What time is the right time for a new brand?
 
What time is the right time for a new brand?
06 JULY 2017 8:08 AM

Hotel brand launches happen all the time, but what are the ideal dynamics to support a successful launch and follow-through?

I’ve covered the hotel industry for 10 years now, and while I know that’s not terribly long by many standards, it does mean that I’ve been able to see a few big-picture trends cycle through.

One of the lessons I’ve learned is that one hotel does not a brand make.

I can’t begin to count how many hotel brands have launched around the world in the last 10 years, but it’s been a lot. (Check out our 2015 brand launch timeline here, which shows some of the major launches through the first part of 2015 at least.)

Now we’re again at that point in the lodging cycle where we see new brand launches happening. In June alone, we heard about InterContinental Hotel Group’s new unnamed midscale brand and Wyndham Hotel Group’s new soft brand, and rumors always are circulating about new brands on the horizon from giants like Hilton and Marriott International.

New brand launches make me wonder about cycle dynamics. More specifically, what’s the best time in the industry cycle to launch a new brand? Or to ask it another way, is there a “bad” time to do it? And if there is a good time, what’s the best way to do it?

I’m posing this question here because I’d like to hear what those of you who have been in the industry for several cycles think about the topic. Executives at brands and hotel parent companies, of course, are terrible people to ask this question. According to them, ANYTIME is the right time to launch a new brand. They all are absolutely convinced their brand fills a huge market void, that developers are clamoring for it and that guests have zero other options to choose from, so this new brand is going to have so much demand right from the start.

They’re also always convinced they’ll be able to reach critical mass of hundreds of hotels in just a few short years (or months or even minutes, depending on who you talk to).

Again, I mean no disrespect to the Marriotts and Hiltons and IHGs of the world, but we all know that brands don’t reach critical mass this way, especially when they’re home-grown brands, not those purchased and mass-converted.

The answer to “when is the right time?” is tough to give, and it depends on lots of variables, but I would venture to guess that right now might be a bit of a gamble.

Sure, we’ve been in prolonged recovery, but no matter what metrics you look at, the downside of the cycle is coming. Some believe we’re already in it; others say the cycle looks different this time around. But regardless, it’s coming. And when construction and transactions slow down, brand growth does, too.

Let’s take a look at some of the brands that launched at the cusp of the last downturn: Home2 Suites by Hilton, which launched in 2009, has about 200 properties open. Marriott’s Autograph Collection, which also launched that year, has more than 120. That’s critical mass, I’d say.

Now look at 2010. The Best Western tiers of Plus and Premier launched that year and are doing well numbers-wise, but remember that many were re-designations of existing hotels. The other three launches that year—B Hotels, Edition and Virgin Hotels—are not so great when you look at the ability to build critical mass. I know, I know, critical mass means different things depending on the goal of the brand, but so far we have one Virgin, two Editions and a small handful of Bs.

The next couple of recession years saw the launches of several brands. Hyatt Hotels Corporation launched Hyatt House, which has a lot of locations, but many converted from former Summerfield Suites hotels and via acquisition. There was also Even Hotels, which has six open locations; Radisson Red, with three open locations; and Canopy by Hilton and Vib by Best Western—both of which have one open property—among other brand launches. Those numbers are not so great.

Many of those that launched during the recession still haven’t caught up to textbook definitions of critical mass, so what does that say about brands that launched post-recession up until today? Will Tru by Hilton, Trademark, Scion and IHG’s unnamed brand have time to gain ground before the next downturn? If they don’t, what does that mean for them?

I don’t know the answers to these questions, so that’s why I’m opening it up to you. Tell me: When’s the best time to launch a brand, or the worst time? What are the consequences if you don’t hit that launch sweet spot? Are there consequences? Inquiring minds want to know. Leave a comment below. Or you can email me at sricca@hotelnewsnow.com or find me on Twitter @HNN_Steph.

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