There may be a method behind the hotel brand expansion madness, but parent companies have to be vigilant in keeping distinct brand identities alive — especially during the current downturn in travel.
The coronavirus pandemic has sparked the worst year for the travel industry on record, and business leaders are in a survival mode of shedding unnecessary expenses and assets. But beefed-up hotel brand portfolios are likely here to stay.
Industry critics have chided hotel companies in recent years for adding so many brands. Five of the world’s leading hotel companies — Accor, Hilton, Hyatt, Marriott, and Wyndham — have more than 120 between them, ranging from Super 8 to the Ritz-Carlton and everything in between.
Not even coronavirus can deter the hotel industry’s growing embrace of so many brands operating within a single company. But global companies have to maintain distinct brand identities rather than inflate concerns of brand bloat.
“Is coronavirus going to slow down the proliferation of brands? Maybe in the short-term, but I don’t think it’s going away on a long-term basis,” LW Hospitality Advisors CEO Daniel Lesser said. “Frankly, in 40 years of being in the business and through several downturns, I don’t think I can identify a single brand that was ever retired. There are brands still around today that were here in the 1960s.”
The success of early hotels hinged on consumers’ desire for consistency. This desire ushered in an era of “cookie cutter” hotels, where people knew that no matter where in the country they were traveling, they could expect the same standards, whether that meant their children would be able to stay free of charge or that breakfast was provided.
But as competition grew and customer preferences changed, hotels began to differentiate themselves, which ultimately led to the creation of new brands.
Pre-coronavirus, companies viewed having more brands as a logical strategy to capitalize on the trend of personalized experiences across the hospitality industry at large. But given the current uncertainty surrounding travel, a beefed-up brand offering can also help companies gain market share across a variety of sectors as travel demand rebounds.
“It’s a natural progression with the evolution of the hotel industry. Having multiple brands makes sense. It makes economic sense. It makes strategic sense,” said John McMahon, CEO of booking site Five Star Alliance. “You used to be able to control the block, now you want to control the neighborhood. And Hilton, Marriott, IHG, Hyatt, they have the ability to do that with their brands.”
Distinction Over Saturation
Major hotel companies are banking on travelers craving familiarity when they once again start booking vacations following coronavirus lockdowns. Business can rebound through a combination of new cleaning protocols and brand awareness, the thinking goes.
“In challenging times, strong brands win,” said Phil Cordell, global head of new brand development at Hilton. “I think it all comes down to the strength of the individual brands. We have 18 brands, and each has a distinct value proposition for owners and guests.”
Hilton’s 18th brand — the “affordable lifestyle” brand Tempo — launched earlier this year, but Cordell said each flag fits a specific niche and has a distinct identity with guests. DoubleTree is known for its chocolate chip cookies awaiting guests upon arrival while Hampton Inn is better known for its waffles at breakfast. The Waldorf Astoria is rooted both in New York City history and ultra-luxurious service.
It also helps that Hilton’s brand growth has happened organically, Cordell added.
“As long as it gives attractive returns to owners and gives a differentiated experience to owners and guests, there’s no magic number,” he said. “We’re in a good place. Could there be other companies who need to be maybe a little more thoughtful in the approach? Probably.”
Marriott hit the 30-brand threshold following its 2016 merger with Starwood.
Even if there is a method behind brand expansions, criticism isn’t likely to abate.
Analysts still argue the brand build-up push would be vulnerable in a downturn. IHG CEO Keith Barr cautioned at a Skift forum last year against brand buildup becoming brand bloat. IHG operates 16 brands, according to its website.
“I think there are too many brands out there,” Lesser said. “There continues to be a proliferation of brand expansion and new brands coming up. It’s becoming harder and harder to differentiate.”
But he also recognizes it is extremely rare to retire a brand. While a company may decide not to expand a lesser-performing brand, if its operator is happy and continues to pay franchise fees, there isn’t a need to completely shelve the flag.
“I don’t think it’s going to necessarily cease,” Lesser said. “Hotel companies today are families of brands and the name of the game is expanding their critical mass.”
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Photo credit: Hotel companies have piled on new brands in recent years, and analysts say coronavirus isn't likely to deter the trend. Dylan Wilbur / Flickr