One thing the major hotel companies aren’t short of as they plan their respective recoveries from the Covid carnage is brands. A quick scan of their websites reveals that, including soft brands or ‘collections’, IHG has 16 flags, Hilton 18, Marriott 31 and Accor a whopping 43.
New brand launches – or in Accor’s case more often acquisitions – have come along almost as regularly as London buses over the last few years. But do four hotel groups need more than 100 brands between them, and what differentiates these brands? Could the pandemic signal the slowing down of the brand launch assembly line?
We spoke to a hotel owner, an operator and a branding expert to get their perspectives on what the future might hold.
• What effect do you think the pandemic will have on the number of new brand launches by the major hotel groups?
Neeraj Handa (Director of Cairn Group, which owns a diverse portfolio of branded and unbranded hotels across the UK): “At present brands have been focused on cleaning standards, hygiene and getting people to travel again. New brand launches have taken the back burner but by 2022 this position may change as they seek to satisfy changing tastes and behaviours.”
Josh Littman (VP development, Europe, at SH Hotels, which operates the 1 Hotels, Treehouse Hotels and Baccarat Hotels brands): “Given the precarious state of the global real estate and hotel industries, launching new, untested brands may be seen as riskier investments than more established brands or companies. That being said, there are still a number of gaps in the market for various product types, and the previous generation of corporate/MICE-driven hotels may not appeal to investors or consumers in this next stage. A strong concept, backed up by an experienced operating team that focuses on bottom-line performance could very well prove to be a great solution to the anticipated amount of distress opportunities coming to market.”
Dina Soliman-Pedersen (Managing director of branding and marketing consultancy BrandFull): “Marriott CEO Arne Sorenson recently said that the effect of the pandemic is worse than that of the great depression and the Second World War. There is no doubt the sector is devastated, so of course in the short term, the focus will be on ‘keeping the lights on’, and just survival. It takes time, effort, and money to build a brand, let alone promote it and drive its awareness, so now does not seem like the right time for new hotel brand launches. In the longer run, I think we will probably see big groups venturing into new areas to follow consumer trends and to diversify their business. For example, when the industry was disrupted by Airbnb, Accor reacted by buying onefinestay. Unusual circumstances call for unusual measures and sometimes it takes a big shock to force us to pause and assess the effectiveness of our strategies and business models. I think the race to launch new brands will slow down and more creative value-adding propositions will emerge.”
• Which type of brands do you think have had their standing enhanced by the pandemic and which have suffered the most?
NH: “Serviced apartment brands have had an elevation to their standing as consumers view them as safer due to less human contact. The demand for leisure staycation breaks has also enhanced the position of boutique and lifestyle brands as consumers look to enjoy holidays in the UK. Corporate brands that do not have appeal to leisure guests have suffered the most as leisure customers are more interested in the ancillary facilities and local beauty spots rather loyalty points.”
JL: “Longer-stay, low-touchpoint brands and lifestyle hotels with strong focus on F&B seem to be bouncing back more quickly. Large, big-box hotels, or those in secondary locations, which focus mainly on corporate or MICE demand could face an uphill battle over the short- to medium term.”
DS: “There are two factors to consider here. One is pure luck and the other is driven by the actions of the brand and its response to Covid-19. Brands that rely more on leisure rather than business are possibly in a better position. Hotels with big meeting and conference spaces and those that are based in the middle of a business district such as Canary Wharf are hit hardest. At the same time hotels in leisure destinations like Cornwall or the Lake District saw a big surge in demand during the summer months, due to people changing their travel plans to staycations. But then there is the other factor which is the brand’s own response to the pandemic. Most hotel brands responded responsibly taking measures like changing their cancellation policies, allowing for more flexible bookings, enhancing hygiene standards and adapting public spaces to allow for social distancing. Then there is another level where some brands have gone above and beyond the call of duty. There are lots of examples where brands showed their true colours; some offered free stays as a thank you to the NHS and essential workers. Some applauded their teams and guests back as they reopened the hotels. These are defining moments that leave a long lasting impression and deeper emotional connection with both staff and guests. Those will benefit in the long run building brand equity and a loyal following.”
• Is demand from guests the primary driver behind brand launches and is there such a thing as too many brands in the hospitality sector?
NH: “I don’t think demand from guests is related to brand launches. In fact I think they try to cater to changing tastes, behaviours and also to different segments of the market. The difficulty with brand launches is when the brands are too similar to each other and do not segregate the market enough to warrant a new brand from the same company. This maybe because the company needs to keep growing and the only way to do this is to introduce new brands as they already have the existing brands in the core markets.”
JL: “If guests are not interested in what you have to offer, then it would be hard to run a hotel business! It is important to not only stay on top of what guests are looking for, but to be pioneering and try to future-proof your offer to what you believe guests will be looking for down the road. It is almost as important to appeal to outside demand for patrons to visit hotel bars, restaurants, spas, and so on. Our 1 Hotels platform is a mission-driven brand that focuses on nature and sustainability without having to give up on luxury. We believe those characteristics will be around for a long time. I don’t think it is possible to have too many brands in the market. Guests will decide what works and what doesn’t, and there are some great and innovative products out there! However, I do think there can be too many brands under one umbrella.”
DS: “Giving consumers choice is a great thing, but up to a limit, for when it is overdone it becomes counterproductive. Too much choice results in decision paralysis, and while brands should serve as a shortcut for consumers to navigate a market, too many of them, especially with no point of difference, result in confusion and irrelevance. Over the last years, most of the big hotel groups adopted a franchise model, which resulted in their focus or priority shifting from guests to hotel owners. That shift led to a myriad of ‘me too’ and/or bland brands launching to meet as many owners’ requirements and budgets as possible. It has become a race for scale and signing more hotels, even if at the expense of the brand. I believe this strategy can backfire in the long run because when brands lose distinction, their core value is eroded. If the brand is no longer a driver of the booking decision, but rather standard factors like price, location or loyalty points, it becomes mere commodity. Once that is the case, why should an owner pay for a brand?”
• What do you see as being the long-term effects of the pandemic on branding in the sector?
NH: “Interestingly the global majors seem to be amalgamating their brands when it comes to COVID safe messages, such as IHG way of Clean, Hilton Cleanstay and Marriott Commitment to Clean – there is no differentiation in the message the consumer sees. However, I think this is a short-term measure and long-term I see things going back to the way they were, but with more focus on hygiene measures, reversing the trend to remove desks from bedrooms and a greater focus on leisure guests.”
JL: “I don’t know what the long term effects will be on anything. I don’t even know what’s going to happen six months down the road! I am guessing that knee-jerk reaction to the current situation is probably not an ideal strategy. However, we will probably see more products in the market that will allow for consumers to stay longer while avoiding close contact with others, a focus on wellness, urban fringe resorts, and so on.”
DS: “Consumers priorities are changing and brands will have to respond to that, not just in the way they operate, but in the way they communicate. For example, in the past brands did not have to communicate much about cleanliness as it was seen as a given. With the pandemic, they have to make it visible to guests that they take hygiene seriously. Things like leveraging technology to limit contact, whether in room access or in payment, ensuring staff has appropriate PPE, one way systems, all those touchpoints are now essential to a brand that wants to act and be seen as a responsible one that cares. The crisis in which we are living at the moment will force a market filtering and rationalisation. The number of brands in the market in my view is unjustified and unsustainable. Brands that are truly distinct and offer real value to consumers will have a better chance to come out stronger and shining the other end.”
