IHG’s Newest Product: The Strength of the Midscale

4 min read

After a long wait, Intercontinental Hotels Group (IHG) has finally revealed their new brand, Avid. This is an incredibly important move because it targets one of the most successful chain scales in the hospitality industry – the midscale transient travel brand. According to Intercontinental Hotel Group (IHG), the worldwide hotel company wanted to provide an excellent option for midscale travelers:

With the extended-stay Candlewood Suites as the only midscale brand in the company’s portfolio, IHG was not addressing the needs of an estimated 14 million travelers who could spend about $20 billion in roomnight revenue. – Elie Maalouf, CEO of the Americas, IHG

Did you catch that? 14 million travelers who could spend about $20 billion in room night revenue. The midscale market is extremely critical to the success of hotel companies seeking to expand their portfolio, and understanding that midscale market is incredibly important to hotel investors looking to make a smart investment move.

The new Avid product by IHG. Source: IHG

Why is the midscale market so foundational?

As mentioned in one of our vlogs, there are different types of chain scales that target different demographics of travelers.

The type of amenities and price point of a luxury hotel like the Ritz-Carlton is vastly different from the available amenities and price point of an economy property like a Red Roof Inn. At your Ritz-Carlton, you’ll have a pool and a hot tub (maybe several of each). Expectations include 24/7 concierge service, a spa, and at least one in-house restaurant. In lower chain scales, you’ll find just the basics: free wi-fi, a clean room, and maybe free breakfast. The price of a room sometimes can also reflect the amenities that it offers.

RevPAR Change - Hotel Investments

Midscale scale hotels have been on the rise faster than most other chain scales, while establishing higher long-term value than economy scale products.  Source: HVS

Here’s where midscale products come into play. Midscale hotels offer a happy medium between both ends of the hotel chain scale range. Midscale hotel assets are more resistant to declines in the national economy and downturns in the hotel cycle. When people are short on money, often the first things to go are the luxury items, or the “wants”. A family faced with a tighter budget may opt out of the Ritz Carlton, and will look to more affordable products, including midscale hotel products. On the other end, midscale hotels also offer a solid standard of quality higher than their economy hotel counterparts, and travelers (especially small business travelers) will definitely pay for that nicer midscale room as opposed to an economy room if they can afford it. This ability for midscale hotel products to do well in both thriving markets and struggling ones makes them a sturdy investment that is more resistant to fluctuations in the economy.

In addition, midscale hotels are often popular with business and corporate travelers, who make up the majority of hospitality revenue annually. Midscale products like IHG’s Avid provide the quality that many small businesses are accustomed to during business operations: wi-fi access, free breakfast, and plenty of conference and meeting space where they can meet clients and business partners.

As we’ve mentioned before, hotel investment options should always be carefully analyzed to make sure that it is an ideal investment for the market. Depending on the location, economic setting, and other market characteristics, it might be a strong option to invest in an upscale or even luxury hotel. In other markets, investing in an economy brand could be the best option. In Schaumburg, EquityRoots decided on a dual-brand model, one that combines the midscale market strength of a Holiday Inn Express combined with an amenity packed full-service Holiday Inn product with an in-house restaurant and bar component. For Schaumburg’s market, this strategy offered a strong amenity for surrounding businesses that demanded additional midscale market options.

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IHG’s launch of Avid makes this a good brand option for developers looking to offer a more consistent lodging product in markets where economy or independent properties are prevalent or in markets where Holiday Inn, Holiday Inn Express, and Staybridge products already exist and are running annual occupancy levels above 80%.  Prematurely investing in new brands before more established brands have recorded solid performance can be dangerous.  Another confusing part can be what to do if you build a new construction Avid in a market that already has older more established brands with lower cost basis.  It will be hard to sell rooms for a higher price, even if your property truly costs more to build than older properties, therefore I think it’s important to note that it is most advantageous to develop Avid only if you own the other IHG flags in the market.  Some brands like Hilton have already discovered this fact, and have created a priority method to develop newer flags like Home 2 and Tru, giving preference to the existing Hampton Inn franchisee in the market.

Sources:

Fox, Jena Tesse. “IHG launches new Avid brand to attract midscale travelers, developers.” Sep 18, 2017. Hotel Management.

“What’s driving customer loyalty for today’s hotel brands?” Consumer Intelligence Series. PwC.

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Schaumburg, IL: Investing Where People Want to Live

4 min read

MONEY magazine ranks the best places to live in the nation every year, and the Village of Schaumburg definitely set out to impress this time around, ranking 9th overall. Of course, the EquityRoots team isn’t surprised — the ranking is a testament to the type of markets we like to invest in. The Schaumburg Holiday Inn dual brand project is worth its weight for investors.

