Brands leverage independent hotels’ success
22 OCTOBER 2015 8:08 AM
Profitable boutique and lifestyle hotels are often on the radar of large hotel brand companies looking to scale up their success.
SANTA MONICA, California—While it’s easier to talk about hotels in terms of being branded or independent, the reality seems to be much more fluid than that binary choice.
A group of brand executives speaking at the 2015 Boutique & Lifestyle Lodging Association Leadership Symposium’s “The blurring of brands” said the natural push and pull between these different realms of the overall industry have made it less obvious where to draw the line in the sand.
Michael Murphy, senior VP, upscale brands for Choice Hotels International, said each side learns from the successes of the other.
“I think there’s definitely inspiration coming from the boutique circle, and also brand inspiration coming from that circle,” he said.
Gary Steffen, global head of Canopy by Hilton, said the emergence of social media has made it much more likely for interesting and unique boutique hotels and chains of only a handful of hotels to succeed on their own.
“Times have changed from a marketing standpoint,” Steffen said. “Smaller brands can succeed if their messaging is relevant, fun and exciting. There will be more success for these smaller branding companies because they can reach their target audience through social media.”
Prospects for growth
But that also makes them more tantalizing targets to get gobbled up by the Hiltons and Marriotts of the world, said Kevin Montano, senior VP and global development officer for Marriott International’s Edition Hotels.
“If they’re so successful, they’ll become a target of big companies,” he said. “That’s the next step.”
Scott Bacon, VP of new business development for the Miles Partnership, said the way many boutique hotels are built puts a natural cap on how many properties they can have on their own.
“Success in many cases is achievable,” Bacon said. “The question comes down to scalability. (With many) you hit 10 to 15 hotels and you’re done. There aren’t that many cities that will fit their niche.”
Montano said cost barriers keep smaller companies from growing into larger brands.
“Launching brands is very, very expensive, especially if you want to do it globally,” he said. “I don’t think that’s easily done by independent. That’s why independent chains can be absorbed by someone after they have four or five properties.”
The combination of those factors drives many to the larger brand companies, which can either buy small chains and throw more substantial resources behind expansion or add individual properties to soft brand collections.
Keeping an independent experience
After larger companies acquire independent properties, they’re immediately presented with a new challenge: How do they incorporate the new hotels into their way of doing things without accidently losing the culture that made them successful in the first place?
Ron Pohl, senior VP of brand management at Best Western Hotels & Resorts, said there are definitely examples on how to not do that.
“You need to recognize the existing strengths,” Pohl said. “The key is to not do what the airlines did with their mergers and the thinking was ‘How do we drive profit and cut service?’ There are more stories of bad experiences with merged airlines than good ones.”
Montano said soft-brand collections have been a useful tool to bridge that gap.
“Owners love it because they can keep their identity and hook into the Marriott pipes,” he said, addressing a question on whether consumers find the collections confusing. “Is there confusion? Our data isn’t telling us that. That’s in part because they didn’t go to these hotels looking for the traditional Marriott experience.”
Montano said he expects several independent hotels will be ripe for acquisition by the large branding companies once the industry reaches the downside of the cycle.
“The downturn is when the fishing gets good,” he said.