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Pinnacle Advisory Group

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Hotel Brands: The Next Generation Presented by: Katherine Chan

Presented by: Katherine Chan

In recent years, major hotel companies have added numerous new hotel brands to their portfolios. Each of these brands embrace a shift within the hospitality industry towards “lifestyle hospitality”, where hotels strive to embrace global trends such as the desire for greater connectivity with peers, honoring local culture through the development of a strong sense of place, and increasing demand for sustainable buildings and practices. These new brands incorporate these ideas within three segments of hotels: select service, extended-stay, and luxury.

By expanding their brand offerings, hotel companies are better positioned to cater to the present and future needs of its guests. This forward-thinking practice adds value to the hotel company’s loyalty program as it not only increases the amount of hospitality options to suit guests’ needs, but also keeps guests from leaving the system.

Selecting a new brand for a hotel product can be advantageous to hotel ownership for several reasons:

1. The facilities, amenities, and services offered by a new brand are carefully crafted to ensure relevance to today’s travelers and be differentiated from existing hotel products.
2. Selecting a new brand may be a means to become affiliated with a hotel company and its loyalty program when its existing brands are already present within a marketplace.
3. The new hotel will benefit from increased corporate marketing efforts from hotel companies that surround the launch of a new brand.

When considering adopting a new brand for a proposed hotel, there are three key factors that prospective owners should ponder:

1. During the initial years of a brand’s launch guests may not be as familiar with information regarding the brand’s hotel company affiliation, overall positioning, or product offerings.
2. Until a critical mass of hotels emerges in diverse geographic regions and locations, the construction or renovation cost is more challenging to approximate during early phases of due diligence.
3. Several new brands are offering signature facilities and services, particularly in the food and beverage department. As few operating comparables are available, care must be taken in the preparation of pro formas to account for all revenues and expenses that will be incurred given the proposed saleable and complimentary services.

The following is a brief summary of brands introduced in recent years, listed by hotel company affiliation.

Global Hyatt Corporation

  • Hyatt Place: Hyatt Place is a select service brand which began as conversions of former AmeriSuites hotels, a brand which was acquired by Global Hyatt Corporation in January 2005. By the fourth quarter of 2005, the brand was announced and presently, there are approximately 130 Hyatt Place hotels in operation with an additional 20 to open by the end of 2009. These properties represent both conversions from AmeriSuites properties as well as new construction.
  • Andaz: Andaz is a luxury brand whose hotels are “design-driven environments with warm, friendly service, simplicity, and locality in mind”. The first Andaz property was opened in 2007 with the Andaz London and the first United States Andaz property, Andaz West Hollywood, opened in January 2009. Currently, three additional Andaz properties are under development in New York City and Austin and expected to open in 2009 and 2010.

Hilton Family

  • Home2 Suites: First announced in January 2009, Home2 Suites is a mid-tier extended stay hotel which targets “savvy, value-wise” guests. The introduction of the brand was simultaneously presented with the news that ten submitted franchise applications were already in place. Home2 Suites expects the first properties to be under construction in the next 6 to 12 months and that by 2012, 100 properties will be open with 60 to 70 per annum thereafter.
  • Denizen Hotels: Announced in March 2009, Denizen Hotels is a luxury brand which will be “modern, with a global appeal and local accent”. While no definite plans have yet been announced for the first property of this brand, the company reports active negotiations for 17 sites globally.
  • Waldorf Astoria Collection: Inspired by the elegance of the original Waldorf=Astoria in New York City, the Waldorf Astoria Collection was introduced in 2006 to create a brand of luxury properties “imbued with renowned style, attentive service and striking surroundings”. Presently, 14 Waldorf Astoria Collection properties are in existence globally, with another 15 under development. It is notable that part of the existing and future Waldorf Astoria Collection is an integration of the LXR Resorts, a group of hotels owned by the Blackstone Group, purchasers of the Hilton Hotels Corporation in 2007.

Starwood Hotels & Resorts

  • Element Hotels: Element Hotels is an upscale extended-stay brand which draws inspiration from Westin Hotels & Resorts. Like Westin, Element’s design and core principles are inspired by nature and as a part of its strategy, Element will require all of its properties to pursue United States. Green Building Council’s Leadership in Energy and Environmental Design certification. Element presently operates 4 hotels in the United States and has an additional 25 properties under development in the United States, Canada, and the United Arab Emirates.
  • aloft Hotels: aloft Hotels is a select service brand whose service mentality is drawn from W Hotels, Starwood Hotels & Resorts luxury boutique brand. Aloft Hotels presently operates 27 hotels in the United States, Canada, and China and has over 60 additional properties presently under development.

InterContinental Hotels Group
Hotel Indigo: Hotel Indigo is a select service hotel brand which offers guests peace and confidence in an inspiring and reenergizing environment. Presently, there are over 20 hotels operating in the United States, Canada, Mexico, and the United Kingdom and there are an additional 10 under development.

Marriott Hotels:
Edition Hotels: Edition Hotels is a luxury boutique hotel brand that represents a partnership between Marriott Hotels and Ian Schrager to “combine the personal, intimate, individualized and unique lodging experience that Mr. Schrager created with the operational expertise that Marriott is known for on a global scale”. The first Edition Hotel will open in December 2009 and presently approximately 20 additional markets are being examined for the brand.

Choice Hotels:
Cambria Suites: Cambria Suites is an all-suites select service brand that expands Choice Hotels’ lodging products to the upscale market. First launched in 2005, the first property opened in 2007. Presently, there are 26 Cambria Suites properties in operation with 9 additional properties under development and opening by the end of first quarter 2010.

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