Soft brand rise gives hesitancy to independent owners
 
Soft brand rise gives hesitancy to independent owners
06 JUNE 2016 9:12 AM

Independent hoteliers must weigh the costs and benefits before joining a soft-brand collection.

LONDON—The seemingly unstoppable rise of hotel company soft brands and collections is adding pressure on boutique and independent hoteliers and owners to join the party.

But the pros and cons of such a move should be carefully mulled over, said sources speaking at the “Brands v Independents” session at the recent Boutique and Lifestyle Hotel Summit in London.

Panelists said there should be two primary considerations when deciding whether to join a brand of soft-brand collection: The effects of adopting brand standards, and whether brands take out more in fees than they created in additional value.

“Some soft brands in my opinion have had a hard time reaching a critical mass, with the exception of (Marriott International’s) Autograph Collection,” said Larry Spelts, VP of business development for Charlestowne Hotels. “That lack of critical mass has not allowed customers to see definitely what the brand is about.”

Nick Turner, managing director of Bespoke Hotels International, asked why he should have to take a 700-page book on brand standards when he thought his hotels are very good already.

“How would those standards be able to be applied effectively? There is a big divide between brand standards and deliverables, and of course they come with costs, too,” Turner said.

Spelts agreed it was critical to ask if the brand added more value than it extracted.

Spelts said usually there is enough quantifiable data to answer that question.

“When I have seen the costs of many of the new soft brands I have been gobsmacked that there was very little difference between their costs and those of the established brands,” Spelts said.

The chain representative on the panel, Andrew Shaw, associate VP of development, U.K. and Ireland, InterContinental Hotels Group, said he agreed the boutique space is where independent hotels really can pull their punches alongside brand offerings, but chain boutique flags still offer advantages like quicker-than-average ramp up and scale.

“(IHG) now (has) 68 Hotel Indigos from a standing start, and Kimpton (Hotels) has the opportunity of having a truly global platform,” Shaw said.

Banks and boutiques
Turner said hotels in the sector often benefit from third-party management. Bespoke manages approximately 120 independent hotels in the United Kingdom, as well as international properties and eight hotels under its own Hallmark brand.

“Third parties allow you to bring out the very best in any proposition. When it comes to boutique properties, the hotels themselves must be allowed to be the real hero, not the flag over the door,” Turner said.

But Spelts said banks have a different perspective.

“Banks, of course, are so much more comfortable going with a brand when they need to add debt. … But even though you might lose a little occupancy when you go independent or soft brand, you still might come out on top, although … maybe banks do not see it like that,” Spelts said.

Shaw said brand success has allowed a larger source of capital to come into the boutique and independent sector.

“Another thing Kimpton has done is bring a different type of owner into the sector,” Shaw said. “Kimpton in the U.S. is primarily owned by private equity and institutional owners, and that will be the case in our first European hotel in Amsterdam. That owner might not necessarily come into the game in Europe without brand recognition.”

Review scores
Philipp Weghmann, EVP, Europe, of market representation firm Preferred Hotels & Resorts, said reviews might be more meaningful than brands. He said tour operators in Europe still hold sway with leisure travelers, while travel agencies remain important in the U.S.

“Tour operator-driven business is healthy, certainly as you do not want to get all your bookings through the large online travel agencies, which is a very consolidated area,” Weghmann said. “We’re waiting for new players in the OTA worlds, but that is not happening, which is not good news for hotels,” Weghmann said.

Weghmann said OTAs will likely continue to have a disproportionately large effect on independent hotels.

“OTAs love independent (hotels) as we do not have the commission rates that brands have already negotiated with them,” Weghmann said.

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