Over the last 10 years, the number of hotel brands has expanded at an electrifying pace. A recent Associated Press article shows that “The world’s 10 largest hotel chains now offer a combined 113 brands at various price points, 31 of which didn’t exist a decade ago.” That’s a dizzying statistic. And, there is no sign of this trend slowing down.
Of particular interest to me has been the proliferation of the new “Collections” from the large brand companies. Marriott International was the first with Autograph Collection. Hilton followed up last year with Curio Collection and Starwood has added Tribute Hotels to join its recent purchase of Design Hotels and the more established Luxury Collection. So why the “gold rush” in this space in particular?
Firstly, I think that the major brands have spotted the demographic and psychographic shift in their customers who, less and less, want scripted, cookie-cutter service. This is a long-term trend and has been enabled by the growth in the importance of the Internet allowing customers to get a good feel for their hotel before purchase. The main reason for brand standardization was the assurance of getting a similar, if not almost identical, product and service whether staying in New York or New Delhi. This was particularly important to consumers the farther afield they travelled.
But, with the enormous growth of review sites such as TripAdvisor, opaque booking sites and Online Travel Agencies such as Expedia and Priceline, consumers now have access to an unprecedented amount of information, including photographs and videos, and for quite some time have been able to book the unconventional hotel with confidence.
This change is not simply a demographic change, though this is certainly a part of the equation. No, this change is also psychographic in nature. The availability of information has fundamentally changed the way most people book travel regardless of age group. To attribute this change just to Millennials oversimplifies and underestimates the scale of behavioral change we have seen.
The second reason for the rise in the “Collection” space is that the large franchise brands are (mostly) publicly traded companies that need to show growth to their shareholders. A new brand helps add new product even in seemingly saturated markets. It also helps circumvent any territory restrictions existing hotels may have.
I speak almost daily with hotel investment groups and owner/operators of hotels. The growth in the number of brands in this space has confused many and it seems that the trade media have become confused, too, all too eager to give these new collections the moniker of “soft brand.”
The problem that I have with naming this new swathe of hotel collections as soft brands is that this name is already taken. For decades, The Leading Hotels of the World, Small Luxury Hotels and Preferred Hotels & Resorts (the company I work for) have been referred to as “soft brands” – offering some of the benefits of working with a larger organization but at a lower cost and enabling owners to retain more control of their asset.
The new collections offered by the major hotel brands are simply another form of the franchise model. They may look like a “soft brand” on the surface but they differ from the established “soft brands” in some significant ways: chiefly, they are more costly and increase the encumbrance on assets with contracts set typically at 15 years.
I think it about time we reclaimed the soft brand label for the truly independent segment and call the new brands what they really are – franchise collections.
Contributed by Jonathan Newbury, Preferred Hotels & Resorts, Chicago