construction costs than originally believed. Meanwhile, on the subject of some of the other new and transformed brands, Murray pointed out that Hotel Indigo seems to be off to a slow start in what is an extremely competitive sector, Wyndham will have a tough time recovering from the damage it received before its recent acquisition; and Choice Hotels International should have focused more on its existing brands before creating Cambria Suites. Despite Murray’s opinion, several hotel investors are interested in Cambria Suites, including Sioux Falls, SD-based Summit Group, Inc., which now has four Cambrias in the works. Those four properties include the world’s first Cambria, which is scheduled to premier in Boise, ID, in December. “Out of the new brands, the one we like is Cambria Suites and we’re also excited about aloft and looking at a couple of opportunities with Extended Stay by Westin,” explained Chris Bills, the Summit Group’s COO. “We also bought our first AmeriSuites a few months ago in Atlanta and on Oct. 1 it will be converted to a Hyatt Place, so we obviously have an interest in the Hyatt Place brand. We don’t have an interest in Hotel Indigo yet, but we’ll see how it grows. The thing that concerns me about it is its conversion aspect. I don’t think you can build a consistent brand with conversions.” Less concerned with the group of new upscale brand entries is Orlando, FL-based CNL Hotels & Resorts, Inc., which today focuses on upper upscale and luxury properties. Nevertheless, the company is at the center of yet another recent brand extension in the form of the Waldorf-Astoria Collection, which now adorns CNL’s La Quinta Resort & Club, Grand Wailea Resort Hotel & Spa and the Arizona Biltmore Resort & Spa and is helping to bring those luxury properties new business. “The Waldorf=Astoria Collection is useful to us and also good for Hilton, and there are other resorts out there that could use such a sub brand and access to Hilton,” said John Griswold, president and COO of CNL. “For our three luxury hotels, what Waldorf does is bring in additional guests during certain slow times of the year. And I think the branding of it will grow and we’d be happy to grow it. But it’s very possible right now that there are other owners out there with luxury properties that are so far just looking to see if it helps or hurts CNL.” So far, those owners are definitely not alone.
