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Hunter Conference Recap: Hospitality Industry’s Run on Soft Brands Will be ‘Limited,’ Say Lodging Executives

ATLANTA — Somewhere between a branded hotel like Holiday Inn and a truly independent hotel lies the “soft-branded” hotel. These properties are pseudo-independent in that they don’t adhere to hotel brand standards but their owners can tap into the networks of established chains for resources like reservation software, loyalty programs and distribution channels.

Owners franchise the hotel properties for a fee, but the operations and look more resemble an independent hotel, which is an attractive concept given how many travelers are looking for authentic experiences from their hotel stays.

“Soft brands are the hot product in the hotel industry,” said Jeff Higley, vice president and editorial director of Hotel News Now/STR Global. Higley’s comments came during the 31st annual Hunter Hotel Investment Conference, which was held March 20-22 at the Atlanta Marriott Marquis in downtown Atlanta. The conference drew 1,850 attendees.

Higley moderated a panel on the first day of the event that included executives from hotel brands and hospitality ownership and development firms.

Evolution of soft brands
According to lodging research and analytics firm STR, soft-branded hotels comprise a little more than 1.3 percent of all U.S. hotel rooms, but that figure is significant in that 11 years the segment didn’t exist. Choice Hotels International’s Ascend Collection, which launched in 2008, is considered the first soft brand in the hospitality sector.

Since then a number of global hotel giants have established their own soft brands, including Marriott International’s Autograph Collection, Starwood’s Tribute, Red Roof’s The Red Collection, the Unbound Collection by Hyatt, Best Western’s BW Signature Collection and Curio, A Collection by Hilton.

And the market share of soft brands is trending upward. According to STR, the number of soft-branded hotel rooms in the development pipeline totals 18,053 rooms, which represents 2.7 percent of all hotel rooms under contract. (These include hotel rooms under construction, in the final planning stages and in the design phase.)

In addition to new openings, hotel companies are purchasing soft brands. Best Western acquired global hotel brand WorldHotels from Associated Luxury Hotels in mid-February. The soft brand consists of 300 specialty hotels and resorts around the world and 31 in the United States.

Ken Greene, president of the Americas at Radisson Hotel Group, said brands like Best Western, which now has four soft brands under its umbrella, are attracted to soft brands because of the prestige they typically hold.

“For us it’s about having that quality and then linking them into our reservation platform to be able to drive in more effective, efficient business,” said Greene. “It also gives us destination locations for our loyalty program.”

Independent versus soft hotels
A few years ago, Vision Hospitality Group was in a pickle. The hotel owner and developer had to choose between branding an asset under construction in its hometown of Chattanooga as an independent hotel, which is what the community wanted, or a branded property, which is what the company was more familiar with.

“We are mainstream developers and partner with proven brands,” said Mitch Patel, president and CEO of Vision Hospitality. “It was going to be difficult to get this property rezoned, so great things do come by accident sometimes. We were going down this true, independent direction, even though we never had done anything like that.”

Overlooking the Tennessee River in Chattanooga is The Edwin. Vision Hospitality Group opened the hotel, which is part of the soft brand Autograph Collection, in October 2018. (Photo courtesy of Marriott International)

Instead of choosing between the two, Patel said that going with a soft brand made the most sense because it was the best of both worlds. Vision Hospitality opened the hotel, called The Edwin, in October 2018 under the Autograph Collection brand.

“It was a lot of fun putting the independent hotel together, but where I stopped having fun is when I started researching [property management] systems and distribution channels,” said Patel. “That’s where soft branding really helps, you get to curate the box and there’s an outlet also that you can tap into.”

Greg Mount, president and CEO of RLH Corp., pointed out that another drawback for owners of independent hotels is the operational cost. Mount said his company is actively looking to provide solutions to independent hotels whereby owners can keep their independence and be able use the company’s systems, pricing and technology at a reasonable cost basis.

“We found that most of these hotel owners are paying 30 to 50 percent more as an independent hotel than what a typical branded hotel pays,” said Mount.

Going the soft-branded route for owners saves on operational costs, but Mount said the main downside for owners would be “losing the independence of their independence.”

Greene said that soft brands could be win-win situations for both the brand and the hotel owner, but that it’s only worthwhile for the luxury segment of the lodging continuum.

“There’s a limited place for soft brands,” said Greene. “As you go down to different segments, they’re just a replacement for other brands. Our strategy is that it really plays a great role on the luxury side. Once you start to go down the segments, it gets problematic.”

— John Nelson

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