NEW YORK—When it comes to franchise brands, most owners and developers will look to the flag that waves strongest in terms of recognition with consumers and hopefully delivers a robust ROI due to such awareness. But with the industry over the years adding so much new product while maintaining legacy brands, enterprising hoteliers have been expanding their horizons and portfolios beyond high-profile-only names to include what’s being categorized as “soft brands.”
For the most part these so-called “collections” are under the massive umbrellas of global lodging chains that franchise large stables of brands and
provide strong support systems for these quasi-independents.
But why would hoteliers choose to go this route? According to Jeff Long of Long and Cox Properties, the owner of the 63-room The Hotel Highland in Birmingham, AL, the decision to become part of Choice Hotels International’s Ascend Hotel Collection has proved “a huge positive.”
“As a soft conversion, we have been able to maintain our unique identity as Birmingham’s top boutique hotel while taking advantage of many of the advantages of being part of a large national brand. Going forward, we are excited about the possibility of Ascend Hotel Collection increasing the credibility and exposure of the Hotel Highland,” said Long.
Located in a historic building downtown in the Five Points South entertainment district, the Highland had suffered from what Long described as having “limited exposure to out-of-town leisure and business travelers despite our having a strong Internet site and a good local reputation.”
The hotel also is next to the University of Alabama Birmingham and is surrounded by four hospitals.
Long said by becoming part of the Ascend Collection approximately 18 months ago, the hotel has gained access to Choice’s reservations systems and rewards program and increased its presence on the World Wide Web via ChoiceHotels.com. As a result, said Long, “We are now generating considerably greater reservations despite the slow economy in downtown Birmingham.”
It also is the only Choice Hotels property in downtown Birmingham.
Long said his company has invested approximately $75,000 to bring the independent property up to meet the Ascend designation.
“Additionally, while we have had to pay some fees to become an Ascend Hotel Collection property, when you consider what we had been paying for our website, reservations systems and property management systems, the cost of joining Choice Hotels has been more than justified,” said Long.
While adhering to certain standards are part-and-parcel of signing a franchise agreement, part of the intrigue of the so-called soft brands is the ability of owners to maintain a unique property identity.
Indeed, one of The Hotel Highlands’ primary investors is Peggy Dye, who heads up her own hospitality design firm, Peggy Dye & Associates, which handled the refurbishment of the property.
Dye gave the historic building a contemporary flair, using a color palette of gold and cream for the guestrooms and suites, and created a decor experience that has a residential feel.
“Every room and space has been carefully designed and thought out,” said Long, who added his company benefits from the flexibility of the soft brand.
Long and Cox Properties, which has developed more than 50 hotels nationwide, also owns and manages. It currently own parts of seven hotels of which it manages one, asset manages three and has a passive interest in three. Among these are a full-service Marriott, a Courtyard by Marriott and a Doubletree by Hilton.
Long looked at other brands in addition to Ascend for The Hotel Highland. “We considered the Autograph Collection and Hotel Indigo. Both were too expensive to operate and convert,” said Long, who noted one disadvantage he sees in playing in the soft-brand field is that “the soft brand is not yet as well known as some other brands.”
Nonetheless, Long is interested in growing the Long and Cox portfolio in part along this avenue. “We have just submitted a Letter of Intent on a hotel in Georgia that we intend to convert to the Ascend Collection if we are able to purchase it,” he said.
The company in March also purchased a Courtyard by Marriott in Burlington, VT, and is converting a hotel to apartments in Atlanta, GA.
While Long and Cox Properties passed on Marriott International’s Autograph Collection, New Castle Hotels & Resorts did not. The Connecticut-based developer/owner/operator opted to do a joint venture to secure a hotel that eventually will become the first soft brand for its 32-hotel portfolio when it is made into an Autograph Collection Hotel.
Together with Halifax, Nova Scotia real estate developer, Southwest Properties, New Castle in April bought The Algonquin Hotel & Golf Course from the provincial government of New Brunswick in Canada, which has owned the property since 1971.
Built in 1889 as part of the Canadian Pacific Railroad chain of resorts that stretched from East to West across Canada, the St. Andrews-by-the-Sea property has been legendary among hotels, which, according to New Castle President/CEO Gerry Chase, suits his company’s overall development and growth plans.
“We are looking for historic, iconic hotels that might benefit from affiliation with a soft brand. [In addition to Canada], there currently are more than 1,000 independent properties in the United States that might be available and might
benefit from new ownership or professional management by a company with experience operating independent hotels,” said Chase.
Of the properties New Castle has in its portfolio, 20 are owned, six are managed and six are in development. Among these are four independent hotels: the Digby Pines Golf Resort and Spa, the Keltic Lodge Resort and Spa, the Liscombe Lodge Resort and Conference Center in Liscomb Mills, all in Nova Scotia, and The Craftsman in Syracuse, NY. (Marriott International, Starwood Hotels & Resorts Worldwide and Hilton Worldwide brands make up the balance of the portfolio.)