Demand Driven

Our team understands that some of the strongest performing investments for hotel investors are often located where quality of living is highest. Whenever EquityRoots’ receives a funding request, our team looks at the proposed project holistically, giving consideration to the brand, amount of funding, and nearby demand drivers that influence people to live or visit a location. Luckily, Schaumburg is abundant with demand drivers, all of which work to ensure that a new hotel development in the village will prove a fruitful investment and bigger economy.

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Schaumburg has a projected job growth of 3.0%, reflecting the village’s promising talent pool in years to come. Many of the companies opening or expanding in Schaumburg will look to host conferences and encourage business trips – which translates into increasing demand for available hotel rooms to host those business visitors. Do you like great weather? Schaumburg has on average 189 clear days every year. People generally want to be in an area that has nice weather, and that can translate to more tourists visiting Schaumburg’s parks and commercial centers, consistently driving revenue.

Many of the reasons why MONEY selected Schaumburg as the 9th best place to live in the US, or alternatively, many of the reasons why EquityRoots selected Schaumburg as the site for our dual-brand development. Source: MONEY Magazine

Other demand drivers can be physical. The Olympic Park is only a short drive from our development meaning that high school, collegiate, and team families have additional lodging options. This is a huge source of potential revenue not only from all the hotel rooms needed, but also for retail and restaurants that these teams will visit. The Woodfield Mall – the largest mall in Illinois and one of the largest in the nation – is an obvious demand driver and amenity for visitors. This benefit works both ways, creating a market where retail and hospitality compliment each other.

Woodfield Mall in Schaumburg, IL is a critical demand driver that brings in value not only through revenue generated from retail, but also as an amenity that supports local hotels and other businesses. Source: Simon Property Group

These demand drivers are also what led EquityRoots to decide that a new hotel in Schaumburg would be the perfect project. To keep up with the commercial needs of a growing Village and the chance to answer that with a high quality project, this project was designed to be healthy for the local economy in addition to the potential opportunity of profit to its stakeholders.

Local investors saw our IHG project as a chance not only to earn a potential return on a Class-A asset, it was also a chance to be a part of developing something that built positive value in their community. For our more recent IHG project in Schaumburg, a significant number of investors were from Schaumburg and nearby regions in Northern Illinois. When you look at different real estate investment options, you also want to consider nearby demand drivers that often provide amenities and other businesses that promote high quality of life. Instead of looking at MONEY’s rankings as a list of the best places to live, you’ll be using it as a guide to help you invest smarter.

Sources

“Largest Shopping Malls in the United States.” American Studies at Eastern Connecticut State University. April 25, 2009.

“The Best Places to Live in America.” MONEY.

 

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Do Brands Still Matter in 2017?

5 min read

Are Millennials Blind to Hotel Brands?

Do brand preferences still matter in the Millennial generation? This question comes up because Millennials have shown an emerging taste for untraditional, decentralized, and independent local providers of goods and services in what is commonly referred to as the “sharing economy”. The sharing economy has undoubtedly made an impact across multiple industries.  Sharing economy leaders like Uber and Airbnb are estimated to grow to $335 billion by 2025. This significant growth leaves many hoteliers and investors alike wondering how the hotel industry will continue to change moving forward. Many are also asking if hotel brands matter at all? After all, Millennials seem to be happy with online travel agents (OTA’s) where brand loyalty doesn’t matter, or online platforms like Airbnb which reveal a preference for more communal, local, and location-authentic lodging experiences.

Are Millennials Blind to Hotel Brands?

Despite higher preferences than their older counterparts, Millennials still show strong preferences for branded hotels.

The travel and hospitality marketing firm MMGY Global launched a study hoping to answer questions about these changing hospitality preferences among American travelers. (You can check out the full article here.) Peter Yesawich from MMGY Global has some great insights worth checking out, and below is a snippet of that report:

MMGY Global

Source: MMGY Global

Highlights from the Study

Our team at EquityRoots also wanted to take a look at the study results to find a conclusive answer on whether or not hotel brands will still matter into the future.

In short, yes – brands still matter, and investing in the right hotels can still lead to a fruitful real estate investment.  It’s true that Millennials still show more interest in a shared economy, especially compared to other age demographics. Knowing this, are hotels still solid real estate investments? Yes, of course they are. Millennials’ preferences are still similar to their older counterparts, including high preferences for full-service flags like Hilton, Marriott, and IHG (77%) as well as all-suites properties (70%). Looking at cumulative interest across all age groups, we see that big brand hotels are still preferred by a vast majority.

