PwC reports wave of new brand activity

NEW YORK–– It’s no secret there have been a significant number of new hotel brand introductions over the past couple of years–– 24 to be exact in 2005 and 2006, according to a recent study conducted by PricewaterhouseCoopers (PwC). According to Bjorn Hanson, PwC principal, hospitality and leisure practice, in order to be counted in the study, a brand did not need to have an open property or even have one currently under construction. “Each brand had to have at least one hotel property in its pipeline,” he explained. “They did not have to have one under construction, but they did need to have a site selected and a commitment from a developer for at least one hotel.” Coming very close to the high of 27 new brand intros posted in 1988 and 1989, the list encompasses some names that are now very well-known such as Starwood Hotels & Resorts Worldwide’s Aloft and Element, Choice Hotels International’s Cambria Suites, and Global Hyatt Corp.’s Hyatt Place–– the latter two already having at least one hotel already open–– there were also a number of less familiar brands such as Taj Hotels & Resorts’ Blue, West Paces Hotel Group’s Capella and Preferred Hotel Group’s Montage. Hanson noted there are a number of reasons for the surge of new U.S. hotel brands, one of course being the favorable economic environment that has allowed the hospitality industry to prosper significantly over the last few years. “Construction and supply growth are continuing to accelerate and brands are trying to take advantage of that,” said Hanson. The number also reflects a collective move by hotel companies to address the needs of the growing population of Generation X and Millennial travelers, a sign of those two demographics’ up and coming influence. “Of all the brands reported, nine of them are specifically aimed at targeting the Gen X/Millennial [groups],” said Hanson. Establishing more well rounded portfolios and addressing needs that may not be met in certain markets may also be behind many of the brands that already have, or are set to debut. “Hotel companies are looking to fill in the white space–– be it a certain price point, segment or demographic–– they are examining what areas they do not have coverage in,” said Hanson. Changes to hotel companies’ existing brands have also played a role. “There has been so much upgrading of brands that it has actually created new white space because existing brands are now being positioned differently and in many cases are often infringing on the segment above them which leads to a gap,” he said. According to PwC’s study, there is also a sizeable number of new brands that are considered by the hotel companies that are developing them to fall within the luxury segment. “If you look at the existing luxury brands in the U.S., it is a very short list,” said Hanson. “Hotel companies may have the view that there are enough Four Seasons and Ritz-Carlton properties and they are looking to be the next big one.” While it may seem the industry runs the risk of flooding the market with too many new brands, Hanson commented the risk of over-saturation is fairly low. “Realistically, not all of the new brands will be successful. If you look at history, the survival rate of a brand is largely attributed to the number of properties it can have in service in a short amount of time because that is what raises consumer awareness,” he said. “The brands that can launch with some velocity and create a solid identity in the market will do well.” Hanson added that while he expects more new brands to be introduced this, year, it’s unlikely 2007 will match the numbers posted in 2005 and 2006. And although the outlook for the lodging market is still positive, he said the new brands will have to strive to stand out to survive in the event of an economic downturn. “When there is a favorable economic environment, just being different–– like in the case of the emergence of boutique hotels–– is enough. But if economic conditions change, yo