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Under the microscope: rebranding
September 24 2008

Hoteliers must proceed carefully when pursuing a rebrand.  Communication is key to executing successfully.

NATIONAL REPORT—Living through a hotel rebranding is a lot like a new-build process. It’s probably more of a challenge because there’s behavioral change, along with different services and a different style at a property, but usually everyone gets pumped up about it, says Gerry Chase, COO of New Castle Hotels.

Chase, who’s rebranded close to a dozen hotels, emphasizes the importance of weighing the rebranding decision carefully.

“Make sure it’s the right brand in the right market and that the distribution will support it,” he said. “Make sure you don’t have a lot of excess supply in that particular flag.”

Chase also advocates getting buy-in across the board.

“You have to clearly communicate what the change is and the benefits to everyone involved,” he said.

That includes the shareholders, lender, management and employees. A failure to secure that buy-in can result in lost momentum.

“You don’t get as quick a ramp-up because you have to deal with the fallout of the missed communication,” Chase said.

Shelton, Connecticut-based New Castle has 31 hotels comprising more than 3,800 guestrooms in its portfolio.

The process that leads to a decision to rebrand is critical. Terry Bickhardt, co-president of Waterford, Connecticut-based Waterford Hotel Group, which manages 26 properties comprising more than 3,600 guestrooms, said Waterford sometimes will consider rebranding when a franchise agreement reaches expiration and a particular market indicates an upside in repositioning. When the current brand offers its property improvement plan, Waterford analyzes the expense of implementing that PIP versus the investment required to switch brands and shift the property’s position in the market.

 “Most of the flags have done a great job in identifying what a brand is and what it should do, so there’s not a huge call to rebrand,” Chase said.

But sometimes, rebranding is in order when supply has shifted, minimizing the performance of a particular brand, Chase said. Or, more simply, maybe a brand simply is not appropriate for that hotel anymore.

Rebranding can be expensive. Bickhardt estimates the cost of rebranding a 200-room hotel in the $200,000 to $300,000 range, with the old and new brand’s PIPs being equal. That cost factors in the application fee, signage, logoed items and the property-management system. Other costs to consider include those of any restaurant changes. In older properties, replacing kitchen equipment is costly.

Although the costs of furniture, fixtures and equipment and room packages generally are comparable between brands, the expense of making exterior changes to the building can be very costly, Bickhardt said. Lobby, guestroom and bathroom size also can limit a property’s rebranding options.

Bruce Stemerman, strategic advisory and asset management managing director for Jones Lang LaSalle Hotels, points out the variations in rebrandings. He’s lived through some brand changes under the same flag, like going from a Marriott full-service hotel to a Courtyard by Marriott, or vice versa, as well as complete changes in brand. Stemerman stresses the significant difference between a simple rebranding and one coupled with an operator change.

“If you’re retaining the same operator and merely changing a brand, it’s a much more fluid, simple process,” Stemerman said. If you’re changing the operator and the brand, he cautions that it can be “very disruptive from a personnel perspective, and that transition needs to be planned out much more thoroughly.”

Once the decision to rebrand has been made, having the right team in place makes all the difference. Stemerman said that like anything else in this business, the devil is in the details.

“The more you plan it out, and the more scheduled out the game plan, the smoother these things go,” he said.
 
Bickhardt said that his company is fortunate to have an in-house technical-services department that takes the lead in implementing rebrandings. It procures all the items in the property improvement plan, pricing them and working them into an implementation schedule. The group works closely with the interior design team in speccing all the equipment.

“If you don’t have those resources in-house, you have to make sure that the third party who purchases, procures and specs all of this FF&E is shopping it and getting the best prices,” he said. He said that a lot of good third-party companies do this work, but it’s vital that your operations team works closely with them.

Don’t miss the boat on the ramp-up, advises New Castle’s Chase. Get the sales effort lined up for the rebranding.

 “You have to start out with the general manager and the director of sales to make sure those two people are hired to support what that brand should do,” says Chase.

Bickhardt advises attention to detail. Furniture might look great, but sit in the chair; make sure it’s comfortable. Fabrics should be both beautiful and able to weather a six- to seven-year cycle of use. He advises sliding the rebranding schedule rather than starting without all the components in place.

Another decision that needs to be made ahead of time is whether the hotel will remain open during the rebranding. Often there’s more of an impact after a reopening.

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