Nobody can say that the hotel business suffers from a lack of brands — more than 1,000 are in operation, according to STR’s most recent global list of chains. And they continue to multiply.
For most major hotel companies, there’s no end in sight to the number of brands they can either dream up or acquire.
Marriott has 30. Wyndham has 20. Hilton has 14 and counting. AccorHotels has 24, not including soon-to-be-acquired Mövenpick Hotels, or luxury rental platform Onefinestay. InterContinental Hotels Group will have 14 once it adds Regent Hotels.
“There is no such thing as too many brands,” Tina Edmundson, Marriott International’s global brand officer and luxury portfolio leader said at the recent Skfit Forum Europe in Berlin. “It’s like being too skinny or too rich.”
Edmundson’s thoughts on brands were later echoed by AccorHotels CEO Sebastien Bazin.
“Anyone telling me ‘You should limit the number of brands,’ I think, is bullshit,” he said bluntly.
Bullshit or not, the debate about brand proliferation is something very much on the minds of the hospitality industry, not just for companies like Marriott or AccorHotels, but for one other very critical stakeholder: hotel owners.
Hotel owners, like Lightstone president Mitchell Hochberg, whose development company owns a number of branded hotels, often cite brand proliferation as one of their “biggest challenges.”
Why? The more brands any one hotel company has, the higher risk of an individual hotel owner’s business being hurt — not only from competitors’ brands but from cannibalization within the same brand family.
Owners’ concerns about brand proliferation aren’t new to the hotel industry, but given the increasing consolidation that’s taken place in the past four years, any trepidations owners already had have only been amplified.
And that’s where hotel companies like Radisson Hotel Group, formerly known as Carlson Rezidor Hotel Group, see room for opportunity.
“Our pie may be smaller than the big guys, but we have a very compelling value proposition for an owner,” Ken Greene, president of the Americas for Radisson Hotel Group said. “They don’t have to worry about us bringing in another property in the same space.”
Radisson Hotel Group has a considerably smaller number of brands than its peers with just eight, “one for each category or chain scale,” Greene noted.
So, who is right? Is it true that you can never have enough brands? Or is it better to keep the number of brands to a minimum? Can a hotel brand ever just disappear? Skift spoke to Marriott’s Edmundson, AccorHotels’ Bazin, Radisson’s Greene, and Dream Hotel Group CEO Jay Stein for their differing takes on brand proliferation and its business impact.
The Case for More Is More
For large hotel companies like Marriott and AccorHotels vying to be the go-to “platform” of choice for travelers when it comes to all of their travel needs, it certainly makes a lot of sense to have as many brands as possible — at least for their bottom lines.
“[Size and scale] matters in today’s very competitive distribution environment,” Edmundson said. “You see these new entrants into the space and the more brands and hotels we have, the more competitive we are.”
The ability to book hotels online gives companies like AccorHotels and Marriott “a portal to irrigate brands,” Bazin noted. “Some brands may only ever be local,” he explained. “Some may be international because they are easier to replicate. But don’t ever be afraid of anyone buying more brands.”
Not only that, but brands still matter, especially to consumers, Bazin and Edmundson argued.
“Brands help consumers make choices,” Edmundson said. “There are so many choices out there … and the most successful brands deliver on that promise consistently. They paint a picture in the mind of consumers on what they expect from a product, service, and quality standpoint.”
Bazin likened hotel brands to friends. Why would anyone want to limit the number of friends, or brands, he or she has in her life?
“A portfolio of brands is the exact same thing as a group of friends,” Bazin explained. “Each of you has 20, 30, 50 friends. There are friends you like to work with. There are those you want to have a solid drink with. There are those you like to go out dancing with. Or go to the museum with. Brands are the same. They have a DNA. You go to a brand for a different purpose.”
What hotel companies need to make sure of, however, is making sure that each of their brands is distinctive enough to stand out from all the rest.
“The danger is having a brand that doesn’t have a very clear point of view,” Edmundson said. “If you cannot articulate what it is for the consumer, if the consumer doesn’t know what you stand for, what’s the point?”
As for hotel owners, Edmundson described the situation as “two sides of the same coin.”
“We have to work harder at pulling these brands apart to market them appropriately, and hotel owners also want growth, and having multiple brands in a market allows us to do that,” she said.
The Case for Less Is Best
Radisson’s Greene, on the other hand, feels that for his company and the hotel owners that Radisson works with, having less brands equates to more value.
“I hear a lot about how consolidation in the industry is good — the larger you are, the more leverage you get — but at some point, there are diminishing returns on that,” he said. “At some point, it can work against you. Our focus is growing the top line for owners.”