The rise of the sharing economy doesn’t take away from brand loyalty. Let’s take a look at our Millennial Airbnb travelers as a case-in-point. Bed and breakfast operations have existed way long before Airbnb (and even before the rise of hotel room standardization in products like Hilton and Holiday Inn). However, brands like Airbnb and HomeAway are streamlining alternative lodging, gaining strong loyal users. Even though Airbnb users are staying in different hosts’ accommodations from trip to trip, many Airbnb users continue to use only the Airbnb platform to find those rooms. In other words, they are familiar with the brand Airbnb and choose to book through there the same way that many travelers today maintain degrees of loyalty among the Hilton or IHG or Marriott. Despite the huge variance that might exist on Airbnb’s platform, users have come to Airbnb repeatedly with some sense of standardization and expectations.

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Hotel Brands Continue to Evolve

The question now becomes “how do current hotel brands adjust to capture the sharing economy audience?” It’s a question that hotels are already taking steps to answer including by:  

– Developing new hotel products like Marriott’s Moxy, Hilton’s Tru, and IHG’s Avid that target the emerging Millennial preferences

– Partnering with Airbnb to provide food and beverage solutions

– Offering “local experiences” and trips that are commonly utilized by the sharing economy.

The hotel investor can rest at ease. Hotel products from strong, established hotel brands aren’t going away anytime soon. Corporate travelers and companies still prefer lodging with hotels, considering hotel brand benefits such as loyalty points and more established quality standards across a wealth of hotel franchise locations. If anything, the hotel industry is thriving, continuing a trend of growth since 2010 as hotel demand increases faster than hotel supply. On top of this increasing demand, hotel companies continue to innovate and appeal to travelers, whether it be through adopting new food and beverage options, creating more communal living arrangements or utilizing the latest technology to provide travelers with instant check-in and other amenities. As the hotel industry continues to evolve, hotel investors will need to keep a fresh eye open for both strong performers in the present day, as well as potential performers in the future.

Sources

“2017 Set to Bring Modest Growth for U.S. Hotel Industry.” Zacks Equity Research. Jul 17, 2017. NASDAQ. 

“Global Portrait of American Travelers.” MMGY Global.

Moyer, Liz. “Hotels, Feeling the Pinch of Airbnb, Promote Local Experiences.” May 29, 2017. The New York Times. 

Simon, Elaine. “Food-and-beverage an opportunity for hotels, Airbnb to partner.” Sep 22, 2017. Hotel Management. 

Yaraghi, Niam and Ravi, Shamika. “The Current and Future State of the Sharing Economy.” Brookings India. 

 

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How Expedia and Priceline Impact Hotel Owners

9 min read

How Expedia and Priceline Impact Hotel Owners

Special thanks to Christina Velasquez for contributions to this article.

When was the last time you used Expedia to book flights or a hotel room? Travelers often turn to Online Travel Agencies (OTAs) like Expedia to quickly find available accommodations, but that doesn’t mean that everyone is benefiting. Nowhere is this truer than in the hospitality industry.

This year alone, we’ve seen both AccorHotels (products include Ibis, Novotel, and Pullman) and Hyatt go head to head with Expedia.1 Hyatt, in particular, made headlines when it threatened to stop working with Expedia altogether, although just last month Hyatt admitted it would continue to work with the OTA for the foreseeable future.2 This isn’t anything new. In 2004, IHG actually left Expedia and did not have any listings on Expedia sites until it re-entered its partnership with Expedia 3 years later. Choice hotels in 2008-2009 had a dispute with Expedia as well, and shortly after the dispute, the hotel brand told all its franchisees that all Choice products would not be on Expedia.3 Despite hotel brands and hoteliers relying on OTAs for a large part of their annual room bookings, these disputes reflect a discontent among hotel owners that is neither new nor insignificant. So…what’s the big fuss about?

It’s a tricky game. In order to understand the Hotel-OTA conflict and analyze potential solutions, let’s first take a look at how OTAs work and they impact hotel owners.

Giants of the Industry

Every industry has its giants. The NBA has the Warriors and the Cavs. The tech world has Google and Facebook. In the hotel industry, we have the big three – Hilton, Marriott, and IHG – all established hotel brands that EquityRoots strives to work with in our own projects.  

But who owns the OTA world? There are two companies you’ve undoubtedly heard of:

  1. Expedia, Inc. has quite the roster, with an army of websites including Expedia.com, Hotels.com, Hotwire.com, Travelocity, HomeAway and Trivago.4 In 2015, Expedia acquired Orbitz Worldwide, which also includes Orbitz, CheapTickets, and Ebookers, among several other brands. Add to that thousands of other affiliate sites, and you’ve got one major player controlling much of how OTA’s operate.
  2. The Priceline Group is the other worldwide giant with a hefty lineup of its own, including Priceline.com, Booking.com, Agoda.com, Kayak.com, OpenTable, and Rentalcars.com.

