Soft Brand Launches and the Threat to Luxury Hotel Collections

During the past few years, the soft brand phenomenon has been one of the biggest stories in the hotel industry. Brands like Marriott and Hilton, seeking to get away from their cookie cutter images, have been growing collections like Autograph and Curio. made up of upscale independent hotels.

In seeking out properties to grow their collections, it might seem that the big guns could potentially be poaching properties from independent hotel consortia like Preferred Hotels & Resorts, Small Luxury Hotels and Leading Hotels of the World. But representatives from these companies say poaching incidents have been rare, and that, for the most part, the growth of upscale soft brands has had little impact on their businesses. That said, all three have recently made moves that could, in part, be attributed to the developing competition.

Leading Hotels of the World (LHW), dating back to 1928, is the granddaddy of hotel collections. Its 375 properties are all independent luxury hotels. Ted Teng, the company’s president and CEO, is emphatic in stating “there is zero impact on The Leading Hotels of the World in terms of soft brands. They do not target the same hotel owners as we do. Our solution is geared toward family owners, many who have built their business over generations, where soft brands are a good solution for institutional owners.”

Jeffrey Sirota, vice president, worldwide sales and Americas region for Small Luxury Hotels (SLH), agrees. “Most SLH hotels are individually owned, versus investor-owned. These owners are deeply involved and they want to call the shots. The hotels are passion projects and the owners want to remain in control and not have to deal with red tape brands may present.”

SLH is a collection of 500 four and five-star hotels averaging 48 rooms. Sirota, noting that “what the hotels have in common is that they are all different,” could just as easily be speaking about LHW or Preferred Hotels.

Preferred Hotels & Resorts has 650 hotels in the upper upscale and luxury categories. Robert Van Ness, executive vice president, Americas, believes a large part of the reason the soft brand concept was developed was to “stuff more of a hotel company’s brands into the same city.” While most cities can only support one Ritz-Carlton or Conrad flag, they can open multiple hotels under one soft brand’s umbrella.. Still, he observes that a number of hotels “are looking to deflag, as a greater share of the market recognizes that you don’t need a large chain to be competitive.”

Membership in a portfolio like Preferred, SLH and LHW usually costs a fraction of what it takes to be a part of a franchise or even a soft brand (which often have lower fees than standard franchises), Additionally, these groups offer shorter term agreements and more flexibility and independence in their contracts. And then, there are those brand standards.

Sirota notes that “Walking into an Autograph Collection hotel–you can tell they still have to conform to the standards set by Marriott in terms of certain requirements instilled upon them by a large brand. We don’t tell hotels what to do. We have no brand-wide initiatives. We feel like it’s a bit contrived and takes away from the authenticity.”

He continues, “Once big companies get involved, the corporate DNA takes over and there’s a loss of authenticity.” Teng concurs. “We serve those who see hotels as hospitality assets, not just financial assets. For Marriott or Hilton, soft brands will always be one of the minor solutions that they offer. We are a champion of the independent spirit…not a subset of something else. Our independence is authentic.”

That said, it cannot be denied that soft brands do have an impact on the collections. Preferred’s Van Ness notes that “franchise collections have increased the competition” when it comes to wooing owners of new-build properties. That’s often because affiliation with a bigger brand may be perceived to be beneficial for developers when seeking financing.

The soft brands also try to woo owners with the benefits of the parent companies’ loyalty programs. But Sirota notes that for unique properties, the requirements of belonging to a major loyalty program can be more of a curse than a blessing. “The loyalty programs of the big brands can be a negative. Properties belonging to soft brands are required to free up a certain amount of inventory for a percentage of the best available rate for those who want to redeem points. Members may be redeeming their points at these independent properties, but not necessarily accumulating them there. So, these hotels aren’t getting new business as a result of membership.”

Even so, SLH has been compelled to introduce a new guest loyalty program, which Sirota admits is a bit of a reaction to the soft brand competition. Invited, which launched in September, is, according to a press release introducing the program, “the result of extensive research demonstrating the benefits members most highly valued from a loyalty program directly related to their hotel stay, as opposed to wider promotions and brand affiliations.” Sirota says the new program is designed to encourage repeat business. “The program will be based on small luxuries. The more you stay, the more personalized perks you receive.”

Preferred Hotels & Resorts has reacted to the soft brand phenomenon by restructuring the company’s portfolio. Previously, notes Van Ness, “there was some confusion regarding the different brands under the Preferred Hotel Group umbrella (including Preferred Hotels & Resorts, Summit Hotels & Resorts and Sterling Hotels) and where to go for which experience. In 2015, we basically brought everything under an experience-based structure as a way to differentiate the products.”

Now, Preferred Hotels & Resorts is one brand with five distinct collections–.Preferred Residences, Connect, Lifestyles, LVX and Legend – a move that makes sense, according to Van Ness, since “experiences and authenticity are part of our DNA.”

LHW is also focusing more on authentic experiences. One of its most recent initiatives is the development of  “Destination Experiences.” The program provides guests with experiential offerings crafted by hoteliers, along with recommendations from local artisans and influencers.

While these actions may be a reaction to the competition, for the most part, the executives at all three of the collections downplay soft brands, with a belief that imitation is the sincerest form of flattery. According to Sirota, “the trends in the wider industry are now catching up to us. More than anything, we look at the introduction of soft brands are recognition that we are heading in the right direction. They are copying what we’ve been doing for years and that is validating.”