A flurry of entrants to the hotel market’s soft brand space in recent years has raised questions as to its enduring viability. Is this shift in the brand landscape warranted? And how does performance in these soft brands compare to that of their more traditional, “hard” brand counterparts?
To begin to answer those questions and more, we first must understand what constitutes a soft brand—a segment’s whose very name suggests an indefinable blurring at the edges. While STR does not categorize brands as either “soft” or “hard,” a useful framework was offered by The Highland Group consultancy, which describes soft brands as “individualized hotels that give owners and operators the opportunity to affiliate with a major chain distribution while retaining their unique design, name, and orientation.” This definition is distinct from that of both “boutique” brands and “lifestyle” brands.
Since 2012, this group of disparate offerings, on average, has consistently outperformed the rest of the hotel industry (i.e., both traditional “hard” brands as well as true independent properties).
Soft brands have put more “heads in beds,” with occupancies hovering in the range of 66 percent to 70 percent. Hard brands reported occupancies between 62 percent and 67 percent during the same period, while independent properties failed to surpass 63 percent.
That strong base of demand has allowed soft brand operators to yield higher average daily rates. In the 12 months ending March 2017, soft brand ADR was $207.55. Hard brand and independent ADRs were much lower at $124.10 and $123.71, respectively.
Given the interplay between occupancy and ADR, it should come as no surprise that revenue per available room for soft brands also tracked higher at $143.36, compared to $82.96 for hard brands and $77.24 for independents.
The careful observer would be quick to point out a nuance not reflected in the data above. To compare hard brands with soft brands is not so much apples-to-apples as it is apples-to-McIntoshes or apples-to-Galas. That is, the collective hard brand umbrella comprises brands at all classes and price points, whereas the soft brands identified in this analysis are concentrated in the luxury, upper-upscale, and upscale classes. Viewed through this lens, it’s no wonder soft brand KPIs are much higher.
Hard brands in the luxury, upper upscale, and upscale classes have posted occupancies that are 7 percent to 8 percent higher than soft brands since 2012 on a trailing-12-month basis. Interestingly, hard brands at the higher end of the market have not been able to leverage that position of strength to generate higher pricing; soft brands were consistently priced higher, which resulted in higher RevPARs as well.
While further analysis is warranted, the data suggest that soft brands continue to make a splash, both in the hearts of consumers as well as in the pockets of owners.
About the Author
Patrick Mayock is a director at STR.