These powerhouses alone hold incredible influence in the hospitality industry in no small part due to their all-inclusive appeal to travelers. Travelers using Priceline or Expedia can book not only hotels, but also auto rentals and flights. Planning a vacation to Los Angeles? It’s pretty easy to log onto Expedia.com, and search for a flight and hotel for your trip. Online filters generally allow you to specify dates, times, and travel budgets to best fit your needs. Hotel owners can actually utilize this powerful tool in a way that benefits them more appropriately – but more on that later.

If travelers search for hotel bookings in L.A. right now, they can compare pricing and offerings from the Hilton Pasadena, the Best Western Plus Garden Inn and Suites, and La Quinta. Once a traveler has made their hotel selection, an OTA actually handles the payment of the hotel for you. From the traveler’s perspective, it’s not difficult to appreciate the convenience.  Especially for travelers not loyal to specific hotel brands, they can use OTA’s to pick the right lodging for their needs efficiently.

How does this hurt hotel owners?

Hotel owners pay hefty commissions when working with OTAs, and increasing dependency on Expedia and Priceline can compromise sustainability in hotel operations. For example – let’s say you own a hotel in L.A. For simplicity, your rooms are priced at $100 per night. Chuck from Chicago decides to fly into L.A. for a trip. Chuck walks into your hotel, and requests a room, paying that $100 rate. Chuck gets to stay at your hotel, and you get to keep $100 in revenue. Straightforward.

Let’s compare Chuck to another guest at your Hotel, Erica. Erica decides to book her hotel through Expedia. She books the hotel online with the same listed room price of $100. Expedia handles the payment and gets that $100. Then, Expedia takes a commission and only pays you $75 as the hotel owner.

Whoa. What happened? Since Expedia helped you, (the hotel owner) gain a customer, the OTA charges you a commission. After all, without Expedia, Erica may never have booked at your property. The hotel owner has to pay a fee of 25% of the room rate – $25. This rate is pretty typical of many OTAs.

A distinction worth highlighting is the fact that Erica does not pay that commission fee. You do as the hotel owner. That’s primarily how OTA’s make their revenue – by charging a fee for hotel rooms booked online. Among all its services offered, Expedia makes 70% of its revenue through hotel bookings.5 That’s not to say that OTA services are not valued. Oftentimes, getting customers through OTAs is a great tool for a hotel owner to have. The issue is that the commission for these bookings are high enough to make it difficult for hotel owners to continue operating.

This booking fee isn’t a one-sized-fits-all setting. Hotel brands like Marriott and Hilton independently negotiate their own commission rates with OTA’s, and those commissions can vary depending on whether or not the booking date is a weekday or a weekend. Typically these rates range from 15-28%, depending on the brand. Independent hotel owners unaffiliated with a brand can face commission rates as high as 30% of the room rate. If your rate is $100 a night, you only earn $70 if your customer decides to book through Expedia.

Hotel Owners Suffer from OTA Dependency

Back to the example with you being the hotel owner. Although it’s true that you still get to keep the larger part of this revenue from Erica’s booking, you’ve been facing increasing costs in the past few years. Labor costs are on the rise.6 You’ve got to pay utility bills, mortgage, internet systems and other new tech costs to keep up with competition in the industry. With Priceline and Expedia charging the high rates in commission, hotel owners have a decreasing budget to cover more front end costs. In contrast, OTAs don’t have to pay the same overhead, brick-and-mortar, and maintenance costs that hotel owners have.

Additionally, a growing concern is that OTAs are becoming the norm rather than an alternative for hotel bookings. Younger travelers especially are conducting many of their travel bookings through online platforms like Kayak and Expedia. In the past, hotel owners were looking at a smaller percentage of their rooms to be booked by OTAs. As OTAs have grown, many hotel owners are now seeing the vast majority of their rooms being booked through OTA’s – this makes it difficult for hotel owners to sustain their operations without raising the prices of their rooms.

It’s important to emphasize that most of the damage is felt by hotel owners, not hotel companies. With or without OTAs, hotel companies still retain much of their revenue through royalty fees (also paid by hotel owners) and are more insulated from the effects of online middlemen.

That doesn’t mean that these hotel companies are completely safe from the effects of OTAs. When OTAs create a large impact on thousands of individual franchise owners, increased discontent among those owners push waves of communication to hotel brands with a clear message: something has to change. That’s what we are seeing now with several hotel brands now questioning their current working relationship with OTAs.

 

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Flights, too?

