NASHVILLE, Tennessee—While on a family road trip to Washington, D.C., Kemmons Wilson was unimpressed with the onslaught of unknown roadside motels that showed a lack of consistency in guestrooms. This sparked in him a desire to create a standardized brand. So, he created Holiday Inn in 1952, a standard product that lives on today.
Guests would seek out Holiday Inns because they knew what to expect while they were on the road, whether stopping in Columbus, Ohio, or New York.
Holiday Inns’ evolution showed the “value of brands,” said Charles Pinkowski, founder of hospitality consulting firm Pinkowski & Company, during last week’s Hotel Data Conference panel titled “Flag or no flag? Branded and independent hotel data takes the spotlight.”
Defining and differentiating a branded hotel and an independent hotel proved much trickier to the panelists. However, whether a hotel is flagged or not flagged—a noted brand or well-known independent—each has benefits to travelers and hoteliers.
What makes a brand?
According to STR, parent company of HotelNewsNow.com, data dating to 2006 shows branded properties have higher occupancy, higher absolute average daily rate and higher revenue per available room than independents.
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“What a brand was 50 years ago and today has changed,” said Sean Mullen, chief sales and marketing officer at Noble House Hotels & Resorts.
“Keep in mind that branded and unbranded aren’t the enemies of each other; it’s a different world for us,” said Richard Millard, chairman and CEO of Trust Hospitality, a company that operates branded and independent hotels.
If a person is traveling with their family, they might stay in a brand, but if you’re traveling to New York, a traveler might choose not stay in a brand, Millard said. “People make reservations for all kinds of reasons.”
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Soft and hard brands
“The Delano is a brand, but that brand is independent. Trump has 10 or 11 hotels, and you could argue it is a brand or not. At the end of the day, a brand is defined by the consumer. In certain markets, the brand is about experience and in other locations, brand is about comfort,” Millard said.
Pinkowski pointed to The Peabody, with three hotels operating in the United States: “It is a brand in and of itself, but it’s an independent.”
A big brand could hurt a hotel, Mullen said. “In certain hotels and locations, a brand would hurt it,” he said.
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Millard said there will be a larger presence of soft brands, including Choice Hotels’ Ascend Collection and Marriott International’s Autograph Collection, which will help market independent hotels and garner them more exposure through the brand name.
The Union Station Hotel in Nashville, for example, is a soft brand that is part of Autograph Collection. The owners put Autograph on it, but there is no evidence of Marriott’s name anywhere on the hotel, not even with its logo, Pinkowski said.
Over time, soft brands will “drive incremental business, primarily driving reservations,” said William Carlson, senior VP of performance analytics at Choice Hotels International, a franchising company that has 11 brands in its portfolio. “The independent hotel will keep its name. You won’t see a brand designation on the hotel. It will keep its local flavor and identity.”
What brands offer, Millard said, is strategic marketing. “The game has changed significantly … The business model has changed.”
“Customers want to stay in a brand family. For customers, that’s a lot of added value,” Carlson said.
A brand is built-in loyalty, he added, and a loyalty program creates an essence of reliability. Brands also have greater access to e-commerce, which drives costs down; a third party, such as Expedia or the global distribution systems also save franchise dollars.
However, independents play a bigger role when moving up the chain-scale segments, Carlson said. “Brands work with midscale and economy.”
There is potential for hoteliers to see a return on investment through social-media channels, though panelists agreed the results are still inconclusive.
“People don’t know what to do with it yet,” said Mullen.
Saving on costs
“From a developer’s perspective, a brand identity brings standardization,” Pinkowski said. But, it’s all about perception.
“It depends on your risk aversion,” Mullen said. “If you believe in human capital and that (the hotel) will outperform the marketplace, why put a brand on it?”
But there are pros and cons of each.
When it comes to renovations or property-improvement projects, Millard said brands have it right.”Lenders account for capital improvement whereas independent hoteliers can put it off.”
At a branded property, fees add up, and this includes reservation systems and marketing, he said. Brands also have operating standards relating to product quality, he said.
Yet, while independent brands eliminate those costs and have more flexibility of what they want to be or what they offer, those hotels also eliminate the advantages of being associated with a big brand, especially not having the same marketing muscle.
“A good manager—whether you’re a brand or not brand—will keep those expenses in line,” Millard said.
Either way, “a successful operator knows how to maintain quality,” Pinkowski said.