Global chains gain steam in lifestyle space
24 APRIL 2014 6:48 AM
Inspired by the growth of boutique hotels, some global hotel chains are introducing lifestyle brands in response to a shift in consumer tastes.
Inspired by the growth of boutique hotels and the ongoing success of Starwood Hotels & Resorts Worldwide’s W brand, Hyatt Hotels Corporation (Andaz), Marriott International (Edition) and possibly Hilton Worldwide Holdings are now hitting their stride with their own luxury, lifestyle brands. By launching these brands, the global hotel chains are responding to a permanent shift in consumer tastes that demand high-end design, cutting-edge technology and personalized service. It is imperative for these global chains to have a lifestyle brand to remain relevant in the eyes of consumers and expand in existing lucrative markets.
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Source: Company reports
Lifestyle brands not just a response to consumer tastes
Although a change in consumer preferences is a driving force behind the brand creations, there are other factors in play. These high-end lifestyle brands give the companies insight into the next big thing that might be rolled out to their other brands—much like the ongoing democratization of design.
There are also business considerations. Professor Chekitan Dev, a marketing and branding expert at Cornell University and the author of “Hospitality Branding” points out that market saturation and brand rights are behind the launch of these brands as well.
“Many of the most lucrative markets are saturated with traditional brands, so the next natural phase in these markets is for boutique hotels to steal share,” Dev said, adding that these new brands can allow these global hotel chains to circumvent existing market rights agreements with owners and franchisees.
The machinery of a chain offers advantages
These lifestyle brands marry the elements of an independent boutique hotel with the strengths of a global hotel chain.
Dev said loyalty programs, distribution alliances and scale are the chains’ “weapons of mass competition.” Loyalty programs have a strong built-in base of potential guests that these brands can reach. In addition, members appreciate a network that includes lifestyle brands for earning and redeeming points.
Distribution agreements also allow these brands to reach guests easily and at a lower cost, either through global distribution systems for lucrative business travelers or online travel agencies for leisure travelers. Dev said, “Scale gives them the advantage of boosting a boutique brand’s business by funneling those customers in their database that require a boutique experience, and serve existing owners that are looking to add boutique properties.”
But scale poses problems
Although the global chains have significant advantages that drive growth for these boutique brands, they do face challenges.
The main obstacle is it is difficult for a legacy company to embrace the creative ethos needed for a lifestyle brand. According to Dev, the “legacy hotels’ emphasis on consistency, efficiency and scale often hinders them from creating something that that is design-forward and quirky with a clear ‘wow’ factor.”
The desire to grow the boutique brand’s footprint works against the brand because it is difficult to incorporate the elements of surprise and unpredictability that is common in successful boutique hotels.
John Keeling, executive VP at the Valencia Group and board member of The Boutique & Lifestyle Lodging Association, said the pioneering W brand has programmed elements, such as the Wet swimming pools, the Bliss Spa and Living Room (lobby). It is difficult to be as creative on the 50th hotel as the first, especially if the company is using the same creative consultants and processes to be efficient. This is unavoidable, according to Nelson Migdal, another BLLA board member and a lawyer who specializes in hotel law at Greenberg Traurig, as ownership is separated from the brand management and without standards, inconsistencies would undermine the brand.
Lifestyle brands are a necessity for global chains
Despite the challenges of launching and growing a lifestyle brand, the global chains need these hotels to respond to changing consumer tastes and continue to grow their footprint in key markets, especially gateway cities.
While the lifestyle brands created by the global chains might sometimes lack an element of “surprise,” there will always be a consumer segment that will desire the loyalty programs and scale of a global hotel chain. Although there is a degree of overlap between the chain-backed boutique brands and independents, Frances Kiradjian, founder of the BLLA, said there will always be guests that prefer the individuality of the independent hotel; both models can co-exist.
Michelle Grant is the travel and tourism research manager at Euromonitor International, specializing in hotels research. In her role, Michelle is responsible for Euromonitor’s hotel industry research, which provides analysis and in-depth coverage of the hotel market in 211 countries worldwide. She works closely with hotel companies, providing insight into consumer trends and market performance to help clients make informed, strategic business decisions. Michelle is a respected source in the travel and tourism industry. She has presented at a variety of high-level conferences, such as the World Travel Market, La Cumbre and the Special Libraries Association and is often quoted in journals, national newspapers and trade publications. Previously, she was a research analyst for Latin America, covering industries such as financial cards and domestic electrical appliances. Michelle has a Bachelor of Arts in Economics and Finance from Washington University in St. Louis.
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