Why Dual-Branded Hotel Developments are becoming Increasingly Popular

 

Dual-branded hotels are establishing themselves as a norm in the hotel industry. Several hotels of this kind have cropped up all across the world. As of January 2015, a study done for the 2015 ALIS conference showed that in the U.S. alone, there were 79 operational dual-branded hotels with 54 additional being under construction. According to this research, a projected 32 percent increase in dual-branded hotels, across the top three hotel brands: Marriott, IHG and Hilton.

A dual-brand hotel is a property that contains two different hotel brands, at a single location. For example, if a developer or investor was responsible for organizing a dual-branded project, they would be able to use Holiday Inn and Holiday Inn Express, or a Holiday Inn and Staybridge Suites concept. Often referred to as a “dual pack”, such hotels have been constructed and have operated at an extremely high efficiency rate for several years now. A couple of the more popular dual-brand hotels include the 65 storied Courtyard-Residence Inn in Central Park, NY—which is the tallest hotel in all of North America and the L.A. Live Complex which includes an 879-room JW Marriott and a 123-room Ritz Carlton.

What are some advantages of the Dual-Branded Hotel concept?

There are plenty of advantages associated with dual-branded hotels. First of all, hoteliers and developers enjoy the ability to tap into two different customer bases instead of only one. Here, hotel owners can fill up their hotel rooms by targeting different demographics, stay occasions and price points — stemming from the business traveler, to the extended stay visitor and family travelers. Each hotel brand focuses on a particular set of guests, whether that be millennials, gen-X’ers, or boomers. Additionally, each brand in a dual-branded hotel, offers different amenities but aims to consolidate many back-of-house expenses and costs, ie.) laundry, staffing, etc. Hoteliers are able to take advantage of the possibility of travelers and prospective guests experiencing new brands and what they offer, and ultimately becoming loyal-long term clients.

The potential for growth is in the ability to reach a more diverse group of travelers, such as those in need of extended-stay amenities versus others in search of a full-service hotel. 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. You essentially have two development budgets sufficing one amenity that guest of both properties can use.

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. 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. You have some unique economies of scale at play. 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 decreased, but costs for staff and sales and marketing departments 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 has marked its spot and continuing to expand in popularity. At the moment, hotel owners and existing properties are starting to flirt with the idea of carrying three or even four flags from different hotel brands in one single location. Hilton Worldwide has already built a “three-pack” hotel in Canada which combines a Hilton, Hampton Inn and Homewood suites. Also, there are some properties out there that are starting to 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.

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 out perform its single flagged counterparts.

Sources:
http://www.cnn.com/2014/06/09/travel/hotel-two-pack/
http://www.bu.edu/bhr/files/2016/02/Dual-Brand-Hotels_Winter16.pdf

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

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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Brand Loyalty— What is it?

 

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 doesn’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 as if the hotel is their home away from home— familiar but one they would choose irrespective of the competition.

 

So what does brand loyalty have to do with 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 into 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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