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In 2017, we’ve already seen the debut of two new “soft brand” collections from major hotel companies: Tapestry Collection by Hilton was announced in January, and most recently, Wyndham announced the debut of Trademark Hotel Collection in June.
Unlike a “hard” hotel brand like a Wyndham Grand or a Hilton Hotel, a soft-brand collection like Trademark or Tapestry is meant to appeal to independent hotel owners who don’t want to be beholden to the same strict standards as a hard brand, but want to benefit from a big hotel company’s distribution network.
Soft brand collections aren’t a new invention. Other hotel soft brands include Choice Hotels’ Ascend Hotel Collection, Starwood’s The Luxury Collection, Marriott’s Autograph Collection, Hyatt’s Unbound Collection, and Hilton’s Curio Collection, to name a few.
But whereas the first crop of these collections tended to focus more on luxury to upscale hotel properties, the newest ones from Hilton and Wyndham are more geared toward the three- and four-star independent hotel. It’s an effort on the part of big hotel companies to try to consolidate even more of the very large and very fragmented global independent hotel market.
Skift spoke to hotel executives from various companies during the annual NYU Hospitality Industry Investment conference to ask them for their thoughts on soft brand collections, and why you can expect to see even more of them in the near future.
Marriott CEO Arne Sorenson
Marriott International has a total of three soft-brand collections: Autograph Collection, The Luxury Collection and Tribute Portfolio. The company acquired The Luxury Collection and Tribute Portfolio when it bought Starwood Hotels & Resorts in 2016.
“I think, increasingly, folks like to have the best of both worlds,” Sorenson said, when asked why soft brands continue to proliferate in the hospitality industry. “And so, in the past, one world was ‘Give me the power of the reservation platform, the power of the brand, the power of the financial performance I’m going to get by being associated with the brands’ or ‘Let me live in a place which I give up all of that, but I have true independence and I can create something which looks unique, and maybe reflects my personality as opposed to somebody else’s personality and I go forward with that.’ What happened with the Autograph Collection launch was that Marriott came out and said, ‘You can have an asset that has a unique personality and still live in this Marriott system where you’re going to get the immediate benefits: loyalty and reservations.”
The company’s first Autograph Collection launch was the Kessler Collection, a group of luxury properties, in 2010. Marriott determined that formerly independent hotels saw 15-20 points of improvement in topline performance while holding on to their unique characteristics.
“And I think there is a real attractiveness to franchisees and real estate and I think, similarly, customers are saying ‘OK, well I want to know somehow that Marriott’s behind it,'” Sorenson said.
Sorenson said that when it comes to positioning Marriott’s three soft-brand collections, he said keeping properties’ individual personalities is key. He also added that Tribute Portfolio’s hotels are more in line with the “three-and-a-half stars range” as opposed to being three stars and that Marriott doesn’t intend to dabble in the three-star soft-brand space anytime soon.
“We really don’t want to have a three-star platform,” Sorenson said. “The challenge, I think, is if you move down too far that’s inevitably what happens. You’re not getting a character or personality that comes through in that hotel, that causes a customer to say ‘You know, this is cool, I want to be part of it.’ I think the three-pack that we’ve got with Luxury Collection, Autograph, and Tribute does skew much higher in this space than any of our competitors do. And that’s deliberate.”
Choice Hotels CEO Stephen Joyce
Choice Hotels launched its Ascend Hotel Collection in 2008, and CEO Joyce says it’s been a success since.
“We were first by a long shot, and we’ve been the most successful by a long shot, and the reason for that is we have enormous excess demand,” he said. “If you look around at some of the other people who have launched these [soft] brands, and you look at how much inventory they have in these markets already, I think that’s why we’re so successful, because we take an independent hotel and we will generate somewhere in the neighborhood of 65 percent of their business. We will wean them off the OTAs [online travel agencies], and we will give them a much lower OTA rate than they’ll pay. In general, an owner that joins Ascend will save enough money in the cost side to pay our fee. Then, all the revenue we generate on top of that is all pure flow through for him. That’s why it’s been a remarkable success, but it’s the combination of enormous demand, and not much supply. That’s not the same for the others, and that’s why we’ve been so much more successful.”