For better or for worse, OTAs are not going to go away in the future. If anything, they will continue to grow. Yet, hotels aren’t the only ones who have scuffled with OTAs. Airline companies such as Delta, American and US Airways have all at one point removed their flights from Expedia to protest high fees. To this day, Southwest Airlines still keeps listings off of OTAs because of those fees.7 Other airlines charge a fee if travelers book through OTAs: most recently, British Airways announced it would start charging a fee for many third party bookings on OTAs.8

Airline brands have even rallied together to leverage their fight against OTAs. Around 2006-2007, major OTAs got sued by several airlines for charging booking fees. The result fell more in favor of airlines. When travelers book airlines through one of the OTA websites, the airline still gets charged with some margin, but there are no longer any booking fees. Similarly, an Illinois Court gave American Airlines a win in their battle against OTA Orbitz (again, now owned by Expedia).9

Hotel brands could attempt to utilize some of the strategies utilized by the airline companies. Hotel owners can upcharge fees if guests book through Expedia or Priceline. Hotel owners can push for hotel companies to band together in a similar fashion as major airlines. It’ll take a high degree of coordination among hotel companies and hotel owners alike, but a concerted effort across the hotel industry could really benefit hotel companies and hotel owners in the long run.

Of course, it won’t be easy. Airlines are in a better position to challenge OTAs – because airlines own all the actual aircraft that travelers fly on; they have a unique position in that airlines own all of their assets. In contrast, the hotel companies do not own the hotels themselves – individual hotel owners do. The hotel brands give owners brand support in return for royalty fees, but they do not own the brick and mortar outright. This key difference gives airlines a greater reason to push back against OTAs, whereas hotel owners must coordinate with hotel companies on a large scale.

Hotel Owners can Utilize OTAs as an Asset

There’s an absolute need for hotel owners to put pressure on hotel brands, and hotel brands uniting against high commission OTA fees is incredibly important for sustainability. In the meantime, how do hotel owners utilize OTAs as more of an asset? There’s a definite stigma among hotel owners against OTAs, but there are ways to look at Expedia and Priceline as potential tools in the hospitality business. Hotel owners do have an opportunity to utilize OTAs like Expedia more appropriately in their favor. 

  • Utilize OTAs like Expedia as your research tool. Hotel owners can use OTA to shop other hotels in the area. OTAs are a powerful localized resource to see what your competition is doing in any given area.
  • Free advertising. The inherent benefit of OTAs is that you can advertise your hotel for almost zero upfront cost. Hotel owners don’t get charged if customers simply see their hotels on OTAs. Hotel owners pay the hefty commission if travelers book through the OTA.
  • Book Direct… Hotel owners should push to have guests book directly with them. Guests should use Expedia to search for the best value in hotels, but if they are booking through OTAs, hotel owners pay for royalties and OTA fees. If guests book directly with the hotel owner and brand, hotel owners benefit because they dodge paying the OTA commissions.
  • …and Invest in Loyalty. Of course, hotel owners need to recognize that it’s so easy for guests to use Expedia and Priceline. Utilize loyalty-building resources. Booking direct provides the opportunity to give guests loyalty points, and loyalty strengthens relationships between guests and hotel brands. Guests benefit from additional loyalty points and increasingly improved service from a long-term relationship with a brand, and hotel owners enjoy that loyalty in the form of increased bookings from repeat business (without paying commissions). If those points cost hotel owners 10% through direct booking by giving out those points, it is still cheaper than guests booking through Expedia and collecting a commission of 15-30%.

Marriott, IHG, and Hilton are some of the brands that have strong loyalty programs where guests earn free points for staying at affiliated properties, but if hotel owners are going to overcome high commission fees, action needs to be taken earlier rather than later. Appeal to hotel companies for higher degrees of support. This is something we are seeing more often now, and many hotel brands are actually asking their franchisees to leverage them further.10 Larger organizations like AAHOA can and already have taken steps to protect hotel owners.11 We’re confident in the ability of hotels to unite and overcome arbitrarily high commissions, and with strong efforts, hotels will be an even better real estate investment than they already are.

Sources

1. “AccorHotels Finds Competing with Expedia is Harder than Expected.” Skift.  Jul 31, 2017.
2. “Hyatt Isn’t Abandoning Expedia Just Yet as the Two Sides Reach Agreement in Principle.” Skift. Jul 31, 2017.
3. Schaal, Dennis. A Timeline of Online Travel Agencies Battles with Hotels and Airlines. Skift. Jun 21, 2017.
4. “About Us.” Expedia.
5. Page, Vanessa. “How Expedia Makes Money.” Investopedia. Aug 5, 2015.
6.Mandelbaum, Robert. “An examination of hotel labor costs.” Hotel Management. Nov 21, 2016.
7.Hobica, George. Battle Heats up Between Airlines and Online Travel Agencies. Airfarewatchdog. Oct 25, 2016.
8.chlappig, Ben. “British Airways will Start Charging a Fee for Many Third Party Bookings.” May 26, 2017. One Mile At A Time.
9.“Court Orders American Airlines Flights Back on Orbitz.” Consumer Reports News. Jun 2, 2011.
10.Mest, Elliott. “Hotel brands urge franchisees to leverage them further.” Hotel Management. Aug 21, 2017.
11.HNN Newswire. “AAHOA takes a strong stance on OTA issues.” Hotel News Now. Nov 9, 2009.

