Soft brands have seen impressive growth and performance since the concept launched almost a decade ago. As the sector expands to target properties at lower price points, it’s set to continue on the same trajectory.
GLOBAL REPORT—Since Choice Hotels International pioneered the soft brand in 2008 with its upscale Ascend Hotel Collection, the sector has been on a steady upward trajectory.
In 2017 alone, Ascend expects to open 45 properties, bringing the collection’s size to more than 240 hotels globally. Marriott International’s upper-upscale Autograph Collection, which launched in 2010, is the fastest-growing full-service brand launch in the industry, with 129 open hotels and 110 more in the pipeline.
Choice and Marriott deduced that both travelers and hotel owners were looking for something that didn’t exist before a decade ago, an option that gave independent hoteliers access to the global distribution engines, technology systems and loyalty schemes of the industry’s biggest players without sacrificing their properties’ distinctive hallmarks, and travelers an experiential stay backed by the reliability—and rewards—associated with a big chain.
It’s no coincidence that Autograph Collection launched in the same year as Instagram and Pinterest, said Jennifer Connell, VP and global brand leader of Marriott’s Autograph Collection and Tribute Portfolio.
“People out there were really trying to show their individual personalities in ways that perhaps they didn’t have an opportunity to do before,” Connell said. “This brand moved along with this trend and the needs of those travelers.”
At the same time, independent hoteliers were struggling following the Great Recession, Connell added, and were looking for ways to increase their demand and revenue in a difficult economic environment. Marriott, in turn, gained access to a portfolio of travelers previously beyond its reach, she said.
Ascend and Autograph Collection—as well as Starwood Hotels & Resorts Worldwide’s Luxury Collection, which has since been acquired by Marriott—were followed by the likes of Hilton’s Curio Collection, The Unbound Collection by Hyatt and several others as the sector’s growth continued. According to The Highland Group’s 2017 Boutique Hotel Report, collated in collaboration with STR—parent company of Hotel News Now—U.S. soft-brand collections, most of which are in the upper-upscale segment, grew at a compound annual average rate of 23% from 2000 to 2016 and are poised to become a significantly larger component of the hotel industry. The segment’s share is currently 0.7% of total inventory in the U.S. and it is expected to exceed 1% soon.
In terms of performance, soft-brand hotels—which are defined by the Highland Group as properties that are unique in design, individually named and branded and affiliated with a major national franchise distribution system—have held their own. Overall occupancy was 71% in 2016, above the overall U.S. hotel industry of 66%, while average daily rate has increased 3.4% and RevPAR rose 4.9% on an average annual basis from 2011 to 2016.
Expanding into an untapped segment
The launches of Hilton’s Tapestry Collection and Wyndham’s Trademark Collection in 2017 have signaled beyond any doubt that the soft-brand sector has a lot more growing to do. Both originated from the realization that there was an untapped pool of independent hoteliers in the upper-midscale and upscale segments who wanted the same benefits as their upper-upscale soft-brand counterparts and could meet the needs of experience-seeking travelers on a lower budget.
Since joining Tapestry Collection as the soft brand’s first property in June, Hotel Skyler Syracuse has gone from operating at 60% to 70% of competitive set RevPAR index to 132% in November, according to Tom Fernandez, director of business development at Syracuse-based Woodbine Hospitality Group. But even before he’d seen these results, Fernandez signed up Woodbine’s second property with Tapestry Collection, the Tailwater Lodge in Altmar, New York.
Fernandez said the appeal was a combination of the Tapestry team’s dedication to enhancing rather than taking away from the independent spirit of the LEED Platinum-certified, former temple hotel and the benefits of tapping into Hilton’s global distribution and loyalty engine.
“On the first day we went live, we had a diamond traveler stay with us and that would simply not have happened before,” Fernandez said. “Partnering with Hilton has also allowed us to bring in technology, such as the digital key, that an independent wouldn’t be able to do.”
It’s a similar story at Trademark, which launched in June. By the end of October, Wyndham announced it had broadened its global Trademark footprint to nearly 60 hotels.
“We offer hotels access to our loyalty scheme, our international sales team made up of hundreds of people all over the world with several hundred key corporate accounts, international trade shows like WTM and our revenue-management services,” said Philippe Bijaoui, Wyndham’s chief development officer of the EMEA region. “This allows properties to channel more direct bookings to their hotel while lowering their operational costs.”
How soft brands plan their growth
Tapestry Collection will have four hotels open by the end of 2017, according to Mark Nogal, global head of Hilton’s Curio Collection and Tapestry Collection. To ensure Tapestry’s continued growth, Hilton will continue to employ the same strategy it did with Curio Collection, which launched in 2014 and today has 42 open properties.
“We learned a lot from the launch of Curio,” Nogal said. “We had owners we were looking to do deals with but the properties didn’t quite match, so we knew we needed to have another category.
“There are some 17,000 upscale properties, not very many of which are branded, so Tapestry really has more opportunity than Curio. Do we want all of them? No. We’ve grown our brands organically, so we’re hand-selecting the hotels that go into our collections to make sure that we’re putting the right hotel in the right category and that what we’re doing and how we’re doing it connects with travelers. That’s a big partnership discussion that we have, which goes back and forth.”
Choice is equally focused on working with owners, according to Janis Cannon, SVP of upscale brands.
“As a franchisor, we are focused on franchisee profitability,” Cannon said. “We continuously engage with our franchisees to understand and anticipate their needs. We also pay close attention to the market, consumer trends and forecasts. This constant focus allows us to be able to stay at the forefront of the category with an evolved value proposition.”
With demand for experiential and authentic travel experiences continuing to grow, Wyndham, Choice, Marriott and Hilton are all predicting robust growth for their soft-brand offerings in 2018 and beyond. Kim Bardoul, hotel analyst at The Highland Group, said the question is whether the brands with lower price points can recreate the level of success the sector’s higher-end concepts are continuing to enjoy.
“There may be room to segment these hotels by price point—it’ll be a different experience but I don’t see why [brands] can’t capitalize on design and uniqueness and offer it at a lower price point,” she said.