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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My Home Away from Home: How Brand Loyalty Affects Hotel Industry Investments

4 min read

by Kernisha Padilla 

I was recently asked to attend a conference in another state and was given the choice of hotels with a per diem limit. I was ecstatic at the thought. Why? Well, I finally had the freedom to stay at the hotel of my choosing, which means I was looking for a place where I was most comfortable; in essence— a place that could be my home away from home.

My Home Away from Home — How Brand Loyalty Affects Hotel Industry Investments

We all have preferences in life and we stay loyal to certain brands, regardless of the array of options available to us.  Not only do we do this with choice of hotels, but everyday items as well. Take a moment and think about your choices for grocery stores, the toothpaste you used this morning, the coffee you drink and the type of computer you’re reading this from. All brand choices no doubt, which means we all are subjected to a sense of brand loyalty that manifests in numerous ways.  Brand loyalty is real and plays a key role in our everyday thinking. Our choices are often so engaged with brand loyalty and we do it so consistently that we often forget we are even making such choices anymore.

Ultimately brand loyalty was the motivating factor when I made my conference hotel choice. It came down to the top three hotel groupsMarriott, Hilton and IHG (Intercontinental Hotel Group). As far as the hotel industry is concerned, brand loyalty is one of the greatest driving forces behind the industry’s success. Marriott, Hilton and IHG marketing principles and driving forces towards increasing their brand loyalty is commendable. The reasoning is obvious; a large and loyal customer base yields an increase in profits for each of the hotel groups. Success through the expansion and growth of their assets and guest loyalty is a must for the hotel industry in today’s ever-expanding market.

 

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What is Brand Loyalty?

Brand loyalty is a surprisingly easy concept to understand. It is the extent of the faithfulness of consumers to a particular brand that is expressed through their repeat purchases and occurs irrespective of the competing brands. The choice of a brand, in essence, becomes less based on logic and rationale and becomes more of a go-to decision.

Taking a look at the hotel industry, brand loyalty is often supported by key factors that attract their customers and following. The availability of a wide range of hotels at different price points, and in different segments, all throughout the world means that hotel brands are looking to foster a deeper connection with their guest and cater to all of their personalized needs. Most travelers are seeking hotels that provide a good combination of key amenities, such as free internet and hot breakfast combined with a consistent quality standard. Expanding upon this, hotel owners have added the use of loyalty or membership programs to keep their customers coming back.

Why Does Brand Loyalty Matter?

The mere sheath of availability of the top three hotel groups alone means that there are approximately 10,000 hotels that have a large loyal customer base. Out of these 10,000 hotels, Marriott alone has 19 brands with approximately 4,500 properties in 87 countries worldwide and hundreds more in the development pipeline.  The long-awaited acquisition of Starwood Hotels by Marriott will officially make them the largest Brand, with the largest brand loyalty following. Hilton offers over 13 brands, totaling 570 properties across 6 continents. IHG has over 5,000 properties through 12 brands across 100 countries. If the vastness and potential of the hotels to attract such a loyal customer base don’t attract you to learn more about brand loyalty I am not sure what will. Think about it. Each of these hotel brands has to invest such a large amount of resources, time and strategy in building protocols unique to each of its brands, positioning it to capture different market segments and different types of travelers, ensuring that their hotels and affiliate brands all are connected and attract more customers.

What’s the best way to get guests to stay loyal to the numerous hotels each group offers? The offering of a loyalty and membership programs that spans each group. Marriott, Hilton, and IHG offer loyalty programs that are based on a tiered or membership level; meaning that every customer that remains loyal to the brand has a potential to earn rewards from their stay ranging from an increase in amenities or an upgraded room to free hotel room stays and airline points. These loyalty programs are individual based, rather than company or group based, which means that regardless of who pays for the room, the actual guest earns the points for later personal use.  This is important to note because many corporations book employee travel for training, seminars, meetings, etc.  And although the employer pays for the room, it is the employee (guest) who earns the loyalty points, often using them later for family vacations.  Each hotel group has found a system that works best for them, feeding off of the feedback from their customers and their needs.  This is why brand loyalty is so important. The goal is to increase the hotel’s customer base through the use of brand identity. In essence, to have an emotionally backed choice for the hotel that makes the customer feel as if the hotel is their home away from home— familiar but one they would choose irrespective of the competition.