Greene said that as companies have added more and more brands in the same categories and in the same markets, it’s become harder and harder for hotel owners to (1) have “a voice at the table” and (2) see the kinds of revenues they once did.
“At some point, your existing hotel owners — the ones who got you to the party in the first place — they start to suffer,” Greene said. “They are now splitting a reservation 34 different ways versus 20, 30, or 40 years ago.”
For some companies, keeping the number of brands relatively small in any one portfolio also makes it easier to communicate with consumers and to build brand loyalty, which may seem counterintuitive to the strategies being employed by companies like Marriott and AccorHotels, who believe their many brands help build loyalty by offering more choices.
“For a small group like us, we felt like it was better to focus on a smaller group of brands and make them meaningful to consumers,” said Jay Stein, CEO of Dream Hotel Group. “When you have more and more brands, it’s harder to get loyalty [to stay consistent among all those brands].”
Stein said that when a big hotel company chooses to focus on one brand in particular, especially a newer one, it could “be pulling people out of the other brands that you own. If you launch new brands, you might actually be saying your other brands aren’t as spectacular or aren’t speaking to the core group you’re trying to reach.”
The Uncommon Case for Eliminating a Brand
When asked why it’s uncommon for a hotel company to ever completely eliminate a brand, Edmundson said it’s much harder to do, given the nature of how hospitality contracts for brands are established.
“You know, truthfully, we thought about that long and hard,” she said, referring to when Marriott acquired all of Starwood’s 11 brands. “It’s hard to do. We’re not in the manufacturing business where we can say, ‘I don’t like that anymore.’ Contracts are typically 30 years, and we have owners who can’t just walk away. Our brands are also really well distributed. Marriott’s Autograph Collection, for example, has 135 hotels — that’s 135 owners — so it’s harder to sunset a brand.”
While Stein, like Edmundson, acknowledged it is much harder for the hotel industry to remove a brand entirely than for other industries, he also wondered if more hotel companies should actively consider doing so, despite the challenges.
“If a brand doesn’t speak to or isn’t relevant to consumers, especially younger consumers, I’d struggle with that,” Stein said. “Consumers want a product that’s keeping up with trends, with technology, with their daily lives, and sometimes it’s hard for our industry to do that. We need to figure it out though, because it’s ridiculous to have a brand with hundreds of hotels that’s well known, but doesn’t resonate with a large group of consumers.”
While sunsetting a brand is easier said than done in the hotel business, Dream Hotel Group is in the midst of possibly doing just that with its Night hotels brand, which consists of two properties in New York City. One of the hotels is owned/operated by Dream Hotel Group and the other is owned by someone else.
Stein said that while the two Night hotels remain in operation, the company is currently considering investing more heavily in its Unscripted hotel brand, primarily because both brands seemed to target the same audience. In this case, it also helps that Night’s footprint is very small and Dream Hotel Group has no intentions of adding more to it.
“For us, it’s about getting a brand that makes sense for the kind of niche that we are looking for, and not having it spread out against two brands,” Stein said. “Truth is, all our brands had potential, but we had to create efficiencies where we saw the most opportunity. We did so by combining the focus of our Night and Unscripted brands into one vehicle for growth in the upper midscale to upscale tier tract. We felt our newest brand, Unscripted, was the best fit based on the brand we were building. Also, ‘Unscripted’ was easier to trademark.”
In total, Dream Hotel Group has four brands, not including Night, and like Radisson, it doesn’t have any immediate or near-term aspirations to add any more brands to its portfolio.
As the Branded World Turns
Even if hospitality companies like Dream and Radisson remain committed to sticking with the brands they have for now, there’s no absolute guarantee they won’t change their minds going forward, and pursue the path taken by brand-hungry companies like Hilton, Marriott, AccorHotels, Wyndham, Hyatt, and IHG.
And the truth is that Edmundson, Bazin, Greene, and Stein — while they all have valid points — might be missing the mark.
“They’re all wrong,” said Bjorn Hanson, a clinical professor with the New York University Preston Robert Tisch Center for Hospitality and Tourism. “The issue is that the answers you got were based on the definition of a brand from a decade ago. With the Internet and the way many people find and search for hotels now, the entire meaning and value of a brand has a whole new definition.”
Because people search for places to stay using terms other than the name of the hotel, and for brands that align with their lifestyles and offer specific things such as fitness amenities, certain types of restaurants, eco-friendliness, or even TripAdvisor reviews, there’s now this “third dimension of brands that exists,” Hanson said.
“A brand can be a single hotel if it tells a story well, and by that definition, there can never be too many hotels. If people feel it has an identity that’s unique, it is a brand.”