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Dual-Branded Hotels on the Rise

5 min read

Dual-Branded Hotels on the Rise

It’s the era of the dual-branded hotel. Dual-branded hotels have cropped up all across the world, emerging as a norm in the hotel industry. As of January 2015, a study done for the 2015 ALIS conference showed that there were 79 operational dual-branded hotels with 54 additional being under construction in the U.S. alone. Additionally, the top three hotel brands (Marriott, IHG, and Hilton) project a 32 percent incrase in dual-branded hotels in coming years.

The L.A. Live Complex dual-branded hotel combines a JW Marriott with a Ritz-Carlton in the same building.

The L.A. Live Complex dual-branded hotel combines a JW Marriott with a Ritz-Carlton in the same building.

Essentially, a dual-brand hotel is a hotel asset that houses two distinct hotel brands in a single construction. Hotel developers and investors can create Holiday Inn/Holiday Inn Express, or Holiday Inn/Staybridge Suites concept. Also referred to as a “dual pack”, dual-branded hotels have been constructed and operated at an extremely high-efficiency for several years now.

Notable dual-brand hotels today include the 65-story Courtyard/Residence Inn in Central Park, NY — the tallest hotel in all of North America, and the L.A. Live Complex which combines an 879-room JW Marriott and a 123-room Ritz Carlton.

Two Brands are Better Than One

With dual-branded hotels, hoteliers and developers enjoy the ability to tap into two different customer bases instead of only one. By combining two hotel brands, hotel owners can fill up their hotel rooms by targeting different demographics, such as combining:

  • One hotel brand targeting Millennials, while the other brand targets Gen-X’ers
  • A corporate-centered brand with a more leisure-focused hotel brand
  • An extended-stay hotel (i.e. a Staybridge) with a full-service hotel (i.e. Holiday Inn)

From price points to demographics, there are endless possibilities.  Each brand in a dual-branded hotel offers different amenities to guests. The potential for growth is in this ability to reach a more diverse group of travelers. Guests of a dual-branded hotel now have the ability to choose which amenities they want depending on the brands at play. For example, consolidating things like a swimming pool, fitness center, and meeting rooms allows the developer to build a nicer version of it for guests of both hotels.

Leaner Costs

Not only does a dual-brand hotel cater to a wider customer base, it also allows developers and hoteliers to save on costs as well. Dual-branded hotels consolidate many back-of-house expenses and costs such as laundry and staffing. Generally, when you think of two hotel brands, you think of double the costs, but the reality is that there are some significant construction cost savings.  One of the great advantages of dual-branded hotels is that they are “designed to maximize resources while minimizing costs for owners and developers,” according to Ian Carter, the president of global development for Hilton Worldwide. Operational costs will be low considering that certain areas of the hotel, such as the laundry room and employee facilities, will be combined. Also, land costs will generally be lower because the footprint and site plan will consist of only one building. Additionally, from an operational standpoint, not only are construction costs

One of the great advantages of dual-branded hotels is that they are “designed to maximize resources while minimizing costs for owners and developers,” according to Ian Carter, the president of global development for Hilton Worldwide. Operational costs will be low considering that certain areas of the hotel, such as the laundry room and employee facilities, will be combined. Also, land costs will generally be lower because the footprint and site plan will consist of only one building. From an operational standpoint, not only are the construction costs decreased, but costs for staff and sales and marketing departments are decreased as well.

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Already in Motion

Although the dual-branded hotel seems to be a pretty normal trend in today’s booming hotel development industry, there are signs that this hotel concept is continuing to expand in popularity. At the moment, hotel owners and existing properties are starting to experiment with the idea of carrying three or even four flags from different hotel brands in one single location. Marriott International has already built a “three-pack” hotel in Nashville which combines an AC Hotels, a Residence Inn, and a SpringHill Suites.

There are also hotel developments that combine different brands from different hotel families while still maintaining each brand’s unique identity, such as White Lodging’s Chicago River North project, which includes a Hyatt, Starwood and Marriott flag under one roof.

Marriott’s triple-brand hotel takes a further step from the dual-brand innovation to add a third hotel under one roof.

Marriott’s triple-brand hotel takes a further step from the dual-brand innovation to add a third hotel under one roof.