What Does Brand Loyalty Have to do With Hotel Investments?

Put simply, investments are driven by interest and the ability to lower risk as much as possible. While no real estate investment can ever be fully guaranteed, there’s something to be said about a hotel investment that carries a Brand License with a steady history of customer loyalty and a large customer base. The effort that the hotel brands put into their loyalty program helps to lessen the risks of investing in this type of real estate.  A Holiday Inn Express performs with a certain sense of stability and predictability than… let’s say Bob’s Bed & Breakfast.

If you’re looking to invest in a hotel, be honest with yourself. While investing generally involves making logical, calculated risks about land and construction cost, make sure to take into account the brand’s loyalty as well. While brand loyalty may often become a subjective decision on behalf of the customer, the success of such loyalty should speak volumes to an investor. Brand loyalty shouldn’t be overlooked. The ability for the major hotel chains and their various brands to attract such a grand following helps ensure that a licensed investment in such an establishment would be worthwhile. As a frequent traveler, you wouldn’t ignore your natural brand loyalty and you shouldn’t do so when considering investing in hotels as well.

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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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Hotel Investments Vs. Multi-Family & Fix-and-Flips

3 min read

Are Hotels a Better Investment Than Multi-Family or Fix-and-Flip?

There’s no shortage of opportunities to invest in real estate—so why zero in on hotels, in particular? It’s a question we get asked regularly here at EquityRoots. Truthfully, of all the myriad ways to add real estate to your investment portfolio, hotels are among the least commonly discussed. Why is it, then, that we would offer our investors the opportunity to enter so specific a niche?

Before we answer that, we’ll offer the disclaimer that yes, there are many people out there who make money off of multi-family properties, fix-and-flips, and other real estate opportunities. By no means are we suggesting that these ventures cannot be fruitful. All we are saying is that, if you put all the pros and cons on the ledger and really think it over, you just might find yourself agreeing with us that hotel investments are uniquely promising and distinctly advantageous.

Real Estate Investment 101

To understand what makes hotel investment so loaded with potential, you’ve first got to understand some of the basics of real estate investment. Let’s break it down to the simplest possible level—the most basic concept of real estate investment. When you buy a home, an apartment building, or a hotel—property of any kind, really—you have to understand that it’s not going to make any money just sitting there empty. To generate a profit, any real estate investment is going to have to have tenants. You’ve got to have warm, rent-paying bodies in the building for it to be a moneymaker.

So now, consider the rent-generating potential of a hotel versus other forms of investment. With a hotel, you’re generating rent money night by night. With most anything else, you’re talking about a month-to-month or even year-to-year lease.

It boils down to simple mathematics, then: With a multi-family unit, you may generate $1,200 per month. With a hotel, it may be $69 per room per night. Now, in some cases, the hotel may not come out on top—and there are other factors to consider, such as hotel maintenance expenses. But if the hotel’s in a good market, it’s got good management, and it’s associated with a good brand, we’re willing to suggest that much of the time, hotel investment is going to be uniquely lucrative.

EquityRoots - Hotel Real Estate Investments Platform

The Logistics of Running a Hotel

We mentioned that there are some hotel maintenance expenses to take into consideration, and indeed there are. For instance, you’ll have to have someone come in and clean the rooms and provide other upkeep services, which naturally eats into the hotel’s overall profit margin.

But even operationally, hotels offer some unique perks over other real estate projects. For example, with a hotel, there’s no concern over delinquencies or renters who simply won’t pay their fair share. You also don’t have to face the worry of your property being vacant for a long stretch of time; again, assuming the hotel has a good market, a good leadership team, and a recognizable brand, you can feel confident that there are going to be tourists and travelers paying for rooms.

