Development executives from six top hotel companies discuss the value of branded properties in today’s lodging market.
More brands are entering the hospitality space each year, and it’s becoming increasingly unclear to many owners and developers whether flagged properties will stand out and remain relevant to guests in today’s sea of lodging options, let alone years down the road. LODGING asked top development executives from six major hotel chains to weigh in on the value of branded hotels in the current lodging market, and their plans to sustain healthy brands that attract both owners and guests in the future. Below are their thoughts on priming and positioning franchises for success.
What is the value of branded hotels in today’s lodging industry?
Ron Pohl, Chief Operations Officer, Best Western: The most important element of branded hotels is that they provide confidence to the consumer, developer, and owner of the property as well as the lending institution that’s supporting it. Branded hotels support operations and all the key things that consumers look for when staying at a hotel. For owners and developers, branded hotels are less risky. In many cases, they outperform non-branded hotels on a global basis.
Greg Mount, President and CEO, RLHC: Branded hotels provide a price-value equation for the consumer. This includes not only a level of quality and service, but also an enhanced opportunity to use the aggregation of the brand to benefit from reduced costs, greater efficiency, and, in some cases, higher demand generation through the skills and resources the brand brings to the table that independent hotels cannot. Scale has never been more important for hotel companies.
How do you prime a new brand for success in today’s crowded market?
Joel Eisemann, Chief Development Officer, Americas, IHG: There are obviously lots of new brands that have been brought to market, but I’m not sure that “crowded” is a word that I would use. I would say it’s a market where some brands aren’t as differentiated as other brands are to the consumer. The word “differentiated” is really the key because if you have a differentiated product, that means you have a compelling offer, and the guest and owner really understand what your product is and the advantages of your brand. Really think about what you’re offering and what enables you as a new brand to stand out. The brand we’re launching this year is a great example of what we would strongly consider a differentiated brand. We thought about whether there was a space in the market to offer a brand below Holiday Express, but we didn’t decide to move forward until we did significant research with customers and owners to determine if there was really a need, and whether owners would be interested in developing the brand.
How are you leveraging your scale for success?
Greg Mount, President and CEO, RLHC: For RLHC, scale has some very obvious advantages. First, there is a larger pool of resources from which to promote the brand. The system offers greater distribution for consumers who are aligned with the brand, providing them with a very direct cost benefit. What is less obvious may be the greatest advantage of all: The big data it generates. We’re starting to use this data to really understand on a micro level what’s happening in our system by brand, location, region, and segment. The challenge is in interpreting that data and applying it to our marketing efforts.
How does your company help franchisees succeed?
David Pepper, Chief Development Officer, Choice Hotels International: Our annual convention is the perfect example of how Choice grows its family of franchisees. This year, more than 5,000 of our franchisees and their families attended. The convention also allows us to connect with our franchisees directly and educate them on our latest tools and resources designed to help them succeed. Choice provides an incredible value proposition for franchisees with a strong distribution and high-performing business model, with a lot of diversity and opportunity. We’re focused on helping our franchisees increase profitability and enhance their operations by driving incremental revenue. On average, hotels that use our revenue management tools see an additional 6 percent RevPAR lift, which translates directly to owners’ profits. Choice is a trusted partner with a deep understanding of our hoteliers and our consumer segment.
What is most important to franchisees?
Bill Fortier, Senior Vice President—Development, Americas, Hilton: They need to make a good return on their investment for owners, partners, and bankers. Whether it’s Hilton or another major or minor brand, if there is no return they will not be back to invest.
How do you make brands attractive to developers?
Rob Palleschi, Chief Development Officer, G6 Hospitality: For 55 years, we have focused on economy lodging. We are not distracted with other brands, or adding and growing in all different segments. I think that focus is helpful for owners and developers because it gives them confidence that we are solely focused on their success. This business is focused on what the customers want, what they expect, and how to deliver that so our owners achieve their profitability goals. We know what we are, we know what we strive to be, and we deliver on that promise.
Bill Fortier, Senior Vice President—Development, Americas, Hilton: The brands need to have understandable and recognizable swim lanes—short/extended stay, full/limited service, economy/luxury, etc. In other words, a product that reaches a certain guest segment. The brand has to stand for something and deliver a promise to the guest. In addition, the brand has to be affordable for its segment, deliver customers through the distribution systems as promised, and provide a return to the owner.
If you were an owner, what would you look for in a brand?
David Pepper, Chief Development Officer, Choice Hotels International: I would look for a company that devotes the time and resources into producing a great brand that maximizes hotel profits and meets the needs of guests, whether they’re traveling for business or leisure.
Joel Eisemann, Chief Development Officer, Americas, IHG: With a franchise model, it starts with revenue contemplation and channel delivery. Is that brand or company going to deliver a premium amount of business that I can select from and appropriately manage and drive the maximum revenue into my hotel? Also, how is the brand’s reputation perceived, and how has it grown to consistency in the market? Has the brand ever had a variation of products types, or is it consistent in what it offers across locations? The third thing I would add to the list is the people at the company where you’re doing business, because you’re entering into an agreement for a long term. When you hit speed bumps or potholes along the way, you’re going to need to talk to somebody who is able to listen, understand, and work with you to solve some of those issues no matter what the franchise agreement says.
How do you make an older brand relevant and exciting to a new generation of travelers?
Rob Palleschi, Chief Development Officer, G6 Hospitality: We are regularly trying to reinvent ourselves. We’re always looking at opportunities to improve our product and services to deliver on guests’ needs and profitability for our owners. It’s everything from fresh new designs to our new mobile app or front-desk property applications. We are constantly looking at how customers want to book, how they are finding us, and how we can simplify that transaction for them, much like everyone else is, but we have to do it within the lens of the economy segment. We can’t charge our owners exorbitant fees to produce this technology. Measure twice, cut once—from a budgeting and cost standpoint, we don’t have the luxury of rolling something out, and then fixing it along the way. We have to make sure it’s tested, vetted, and rolled out correctly or else it will negatively impact our value proposition not only for our guests, but also our owners.