Your Hotel Investments

Lastly, there are companies and tech platforms, like EquityRoots.com, that have decided to jump on board with the dual-brand hotel concept and explore the possibilities it has to offer. Currently, the crowdfunding company is scheduled to break ground on a dual-brand hotel project in Schaumburg, Illinois. Specifically choosing two IHG products (Holiday Inn and Holiday Inn Express) to create a dual-brand hotel that captures 100% of IHG’s transient travel segment. Experienced developers, and crowdfunding platforms such as EquityRoots.com, have taken advantage of the dual-brand concept in order to maximize investor returns and investment profitability. Given the competitive advantages over single flagged properties, EquityRoots.com strongly believes that a dual-brand hotel investment will outperform its single flagged counterparts.

Sources:

Becker, Jill. “Rise of the two-in-one hotel.” Jun 10, 2014.

“Construction Begins on Marriot’s First-Ever Triple-Brand Hotel, Located in Nashville’s Popular SoBro Neighborhood.” Marriott International. Jul 14, 2016.

Lesser et al. “The Evolution of Dual-Branded Hotels: How the Marriott/Starwood Acquisition Enhances Opportunities for Developers.” Winter 2016. Vol 4, Issue 1.

 

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Independent Hotels: Harnessing Soft Branding

3 min read

Soft Brands and Independent Hotels Starting to Make an Impact in the Hotel Industry

Independent hotels are not a new trend in today’s hospitality world. This concept has actually been around for some time now. These are hotels that neither belong to a hotel chain nor are they linked to any central reservation system. Over the years, independent hotels have been trying to scratch the surface in terms of obtaining a piece of the action. In other words, it has been a tough road for them to acquire some market occupancy shares in the lodging industry when they have to compete against the likes of the already established hotel chains such as IHG, Marriot International, Hilton, and Hyatt.

Part of the issue for independent hotels is that they don’t have enough resources—meaning that they don’t have the necessary distribution channels and marketing support like a hotel chain would have. In addition, these hotels are already at a disadvantage because of the lack of a loyal customer base. For example, there is no frequent guest program which offers rewards. As a result, independent hotels have to resort to a terminology called “soft branding” to target and develop a loyal customer base.

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What is Soft Branding?

According to Cindy Schoenauer, a senior consultant of PKF Consulting, Inc., soft branding is an opportunity for independent hotels to keep their reputation as an independent boutique hotel while benefiting from a global reservation system with a proven track record for sales and marketing efforts. Here, independent hotels are gaining tremendous momentum in the area of distribution through universal distribution systems and through internet coverage. They are also teaming up with major hotel chains to have access to their customer base in exchange for a franchise fee. By capitalizing on soft brands, independent hotels are making an impact in major markets and in special resort locations.
Furthermore, while using the resources of branded hotels and taking advantage of third-party distribution systems to target prospective guests, independent hotels still manage to be different and retain their individual identities. Here, independent hotels take into consideration what their customers prefer and what they are fond of when using a particular product or service.

Ideally, hoteliers want to create independent hotels that will connect them to a specific niche within the consumer base in the hotel lodging industry. They hope to attract consumers who express an interest in hotels that can identify with their own lifestyle or personality. There’s no doubt about it, independent hotels and boutique products have taken a new approach in catering to a niche market like Millennials, and have proven to become profitable in doing so – but the overwhelming majority of new development is still led by the select-service products catered towards a corporate traveler offered by chains such as IHG, Marriott, and Hilton.

Learn More About Soft Branding | Contact Equity Roots

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EquityRoots brings crowdfunding to hotels

2 min read

Official Press Release

EquityRoots.com, a brand backed by lawyers, hoteliers, and land-use experts is an online crowdfunding platform exclusively dedicated to offering investment opportunities in branded hotels, assisted living facilities, and other lodging assets. The team at EquityRoots.com has developed and launched an online platform to offer prospective investors, both domestically and internationally, a chance to participate and invest into highly rewarding franchised hotel assets by Marriott, Hilton, IHG, Starwood, and Hyatt. Similarly, hotel owners may use the platforms to find equity partners or get a loan from the public.

However, all funding requests undergo a strenuous vetting process before EquityRoots.com chooses to conduct a public offering and allow registered website users to perform due-diligence, sign contracts, and invest with the click of a button. It’s worth noting how simplified and efficient the real-estate investment process becomes without brokers, middlemen, or commissions. This is the essence of crowdfunding.