Investing with EquityRoots

But all of this underscores the big reason why hotel investment is, comparatively, a fairly seamless and accessible investment: When you invest through a platform like EquityRoots, you’re not actually signing up to run the hotel. You’re investing in an experienced hotel management team with a peerless track record and a trustworthy flag on its pole. In fact, EquityRoots has sufficient clout in the hotel industry that we can gain access to The Big 3—Marriott, Hilton, and IHG.

Those brands aren’t available to just anyone—not even investors with huge wads of money or a few years of actual hotel experience. They only trust their coveted name recognition to truly seasoned, expert hoteliers—and EquityRoots is proud to be on that list.

The bottom line: An investment with EquityRoots is smart. We know the hotel business. We choose promising markets and ensure that our hotels are well-run and that they offer brand recognition. All the pieces are in place for a robust, fruitful real estate investment.

Learn more about it by contacting EquityRoots today!

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In the Hotel Industry, Brands Matter. Here’s Why!

3 min read

In the Hotel Industry, Brands Matter. Here’s Why!

Imagine the following scenario. You’ve been asked to travel out of town for a professional conference. The conference is being held in a convention center, and nearby there is a trio of nice, high-quality hotels—a Hyatt, a Marriott, and a Hilton. Your boss asks you which one you’d rather stay at; the choice, she says, is totally up to you.

If you’ve never traveled much before, you may express little preference. But assuming that you’re a seasoned vacationer, or that your work sends you to a lot of far-flung destinations, you probably know exactly which of these three hotels you want to be put up in. They may all be equal in their amenities, in their quality, even in their proximity to the convention center—but you have your brand, and you’re loyal to it.

Hotel Guests are Loyal to Their Brands

Such brand loyalty is by no means uncommon among tourists and travelers—the people who make up the hotel industry’s basic client base. Many regular travelers have brands that they stick to whenever they can, whether traveling within the country or even internationally. Hilton people tend to remain Hilton people; Hyatt people pick Hyatt hotels whenever they have a chance. And so on. In fact, many regular travelers would prove all too willing to drive an extra couple of miles to their convention center just to get the hotel of their choice.

A big part of this is consistency. People take comfort in knowing that all Hyatts are essentially the same, in much the same way that a Big Mac tastes the same at any McDonald’s in the country. Not only is there a basic level of quality that’s always going to be met, but you know whether or not there’s going to be free Wi-Fi; whether or not there will be a breakfast service; you even know what kinds of bedding to expect. For people who travel frequently, these little comforts are no small thing. They ensure an experience that is dependably posh and surprise-free.

Additionally, hotel owners actively foster this level of brand commitment. These days, most major hotel chains offer customer loyalty rewards, meaning discount points for those who consistently pick the same hotel brand. So not only do regular guests get a consistent and surprise-free experience, but the hotel chain actively makes it worth their while.

EquityRoots - Hotel Real Estate Investments Platform

Brands Matter for Investors, Too

All of this underscores an important point for the investor—that while no real estate investment can ever be fully guaranteed, a hotel that’s well-managed, situated in a vibrant market, and affixed to a recognizable brand certainly comes with some advantages and a greater chance of success.

Just take Marriott as an example: This is a company that has done so much to ensure a consistent guest experience and has built such an effective loyalty program, that investing in a new Marriott hotel is effectively investing in a business with a ready-made, built-in market.

All of this goes to show that, when considering a hotel investment, brand matters. And that’s one of the things that allows EquityRoots to stand out. We understand the role that brand plays in consumer behavior, and we can provide access to some of the best hotel brands in the world. This includes even the Big Three-Hilton, Marriot, and IHG—which are only attainable to the most seasoned and successful of hoteliers. (Even those with plenty of money and a few years of hotel experience are by no guaranteed a place at the Big Four table.)

Hotel guests don’t ignore brand affiliations—and hotel investors shouldn’t, either. Contact us today to learn more.

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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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