When asked if he thinks that the soft brand collection needs to change or evolve, going forward, to remain successful, Joyce said: “No, because actually I think it’s going to go the other way. The reason being is I think people are generally moving away from cookie-cutter consistent formulas, and they want difference. It’s not just the experiential traveler. It’s that everybody wants it. People have learned about good design and interesting spaces, and that’s what they want. They don’t want sameness. The issue is for the independent and the hotel without a brand affiliation: you can’t compete in this marketplace.”
He added that the amount of investment necessary for technology solutions is also something that’s challenging for independents to keep up with. “We spent $400 million dollars a year on technology and e-business,” Joyce explained. “Your phone, which is the hottest thing now because more than half of our reservations come in on a mobile device … two years from now you’re not going to book on that. You’re going to say to Alexa, ‘I want rooms.’ We’re way ahead of that.” [So are Best Western, Marriott, and Wynn Resorts, too.]
Preferred Hotels & Resorts CEO Lindsey Ueberroth
Preferred Hotels & Resorts competes directly with the big brands’ soft-brand collections and Ueberroth said: “Obviously, it creates more competition for us because previously we didn’t used to compete with the chains because they didn’t have product like us.”
She did, however, say that even with new collections being launched all the time, Preferred’s portfolio continues to grow.
“On the flip side, I’d say it’s been a really positive thing for us as a company — the fact that we’ve been doing this for 50 years. We’ve grown our portfolio to 650 hotels. What the chains are doing is just sort of putting a magnifying glass on something that we’ve been doing and doing really, really well. For example at NYU, there were hotel developers or even lenders or management companies that now want to talk to us that previously might not have because it just wasn’t on their radar before.”
Ueberroth said that the scale of her portfolio is also an advantage. “There are now a lot of these new soft brands and nobody’s really been able to scale that dramatically. I mean, [Marriott’s] Autograph is probably the largest at this point in time, but when we look at it from a competitive standpoint, we’re by far the largest independent, versus if you compare it to some of the other ones. The competition’s there, but not on any massive scale.”
She said of the other soft-brand collections: “They sit in a different segment. Preferred Hotels & Resorts is the master brand, and we’ve got the five segments underneath. We go from a very casual, upper upscale, to ultra-luxury. Most of these soft brands that have been launched really sit in kind of that midscale to upper upscale [category]. We don’t compete with them on all levels when you look at the type of hotel product that they’re going after to put into their collections.”
When asked if Preferred would attempt to attract more midscale properties, Ueberroth said, “I think it’s important for companies to know their core. For us the core has always been full-service, independent luxury hotels. I think that we really want to stay focused on that and not create that brand stretch. I mean, it’s one of the core reasons why we actually rebranded two years ago and retired four brands; it was really to focus what our message was with, what the brands stand for, and the type of hotels that we feel that we can really celebrate and help. The answer is ‘never say never,’ but for the foreseeable future, I don’t think we’re going to get into the select-service or midscale market.”
What makes Preferred different from the chains’ soft-brand collection involves the contract length and financial model. “The chains still have their same business model in terms of the length of contracts, which are much longer — somewhere between 10 to 15 years is what theirs are. It’s still a percentage of total revenue,” she said. “Our average contract length is about five years and ours is based on rooms revenue only and business that comes through those channels. It’s a different financial model. For a hotel owner that doesn’t want to encumber their hotel asset with a lengthy contract, that might be one reason why they appeal to us. I think, also, the hotels in our collection, they truly are one-of-a-kind gems.”
Ueberroth added, “We work similar to the big chains. We act as their brand. Whether it’s going out and getting brand-level agreements with the big metasearch [companies], which we do. Let’s act as a brand with TripAdvisor, Trivago, all the Kayaks. We’ll do those sorts of things. Obviously, the loyalty program and launching a member rate program was also important for hotels. I tell them, ‘Listen. I am trying to shift share from the OTA.’ Being able to have a membership program we think is important.”
“The OTAs, we don’t look at them as the big bad wolf. We look at them as a distribution partner; it’s just how much business hotels are putting through them that I think is really what we’re trying to shift and say, ‘Listen, we can provide you other partnerships at the brand level, or rather the distribution channels that can kind of balance that out to counteract those that previously were putting a lot of business in the OTA channel.’ We try to do a lot of things as the brand to shift the more direct business, more loyalty business, more travel agent business. We work with the hotels very conservatively to figure out what that best strategy is but we would say the OTAs, they play an important piece there. I would never tell a hotel to completely do away with it.”
