Tyler Morse, CEO of MCR Development, which recently opened the TWA Hotel, talks about the shifting power dynamic between brands, independents and hotel owners.
NEW YORK—Now that MCR Development’s TWA Hotel, a massive project which rehabilitated the former TWA terminal at JFK International Airport, has “left the nest and is flying,” CEO Tyler Morse said the company is exploring many options for its next big project.
“I have a couple of big projects I’m working on. They’re not quite at a stage where I can talk about exactly what we’re doing. Last year, we bought 26 hotels in our branded portfolio, and are very happy with those acquisitions. We’re building seven hotels in six U.S. states right now from the ground up. We have a couple of projects we’re working on here in New York City that will be coming soon,” he said.
During the recent NYU International Hospitality Industry Investment Conference, Morse spoke to Hotel News Now about the uniqueness of the fully independent TWA Hotel project. Watch the video interview below.
But the project also further revealed a trend he’s noticed for some time: A shifting in the power dynamic between owners and hotel brands.
MCR, a hotel owner and developer, has both independent and branded hotels in its portfolio, with Hilton and Marriott International brands dominating the branded side. The reality that not every hotel needs a brand flag presents options for owners, Morse said.
“The landscape is changing quite rapidly. In a good economy, which we’re in right now, the pendulum swings back to the owner side and you don’t need the brands as much. From our standpoint, the most valuable brands out there—I think there’s 150 brands in the hotel world, all in—the highest return on invested capital is Residence Inn by Marriott and Hampton Inn by Hilton. The consumers love the product, it’s a great value proposition, you get your points, and that works out terrifically. But as you fan off from those two kind of tent-pole brands, the value proposition is not as strong,” he said.
“We as owners need to say, how much am I willing to pay for distribution? This is the core question. We built the building, we run the building; how much are we paying to get reservations and how many reservations are we getting out of that? You’ve got to simply do that math, and a lot of people are doing that math and saying, hmm, maybe I should go independent. Maybe I can do this on my own. There’s a lot of conversations happening right now about the value of each individual reservation.”
Morse said the decision between flying a brand flag at a property or not depends on the property itself and the market it occupies.
“There’s a product for each market. In Manhattan, and at airports where there’s tremendous latent demand, you don’t need a brand as much,” he said.
“We own a Courtyard in Brownsville, Texas, that performs great. I will definitely want to have a Marriott flag or Hilton flag on that property down there. From a demand standpoint, you just don’t see the demand characteristics that you see in a Manhattan. You’ve got to look hotel by hotel, market by market, street corner by street corner. Sometimes you can go without a brand, and sometimes you need a brand, and that defines the leverage and the negotiating leverage with the brands.”
He added that the proliferation of brands raises questions about the value proposition of a branded hotel.
“If you look at just the Hilton and Marriott portfolio, there are 49 brands. We sit here at NYU, which is filled with hotel professionals, I would bet that half of the people here couldn’t name the 49 brands across the two 800-pound gorillas’ portfolios. And these are people who are in the industry. You go out to the consumer world, and they follow the 49 brands even less, and it becomes very noisy. What they’re really selling is the halo brand of Hilton Honors and Marriott’s Bonvoy rewards program,” he said.
It’s important to think about the value of the points loyalty programs offer, Morse said.
“Are the value of those points as good as they were in the past? You’re getting points for everything now; points from your credit card company; from your air carrier, from Expedia. Everybody’s giving you points for everything you do, so it’s a relative value of points. Are you making a purchase decision to stay in this branded family because you get the points? That’s the question you have to ask about this proliferation of brands,” he said.