Chase said the independents are enjoying great success, “so we are attracted to this sort of project as a normal course of business. We also already were operating in Canada and had good working relationships with the provincial governments. The Province of New Brunswick was offering to finance the debt on the hotel, which made it financially attractive, and finally, it was clear to us from the outset that it would be perfectly suited for the Autograph Collection.”
To get there, the joint venture is investing $20 million into a complete renovation of all 234 guestrooms and suites, public spaces, new windows throughout the Tudor-style hotel, a new clubhouse and a three-story swimming pool slide to add shoulder season appeal. Right now, the Algonquin Resort is operating under its current name but will close in September to begin the renovation process. Moncur, a Canadian design firm known for its work on the Westin Nova Scotian and the Deerhurst Resort, will do the redesign.
The hotel is slated to reopen in June 2013 as the Algonquin Resort under Marriott’s Autograph Collection.
“The Algonquin is important to the economy of St. Andrews and the entire province, and we take our responsibility to the associates and the surrounding community very seriously. Once the renovation is completed, I am confident that it will again realize its full potential,” said Gordon Laing, president/COO of Southwest Properties, in a statement.
St. Andrews-by-the-Bay is a historic seaside community, and most of the lodging choices are independent hotels and family-owned B&Bs.
Chase said there are not many branded hotels in the market and visitors seem to appreciate the unique character of the town and its accommodations. “Affiliating the Algonquin with the Autograph Collection opens this market to loyal Marriott clients who appreciate both the perks and convenience of brand loyalty and the distinctive characteristics of a 120-year-old hotel. I see this as the best of both worlds for the hotel, the customers and the market,” said the executive.
In terms of revenue generators, The Algonquin has a tremendous following of past guests, many of whom have been taking family holidays there for generations, said Chase. The hotel is close to the border to Canada from Maine and is highly recognized throughout Canada because of its history with the Canadian Pacific Railroad.
“The hotel boasts one of the top 10 holes of golf in all of Canada, and Score golf magazine recently named it one of the top 100 courses in Canada, so golfers are a significant driving force,” he added.
Chase acknowledged pursuing soft-brand projects can have its issues. He noted, for example, that soft brands are still expanding and gaining distribution and awareness with the traveling public; however, he felt “once brand-loyal customers become aware of the ability to sample iconic, historic, one-of-a-kind properties operating under the banner of their trusted brand, I think you’ll see that small disadvantage disappear.”
Asked if New Castle had considered other soft brands in converting The Algonquin, Chase was straightforward: “Marriott is one of the strongest brands in the business and we immediately determined that their Autograph Collection was the right affiliation for this hotel. With no disrespect intended for the other soft brands, Autograph was our first and only choice.”
Much of that choice stemmed from the ability to tap into Marriott’s extensive revenue-generation engines, in particular its group sales channels, without having to conform to sometimes restrictive brand standards. “We retain the flexibility of operating as a standalone iconic property, with its own unique personality, and gain the distribution and back-of-house infrastructure that will help us bring the hotel to a worldwide audience,” said Chase.
Since The Algonquin is New Castle’s first soft-brand project, Chase was asked what the lender perspective overall is on such endeavors.
“At this time lender interest is still uncertain. Developers will need a history of success with independents or soft brands to support aggressive lending. We were fortunate that this property had the support of the provincial government of New Brunswick, which provided long-term financing to help renovate the property and reposition it as a Marriott Autograph.“
And ROI? “It will be another year or so before we can answer that question with any certainty, but as a developer, we applied our same principles: purchase at the right price, combine with proper budget for capital improvements and assess the demand generators in advance. That formula has worked so far with both branded and independent hotels and I see no reason why those principals wouldn’t apply to a ‘hybrid.’”
While New Castle currently has under development a two-flag, Springhill Suites/Residence Inn project in Syracuse, NY; a Westin in Jekyll Island, GA; a Courtyard by Marriott in Akron, OH; a Residence Inn near Northeastern University in Massachusetts; and another in St. John’s, New Foundland, Chase sees widespread opportunity for adding soft brands.
“In almost every major market in North America there are historic or iconic properties that need help to generate the additional revenues needed to carry them into the next decade. The opportunities are in resort areas and in cities large and small,” he said, noting The Algonquin is a classic example in more ways than one. “It is one of the ‘Castles of the North,’ the great hotels of North America…The advertising from 1890 claimed guests could sit on the veranda and take in a 75-mile stretch of some of the most picturesque coastline in the world. [Next year], when it’s complete, you’ll have the refined feeling of another era and the thoughtful reality of today’s amenities rolled into one remarkable location. It’s those unique combinations of attributes that make the world’s most renowned hotels, and that’s what the Autograph Collection is all about,” said Chase.