With new hotel brands launched seemingly every day, development executives with several hotel brands believe consumers will ultimately decide how many brands is too many for the industry to maintain.
LOS ANGELES—At a time when investors are bemoaning the number of hotel brands on the market, development executives at hotel brands say market forces will determine the tipping point, and perhaps more importantly, which brands will continue to thrive.
Speaking during the “The CDOs outlook” session at the 2020 Americas Lodging Investment Summit, Chip Ohlsson, EVP and chief development officer for Wyndham Hotels & Resorts, said consumers will dictate how many brands is “too many.”
“When brands stop making money and become dinosaurs, they die or go into extinction,” he said. “We’ve seen it before.”
John Russell, interim CEO for RLH Corporation, did identify brand proliferation as one of the key challenges for his company to face, although he doesn’t believe it to be an insurmountable one.
“I think an opportunity and a challenge is there are 300 hotel brands in the United States,” he said. “We’re confused, so just think about what the guest (feels). The reason we have so many hotel brands is they are personalized and customized to the traveler of today, and that’s a good thing. But it’s challenging for all of us to compete with 300 brands.”
Gaurav Bhushan, chief global development officer for Accor, said the challenge for all hotel brands is to remain relevant and address the needs of owners. Brands fail when they don’t accomplish that goal.
“In an asset-light business like we’re in, it’s when you’re not an effective traffic provider that you’re not in business,” he said. “So as long as we can, we’ll bring real value to the owner and create a product for the customer that they’re really looking for.”
David Pepper, chief development officer for Choice Hotels International, said the ultimate goal for any branding company is to create that connection to guests that translates into repeat business for owners.
“The way people book and how expensive it is to get that customer to book with you has become so difficult for the hotel owner,” he said. “That’s why you need a bunch of brands, so if someone is going to stay with Choice, they have a different brand for each experience. And it’s the same with Wyndham, Accor, Red Lion, Marriott, whatever.”
Money flowing to the midmarket
Ohlsson said the biggest space of growth for the hotel brands is in the midmarket, which Pepper further identified as upscale select-service properties and upper-midscale.
“At the end of the day, what drives the engine in the U.S. is midscale,” Ohlsson said. “So for us, the acquisition of La Quinta was very important as we grow that brand.”
Pepper said his company in particular has identified extended stay as a segment ripe for further growth, as evidenced by Choice’s launch of Everhome Suites, the company’s fourth extended-stay brand.
He said Choice has seen a significant amount of institutional investment flowing to extended-stay development, driven by unmet traveler demand for those products and high profitability.
“Our business concern from owners right now is the cost to operate a hotel,” he said. “With a WoodSpring Suites, you can operate a hotel with basically six FTEs.”
Russell said his company is targeting a somewhat overlooked segment in the industry.
“The real big (opportunity) for us is what these guys don’t want,” he said. “There are 500,000 exterior-corridor hotel rooms. We have a brand called Signature that is going to be what I call an inexpensive, chic retrofit for these hotels because they’re in great locations—Florida, California, Georgia.”