Executives outline the case for new brand development
 
Executives outline the case for new brand development
04 OCTOBER 2018 7:47 AM

Executives from global hotel industry brand companies discussed how the peak of brand development is still in the distant future as long as hoteliers continue to meet the demand and desires of guests.

LONDON—The search is on for white space in a world of brand overload, and the answer could come in multibranded hotels and finding value by constantly improving the relationships between brands, owners, operators and investors, according to sources.

Two executives from North American hotel companies gave the benefit of their experiences at a panel titled “View from the top: Development insights” at the Hotel Investment in Europe Conference.

Jim Chu, SVP of franchise and owner relations at Hyatt Hotels Corporation, said success comes from a multifaceted approach. For example, Hyatt has been busy in Europe developing its Hyatt Place and Hyatt Centric brands.

“It is about discipline for us at the top end of the tiers we compete in,” Chu said. “This is a strategy that allows us to differentiate ourselves in each segment and allows our customers to find one of our products in the cities they are travelling to. Our customers understand it, and also importantly our owners understand it.”

Kenneth Hatton, SVP of global development at Belmond, said his company realized it needed to be flexible within a competitive, global market of numerous brands despite only having its Belmond hotel brand.

“Historically, we’re a collection of hotels, but since the creation of the Belmond brand, it has allowed us to bring out the commonalities, not so much the brand standards,” he said, who added the goal of his hotels was to underline the experience of each of its destinations. “Then we ask, how can we find other places that are that special? We must be comfortable in saying no, so we spend a lot of time filtering through to find something that is special.”

Hatton said Belmond is moving from being an owner-operator to one that also incorporates third-party partnerships.

Development dreams
Chu said with plenty of diligence there is enough space for differentiation for more brands, but scale is key.

“The industry now is better suited to acquire brands or start with a platform,” he said. “I think our Andaz brand, now almost 10 years old, would have been difficult to start without scale.”

Hatton noted the difference between developing a brand in the U.S. versus Europe.

“The U.S. is 70% branded, Europe 30%, the (United Kingdom) 51%, but at the bottom of it all is about how well you manage your hotel,” he said. “There are plenty of rubbish brands out there, and the questions are: Are there brands that should be taken over? Are there independents that would be better off under a brand?”

Brand recognition is equally important, Hatton added.

“There is room to move into the unbranded arena without insisting on brand standards, certainly as such owners will not put in the CapEx, but our owners want a brand that is recognized by the guest,” he said. “We compete within a narrow brand, with our rates up at the top, and that is a hard slog to keep owners happy. If you do not (keep them happy), you will destroy the brand.”

Chu said Hyatt increased the number of developers it worked with, while Hatton said that would also come about if it can be shown loyalty is increasing.

“Our guests would go to the ends of the earth to hang out with their kind of person, so geographically there is a lot of room for us,” Hatton said. “In luxury, a lot of things have moved in terms of owning that (segment), so white space will be around revenue outside your core. We are not fully sure what a lot of what that (white space) will be, but it will be around what are the kinds of things our guests want to do. How do we keep them engaged in Belmond, and what revenue opportunities will come from guests wanting to be part of that lifestyle?”

Europe
Chu said it would behoove hoteliers to realize Europe is enjoying about as stable an economy as it has ever seen.

“Despite the things that raise an eyebrow, Europe has good performance metrics,” he said. “Yes, it’s expensive to get deals done, but there is a lot of interest. Maybe it is time that is the issue, to get things done in an expeditious, efficient timespan. … We have approximately 800 (assets), and still we think we have lots of runway.”

While both the U.S. and Europe have geopolitical and economic concerns that hoteliers worry have a negative impact on travel demand, panelists said there’s no need to spend much time worrying about them.

“There’s a lot of European capital coming into the U.K., and you wonder what they are doing, maybe seizing an opportunity?” Hatton said. “Every market is so specific as to why something will or will not grow.”

The capital for new developments is equally flexible, Chu said.

“It depends on the product,” he said. “Select service is more local, and I do not see any financing issues. We are looking at a lot of public-private convention center hotel deals in the U.S., and in Europe it might be more high-net-worth business.”

Hatton agreed.

“We’re looking at lease and (joint ventures), too, not just ownership, so again it is about flexibility,” he said. “What is the risk, and what is the reward? That opens up the conversation. We are also investing in systems and people to show we can move into third-party agreements.”

Private equity, despite well-publicized exits from hotel platforms in Europe, might also not be fully dormant.

“Three trillion (U.S.) dollars of capital have been raised by (private equity) in the last five years, and only $1.7 trillion has been allocated, and that means higher leverage,” Hatton said. “This is a systemic worry, but I am not saying that cannot be solved.”

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