SAN DIEGO—At a time when seemingly no one but die-hard hoteliers have anything to do with hotel development, there are several consumer brands that are taking the plunge.
Three of those adventurous entities spoke about creating a viable product for the hotel industry during the “Brand Extensions into Lodging—‘Chic’ consumer brands enter the hotel industry” panel last week during the Americas Lodging Investment Summit at the Hilton San Diego Bayfront.
Virgin Group, the venture-capital conglomerate founded by Richard Branson, has set its sights on establishing a Virgin hotel brand. Anthony Marino, managing partner, leisure fund, for the company, acknowledged there is no shortage of hotel brands (OK … “way too many”), but in the lifestyle arena there might only be two or three relevant products.
“We’re in this for the real estate opportunities,” he said. “There are lots of nice hotels that have been built, but there is no excitement about them. There really isn’t emotional connection to that brand. … We want to be one of the top two or three brands that people care about, but the competition is fierce and it’s street-corner economics. But we think there is room for doing a better job for the consumer.”
|A suite in the Hotel Missoni Edinburgh.
Virgin started its hotel initiative one year ago with a small team in New York City that is working on the branding and operations plan, according to Marino. The four-star brand will capitalize on Virgin’s image as a feel-good, fun and edgy brand that appeals to a large demographic. The particular design aesthetic is not as much a part of the brand image, he said.
Baccarat Hotels and Resorts, founded by Starwood Capital Group, seeks to infuse unique hotels with the glamour, seduction and celebration of its namesake crystal brand, said Neil B. Jacobs, president, global hotel operations for Starwood and president, Baccarat Hotels and Resorts. It was announced in 2007 and has one residence project open in Shanghai.
Development of the brand has been slowed considerably by the global economic downturn, Jacobs admitted. “To launch brands in this climate is not simple,” he said. “We think we can have more success in Asia Pacific and the Middle East rather than North America or Europe. We don’t see that changing much for the next 12 to 18 months.”
Hotel Missoni, developed by the Missoni fashion label with a worldwide license agreement with The Rezidor Hotel Group, is the only brand that boasts an open hotel property, which opened June 2009 in Edinburgh, Scotland.
The project is on schedule, having signed two to three deals last year, said Gordon McKinnon, executive VP and chief branding officer, Carlson Hotels Worldwide/The Rezidor Hotel Group and brand leader, Hotel Missoni.
The first ingredient in any brand extension is a viable business model, the panelists said.
“The idea was not to turn hotels into Baccarat retail showrooms,” Jacobs said. “It’s about having a few touches that represent the brand. It’s more about the DNA, energy and experience you’re creating in the property through the brand that makes it viable. ”
Virgin Group is not in the vanity brand business, Marino said. “We want to make money with real estate,” he said. “We’re not doing it for grandeur of brands that don’t work for the customer. We’re working within the constraints of a business with significant capital requirements.”
Each of the companies did some homework, but with a new brand it’s not necessarily a priority to ask the customer what they want because they might not even know, the executives said.
“Nobody said in a research survey 20 years ago, ‘I want a fax machine,’” Marino said. “People don’t always know what they want. There are simple things that don’t always come out in the research, and we try to extract those things ourselves.”
Hotel Missoni relies on the strength of the original brand image.
“Sometimes we have to take risks and move forward,” McKinnon said. “We didn’t do a lot of research. We talked to consumers to identify certain big brush strokes, but we did not invest in a huge amount of research.”
Baccarat has the benefit of a leader with a bit of hotel branding experience—Barry Sternlicht, who formerly ran Starwood Hotels and Resorts Worldwide.
“We have a chairman with a pretty good track record in the hotel industry,” Jacobs said. “He felt that given that he owned a crystal company, he had the opportunity to do something with it. We’ve done some focus groups to see how people feel about Baccarat.”