LODGING brings you the third installment of our three-part Ownership Series, providing owner perspectives on various hot topics and industry trends. We speak with Ketan Vora, founding partner of real estate firm Edgewater Group LLC, about his approach to soft branding. At The Lodging Conference 2022, our team will conduct a roundtable with owners on the topics covered in the series.
For both travelers and hotel chains, an independent hotel offers a unique value proposition: a sought-after destination, a special history, a design imbued with local flavor, an innovative dining experience, and other intriguing features. While boutique properties understandably want to retain their individual identity and operational approach, many seek the advantages of being associated with a hotel brand to help lower customer acquisition costs, benefit from the technology and innovation investment of a larger hotel company, and derive greater purchasing power through volume. At the same time, they do not wish to lose their independence and commit to the terms of a traditional franchise agreement.
In such circumstances, a soft brand relationship may be ideal: The independent hotelier gains the visibility of the parent brand and access to its many business-enhancing resources designed to deliver better performance, while the parent brand gains a desirable new addition to its portfolio. The often-happy medium between full independence and franchise status has led to nearly all the major chains launching soft brand collections.
However, an independent hotelier thinking about signing with a particular brand should not be swayed merely by the popularity of soft branding. Rather, the advantages that come with that affiliation must be carefully weighed, as well as the potential working relationship: Does that parent company understand the boutique property’s market and goals, and will the soft brand association allow enough operational freedom?
For Ketan Vora, founding partner of real estate firm Edgewater Group LLC, Choice Hotels International “passed” this assessment back in 2018 when three of Edgewater’s hotels joined Choice’s Ascend Hotels Collection. They include the Wyvern Hotel in Punta Gorda, Florida, a chic boutique property that features a rooftop tapas restaurant and an art deco piano bar, and two properties in Apalachicola, Florida: the Water Street Hotel & Marina, with 30 suites featuring private verandas on the waterfront, and Coombs Inn & Suites, comprised of three downtown Victorian mansions complete with original oil paintings.
In general, Vora’s team was attracted to the enhanced market reach that came with the new affiliation, which he describes as “plugging into the power of the Choice brand.” “Non-branded distribution channels are limited to local visibility, your own Web presence, and then obviously, the OTAs,” he explains. But in addition, Vora found that the working relationship was conducive to attaining the next level of success for the three hotels. “Their flexibility to adapt to the varied needs of our guests and responsiveness to any situation that we may need guidance and/or support on further confirmed our commitment to the brand,” he says.
Maintaining Operational Freedom
Indeed, the flexibility of the parent brand and the operational freedom it allows the hotels in the collection can vary and must be taken into account. Despite the “soft” brand agreement, brand-wide initiatives could impose on the independent hotelier’s business strategy, design approach, service style, amenity offerings, etc. Operational freedom was especially important to Vora, who wanted the three properties to enjoy the leeway of adapting to changing guest needs in their local markets. “Having the flexibility to be able to deliver personalized experiences without being held hostage with the one-size-fits-all mindset provides both the operator and the brand the ability to achieve efficient scalability and responsiveness for our guests,” he says.
While the one-size-fits-all approach may be fine for the many business travel-oriented hotels in primary markets, he feels it generally does not work well for mid-market upscale hotels, such as Edgewater’s properties. “Being focused in secondary and tertiary markets, a soft brand enables us to tap into the market segment need for travel with a unique distinction/differentiation to the guest’s travel experience. For the most part, travelers are out there with a slightly different pace than they are in a primary market. They may have some extra time and would like to take in our local culture, music, etc.” For example, at the Wyvern Hotel, the local culture is brought indoors to create a distinctive experience for arriving guests. “We support the Visual Art Center in Punta Gorda, and as part of that partnership, we have local artists provide artwork for the lobby that updates every six months and gives the guests a really nice feel when they’re walking in,” says Vora.
Achieving Less Reliance on OTAs
Among the major advantages of soft branding is the use of the parent brand’s reservation platform and thereby reducing reliance on OTAs. The greater financial security can certainly be attractive to the independent hotelier. “All three properties prior to the conversion/enrollment into the Ascend Collection had higher (some as high as over 50 percent) contribution from OTAs,” says Vora. “This has been reduced across the board, with the highest in our Ascend portfolio now being over 31 percent” contribution from OTAs.
As a result of utilizing Choice’s reservation platform, RevPAR has increased at two of Edgewater’s three Ascend properties in recent years, representing an overall approximately 25 percent increase in RevPAR.
Capitalizing on the Parent Brand’s Platforms and Services
Access to the business-enhancing tools of the parent brand can be another advantage of soft branding. For example, Choice Hotels introduced the revenue management tool ChoiceMAX in 2021, which helps affiliated hoteliers determine ideal room pricing. The mobile app provides real-time updates on inflation, room type prices from other Choice hotels, competitor prices, and other key data. Prices for the upcoming 14 days are automatically updated up to four times daily, and competitor prices are updated twice daily. ChoiceMAX also forecasts and provides prices for the next 365 days. The tool “enables us to leverage the investments and learning across the entire organization versus a select few owned/operated assets,” says Vora. “It constantly updates itself and provides good guidance and a strong first step toward managing your rates.” For convenience, the system is cloud-based, allowing owners/operators to update their revenue strategy from their mobile phone in real time.
Brand-wide sustainability initiatives can also benefit soft-branded properties, just as they help franchisees. Choice Hotels recently contracted with Schneider Electric, a digital automation and energy management company, to help track affiliated hotels’ energy and water consumption. At the time of this writing, Choice Hotels was in the process of piloting Schneider’s energy data collection software, Resource Advisor, which will help affiliated hotels identify potential energy efficiency opportunities. For example, the dashboard will calculate carbon emissions based on energy usage. “It’s important for us to explore ways that we can be much more sustainable as a hotel operator and owner,” notes Vora, whose properties have been utilizing Choice Hotels’ existing services in this area.
The parent brand’s more robust promotional vehicles can also be an asset. “The larger reservation system allows you to get a much better and wider kind of distribution channel within the loyalty members” in Choice Privileges, Vora points out. “And the brand itself allows you to tap into guests that otherwise would not know of your property, even traveling through the area or by the area. So for us, [the soft brand relationship] really does add to the ability to reach a greater audience. Also, whenever we’ve had opportunities to share our stories [of corporate citizenship] with the brand, they’ve done a really fantastic job of sharing it with the larger audience through their social media and outreach program.”
Benefitting From Brand Leadership
While the parent brand generally has less operational oversight of a soft-branded property than a franchised one, quality leadership is nonetheless important to all affiliated hotels. In the case of Ascend, “strong, competent, and stable leadership” helps to ensure a promising future for the brand, says Vora, who is a member of the Ascend Owners Advisory Council.
Those leaders, he observes, have thus far demonstrated the ability to create “a platform that allows owners to effectively compete both on the top and bottom line in their markets” and can be expected to further enhance that platform down the line. As a result, he is optimistic about growing Edgewater’s collection of Ascend properties: “We continue to explore opportunities [to acquire hotels] and bring them within the soft brand. Unlike 2018 when we enrolled, we now know how the program works, and we know the consistency and the commitment of the leadership.”
The takeaway for independent hoteliers considering joining a soft brand is to ensure they are not only connecting to a network and a toolbox. They are also benefitting from a team of executives whose vision and business practices align with their own.