EquityRoots.com approved and launched its first offering for a dual-branded IHG project in a prominent NW suburb of Chicago – Schaumburg, IL. The hotels will be surrounded by 2.4 million square feet of Class-A office and around the corner from the 3rd largest mall in the country. In general, crowdfunding has opened the doors for savvy investors from all over the world to pool capital and invest side-by-side with proven industry players. Online capital formation has allowed Equityroots.com to take advantage of the accessibility of the Internet and the vast networks of friends, family, and professional networks that stay connected through it. With recent legislation like the Jumpstart Our Business Startups Act, EquityRoots has and will continue to democratize the investment marketplace.

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EquityRoots raises more than $2M within 72 Hours

2 min read

 Official Press Release

EquityRoots.com, a brand backed by lawyers, hoteliers, and land-use experts is an online crowdfunding platform exclusively dedicated to offering investment opportunities in branded hotel assets. The team at EquityRoots.com has developed and launched an online platform to offer prospective investors, both domestically and internationally, a chance to participate and invest into highly rewarding franchised hotel assets by Marriot, Hilton, IHG, Starwood, and Hyatt. Similarly, hotel owners may use the platform to find equity partners or get a loan from the public. However, all funding requests undergo a strenuous vetting process before EquityRoots.com chooses to conduct a public offering and allow registered website users to perform due-diligence, sign contracts, and invest with the click of a button. It’s worth noting how simplified and efficient the real-estate investment process becomes without brokers, middlemen, or commissions. This is the very essence of crowdfunding.

EquityRoots.com recently approved and launched its first public offering for a dual branded IHG new-construction project in Schaumburg, Illinois— a prominent corporate-suburban market of Chicago. The hotels will be surrounded by 2.4 million square feet of Class-A office space on a site with expressway visibility and minutes from the 10th largest mall in the country. Development plans will feature a full-service brand paired with a Limited-Service flag, efficiently sharing a swimming pool, patio, and fitness center. The public offering raised more than $2 million within the first 72 hours.

In general, crowdfunding has opened the doors for savvy investors from all over the world to pool capital and invest side-by-side with proven industry players. Online capital formation has allowed EquityRoots.com to take advantage of the accessibility of the Internet and the vast networks of friends, family, and professional networks that stay connected through it. With recent legislation like the Jumpstart Our Business Startups Act, EquityRoots has and will continue to democratize the investment marketplace.

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EquityRoots.com to Democratize the Hotel Investment Space

2 min read

Official Press Release

After the Jumpstart our Business Startups (JOBS) Act of 2012, it seems like there has been vibrant excitement surrounding the concept of raising capital for real-estate projects via crowdfunding.  Crowdfunding is the window into democratizing the investment marketplace, allowing everyday-people a chance to participate and own a fractional interest in the project.  Equityroots.com is an online platform backed by lawyers, land-use experts, and hotel owners- aiming to raise capital for well-planned hotel projects.

Seven young experts in various areas of law, business, and technology are responsible for starting this novel firm—EquityRoots.com—which was inspired by recent bipartisan job creation legislation, also known as the Jumpstart our Business Startups (JOBS) Act of 2012.

EquityRoots.com provides a crowd of investors the opportunity to invest in hotels and other real estate assets while maintaining security on real property.  Just about anyone can become part of the crowd when they sign up for a free account online. There is no role for middlemen—brokers or commission agents. EquityRoots.com will allow even the smallest investors the opportunity to pool capital, allowing ordinary people to invest side-by-side with veteran real-estate developers.

The goal is to offer a platform accessible to the entire world while stressing the need to democratize the real estate business—thus allowing everyday people to have an opportunity. This includes investors within the U.S. and abroad. Each investor will be able to view current deals on equityroots.com and pick a project that they would like to fund. Additionally, they can sign contracts, perform due-diligence, and safely transfer funds to escrow with the click of a button.  They have all the tools to manage a portfolio of holdings through their online account.

Foreign Investors and EB-5 Visas

Foreign investors are not excluded from participating.  In fact, EquityRoots.com offers investment opportunities to foreign investors as well. Staff attorneys will file EB-5 visa petitions on behalf of a foreign investor to immigration authorities, which will allow investors from India, China, Russia, or even from Brazil to become permanent residents in the United States if an individual invests at least $1 million in an equityroots.com hotel offering where 10 American jobs are created.

Business and hotel owners may submit their respective project for funding online as well—where the staff at EquityRoots must pre-vet, underwrite, and approve the project before conducting a public offering.

“The objective is to offer assets that are healthy for the local economy, and have the potential of bringing healthy returns for its stakeholders and investors,” says Bhavik Dani, the Founder and Deal-flow officer of EquityRoots.com.  “It’s about time the principles of democracy meet the fundamentals of real estate investing, letting the masses have a shot at it,” he adds.

To learn more about crowdfunding and hotel investments, information can be found at www.equityroots.com or you can call (312)483-2200.  Equityroots.com is proudly headquartered in Schaumburg, IL.

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