Hilton’s interesting bet on the downturn
 
Hilton’s interesting bet on the downturn
09 FEBRUARY 2017 8:51 AM

A recent Tapestry Collection project involves converting a Crowne Plaza to a soft brand. Let’s consider what a move like that means for cycle dynamics. 

How hotel industry cycle dynamics mesh with brand launches and performance is a topic that has always fascinated me—yes, I’m a nerd and happy with that.

When times are good, guests and developers alike flock to higher-end brands and segments. When downturns happen, guests trade down, independent hotels might retreat to brands for support—and swallow the pill of franchise fees as a cost of doing business—and development of course slows way down.

When we’re in this perpetual middle, where we’ve sat for the last few years, brand dynamics also sit in the middle—it’s why developers, brand companies and guests are loving upper-midscale to upscale select-service brands that hold a lot of value for everyone.

But yesterday when I read details about one of Hilton’s first Tapestry Collection deals, I thought a little more about Hilton’s latest brand launch and how it might just be a very interesting bet on the downturn. No, I’m not endorsing the company or the brands in any way, just looking at their positioning in a way that strikes me as interesting.

You’ll recall that Tapestry is Hilton’s latest brand, this time a soft collection of conversions intended to sit in the upscale space below its other soft brand, Curio Collection.

Hilton has a couple announced deals and more in the works, and yesterday this headline caught my eye from the Richmond Times-Dispatch:

“Shamin Hotels buys downtown Hampton hotel; property to become new Hilton-branded Tapestry concept.”

What? They’re turning a Hampton into a Tapestry? Huh? But they’re both Hilton brands!

Then of course I read further and realized that in fact the buyer, Shamin Hotels, purchased a hotel in Hampton, Virginia (okay, there’s the Hampton bit), which will become one of the first to join Tapestry.

Here’s the other interesting detail: The hotel that Shamin purchased and will convert is a Crowne Plaza, not an independent.

This brings us to consider the role soft branding will play as the cycle turns. Mind you, some branded soft brands were around pre-recession, and plenty of Leading Hotels of the World and Preferred Hotels & Resorts-type organizations were around, but the majority of brand-led soft collections as we know them today launched during or after the toughest recession years.

Since then they’ve evolved to find various niches, from collections of high-end truly independent properties—like the castles in Geneva and so on—to the quirky independent boutiques and even the slew of purpose-built-to-join-Autograph-or-Curio hotels we’ve seen pop up in recent years.

But we haven’t seen a wave of established brands converting into soft brands—at least not that I’m aware of. (If I’m wrong, by all means let me know.)

Brands of course convert to other brands all the time. Owner buys it, gets a PIP, shells out a bunch of money, has a new brand which it pays fees to, and so on and so forth.

But what if that owner could buy the box—a good one, a Crowne Plaza, a Four Points, a Courtyard, a Radisson—and instead of doling out PIP money to keep it in the brand or convert to another one, that owner gets the benefit of the good box and brand support, but at (presumably) a much lower cost (factoring out that PIP and some if not all of the fees)?

Along the way, Hilton gets its organic growth and gets some fees (if not Hampton Inn-level fees, but hey, there’s probably already one in that market anyway).

It’s something interesting to think about as we all hedge on how hotels will weather the next downturn.

I’d love to hear your thoughts. Let me know what you think in the comments below, email me at sricca@hotelnewsnow.com or find me on Twitter @HNN_Steph.

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