Best Western Hotels & Resorts CEO David Kong
“I think the soft brands are a win-win kind of approach to branding, in a sense that they allow an independent hotel to tap into powerful reservation engines like Best Western and Hilton and participate in a lot of their programs, also without the stringent requirement of the brand standards or the brand identity requirements like logo and signage,” Kong said. “The brand can also expand its distribution.”
Kong said Best Western’s BW Premier Collection is “doing very well.” He added, “I think we’re close to 100 now around the world and it hasn’t been that long. It’s only been a little over two years and to ramp up that fast shows that there’s tremendous demand, not just in North America but around the world.”
He thinks that the international hotel market poses even more opportunity for soft-brand collections. “I think the demand for soft brands is greater outside of the United States because I would estimate about 70 percent of hotels are unbranded outside of America. The potential of having to think about a universe of potential is huge. It’s absolutely huge, so I think we will continue to see great success with it. When we launched [new franchise model] SureStay, we, on purpose, included a soft brand also. There’s a SureStay Collection for that reason and our first SureStay Collection hotel is a 100-some-year-old historic hotel that’s also a convention hotel, of very high quality. I think it has a 4.5 rating on TripAdvisor, so it shows you the potential that’s out there and the caliber of the hotels that fall within the independent hotels; they’re great targets for soft brands.”
He continued, “Going forward, I think of all the questions hotel chains should be considering, it should be: How do you put soft brands on steroids? Right now, it’s one at a time, right? Some of the other brands might boast they have 100 some hotels in the soft brands but if you look a portfolio of 6,000 hotels, that’s not a lot, right? Hardly makes a dent. I think we all have to ask ourselves, how do we put soft brands on steroids? Which would mean that the hotel companies need to take a look at how they use their website and loyalty program as a distribution platform. It’s kind of like starting an adjacent business.”
Asked for his thoughts on AccorHotels’ Fastbooking platform, where independent hotels simply pay Accor to be listed on Accor’s website without officially joining a soft-brand collection, Kong said: “I think that’s the next generation of soft brands and I think they’re brilliant in doing that, but of course, it’s not without price. If you go on that path, you’re going to start alienating your owners and licensees, and you have to have that really good story to tell.”
Kimpton Hotels & Restaurants CEO Mike DeFrino
“People do love themselves some soft brands, don’t they?” DeFrino said. “They’re not a lot of work, I don’t think. I think that it’s pretty easy to launch a soft brand because there’s so many of them. You know, the soft brands do provide a relatively easy growth vehicle for the big brands because they aren’t heavily regulated. We are, and sometimes people say, ‘Well, isn’t Kimpton a soft brand?’ It’s like, ‘No, no, all of our hotels are managed, we actually think the Kimpton brand, the experience, the delivery, the people mean something to our travelers.’ We think there are people who are looking for not just some integrity in design and restaurant, but also integrity in service and delivery and a little bit of operational credibility. And while many of the individual hotels within the soft brands have that, you just don’t exactly know because although they might be part of this collection, there’s no assurance that they’ve met any level of criteria. So, they’re certainly here to stay and we compete with them for both customers and for development. People lay us up against those when they’re considering options if they’re building or converting a property. Although we aren’t one, we are in the mix, as you might imagine.”
Dream Hotel Group CEO Jay Stein
“We’ve talked about [launching a soft-brand collection] and, to some degree Unscripted could be one because we’ve looked at some opportunities where if someone may have a strong name already that they want to work on, we might do ‘So and So by Unscripted.’ So, we’re still kind of in the feeling-out stage of that. But I don’t think we bring enough to the table where someone’s going to get overly excited when they see, ‘by Dream Hotel Group.’ So, it’s hard to say, ‘X Unscripted Hotel, by Dream Hotel Group.’ How many things are you going to be? At some point, you’ve just got to be what you are.”
Bigger brands, however, are logical owners of soft-brand collections, he said.
“But I think for the brands, what Marriott did and what Hilton did, and now many other brands following suit, I think is brilliant. But you get charged a lot of money. You buy a soft brand, but you get charged for a hard brand. There’s no fee difference. And a lot of times, if they deliver, why should it be less? But we play in a different field. Our fee structures are significantly different. I think if, in Market Square, we do what we’re supposed to do, we will do as good numbers as those brand hotels will do, and that’s why developers find us as an exciting option to look at, to not go with a big brand but still be with a real management company that has brands that speak to some of our core guests.”