All eyes have been on the mergers and acquisitions of hotel brands,Êsuch asÊStarwood Marriott, Accor’s acquisition of Fairmont, Raffles and Swissotel, but the trend no one is reporting or talking much about is the influx of new hotel brand concepts. Specifically, hotel brand concepts tied to retail, sports and/or iconic historic figures seeking investors to launch.
This phenomena is intriguing to me both as a former hospitality professional and as a real estate sales executive dealing daily with investors seeking hospitality acquisitions or investments.ÊAs a hospitality professional I ask myself does the industry really need a new hospitality brand? Is there enough market-share to produce ROI to investors? And finally, operationally, are the creators of these new brands equipped to meet and exceed guests’ expectations?ÊAre they operationally prepared to fill rooms, Òheads in beds?Ó
As consumers of travel hospitality products, we all have had unique travel experiences. There is always some aspect of hospitality to be tweaked, revamped or revised. The true measure of a great hospitality brand is the seamless manner in which the property operates. Consistency. A well-oiled operation if you will, resulting in an exceptional guest experience.ÊFrom the moment you enter the lobby, into your guestroom, indulge in amenities and services, your needs are met and if you are fortunate, expectations are exceeded.ÊService excellence is the core value of the hospitality industry and ingrained into the psyche of every hospitality professional.
So, it amazes me when I am approached by groups or individuals armed with plans for a new hotel brand and/or launch. Often times they do not have solid hospitality backgrounds nor the teams to operate hotels.ÊMore important, there is no clear vision, concept or market study to support their claims of a demand for a specific hospitality brand or services. Market studies are critical and must be considered and compiled prior to presenting to investors.
Let’s start with demand or more plainly, the need for yet another hospitality brand. I counsel investors to always consider the fact that if there was a real need for their specific hotel brand/concept, why hasn’t it been considered and implemented by an established brand? What are the trends, i.e., travel patterns to support a specific concept or market segment that is not being met?ÊAnd can this trend withstand the ever-changing economic climate as it relates to the hospitality industry? I must say honestly that the above questions cannot be answered in a manner that would satisfy and investor, in most cases.
Launching a brand not tethered to some sort of recognizable brand (retail, et al) is extremely risky. And I believe that most new brand concepts (not connected to major hospitality brands, standalone) are not viable and will not be able to withstand the test of time. Particularly in an economic environment that is uncertain.ÊSo, what’s the visionary/entrepreneur desiring to revolutionize the hospitality industry by launching Òa new generationÓ of hotels and/or resorts to do?
Revisit history, andÊthe history of hospitality. The truth of the matter is in each generation a pioneer gives birth to a new hospitality concept; redefining the hospitality experience and guests’ expectations.ÊWhat these visionaries have done successfully is identify a NICHE, an untapped market of travelers with insatiable appetites for an experience that speaks to them, albeit economically, culturally, socially satisfying their travel desires.
What these innovators of hospitality all had in common is simply their ÒinventionsÓ were deeply rooted in the times: economic, generational, societal and cultural. What are some examplesÊyou might ask?Ê Cesar Ritz, (Ritz Carlton Hotels) Bill Marriott, Jr., (Marriott International) Conrad Hilton, (Hilton Hotels), Kemmons Wilson (Holiday Inn), Jay Pritzker (Hyatt Hotels), Isadore Sharpe (Four Seasons), Ian Shrager (Morgans Hotel Group), Caroline Hunt (Rosewood), andÊBarry Sternlicht (Starwood HotelsÊand Resorts). You get my drift.
These hospitality luminaries were all ahead of their times; they looked not simply at the industry in its present forms (during their respective times) but instead their brands’ impacts on the industry for generations to come. In other words, they were forward thinkers due in large part to the bottom line, ROI, they each set out to create a product that could withstand the test of time and appeal to generations of travelers to come.
I could go on and on about each of these legends, their models and concepts but there isn’t enough space. What I am saying is for those who believe there is a need for new hospitality brands not associated with established, well-known brands; think long and hard about long-term growth, viability, relevancy in terms of current market segments and most important investment dollars (ROI).
Ask yourselves will the concept appeal to future generations of travelers remaining despite economic conditions? Will there be a demand in the future for the brand concept by travelers who will continue to become more educated, savvy and discerning with regard to hospitality preferences? If you can honestly answer yes to the above questions, then launch and launch quickly. You’re on to something.
The most critical point I want to make here and one that most creative, would be hospitality entrepreneurs fail to consider, is why would an investor invest in a new hospitality brand concept?ÊWill this idea or concept realistically generate ROI for the investor?ÊAt the end of the day all that matters is the ability to produce returns and quick. In this economy investors interested in hospitality assets are playing it safe.
From where I sit in my profession as a real estate sales executive, investors favor established brands and franchises across all categories:Êlimited service, three and four-star brands/franchise systems.ÊThe reason is simple, there is minimum risk due to brand recognition, clearly established market share, operations, global distribution systems, revenue management, sales and marketing et al.
While a newly formed brand may have in place all the above via sales/marketing representation and secondary management companies to operate; it lacks name recognition and must work to
establish market-share.ÊHere I am referring to new brands not connected to established brand names. It may take far longer to achieve ROI and investors’ desired returns.
I don’t want to paint a picture of doom and gloom nor dash the dreams of a would-be hospitality entrepreneur or new brand, but rather suggest ways to realize goals of creating a new hospitality product with minimum risk.
For one, collaboration and integration. I am a believer in integration as discussed in my previous article.ÊI truly believe that there are numerous opportunities for existing brands to collaborate with newly formed brands to provide new services, amenities and programs to attract new markets.
Immediately what comes to mind is a term widely used across all business sectors, co-branding.ÊMost recently while working with a newly formed hospitality brand to secure investors, I approached an established brand to begin discussions to co-brand or integrate the new brand’s concepts into the existing brand’s business model. For the existing brand this tactic presented an opportunity to tap into a new market of younger, active travelers by offering new programs formulated by the new brand.ÊThe benefits to the new brand is an opportunity to launch a new concept, tap into established systems, professional expertise (operations), distribution and support of a marketing machine.ÊCo-branding strategy would garner tremendous returns, long-term for the investor. A win-win for all.
I encourage the new generation of hospitality visionaries to study the history of hospitality, review existing hospitality brand models, consider the viability of your product and whether it will generate desired ROI.ÊI would also strongly advise entrepreneurs to consider co-branding collaboration, andÊstudy an existing internationally renowned brand for whom your concept would be a great fit. Begin the dialogue armed with market studies, clear understanding of current conditions, a thorough concept to include strategies to increase market-share and improve the bottom line.
At the end of the day there is always an opportunity to create a unique and memorable guest experience, andÊto uncover new markets. There is room for tremendous growth in an ever-changing hospitality industry.ÊThat’s a great thing.ÊHowever, if there is an opportunity to improve upon what already exists by creating demand, increasing market share and producing ROI, then seize the opportunity and launch!
By Trica Jean-Baptiste, President of Morgensheer Hospitality, Inc.
Trica Jean-Baptiste is the founder and President of Morgensheer Hospitality, Inc., a consortium of hospitality, real estate, development, sales and marketing and communications consultants. The Morgensheer Hospitality Inc. Consortium provides strategic hospitality services to real estate investors acquiring and developing hospitality assets. Trica is a licensed real estate sales associate in New York State, held by Brick and Mortar Group. Prior to embarking upon a second career in commercial real estate, Trica Jean-Baptiste was President and founder of Trica Jean-Baptiste Communications, LLC; an award-winning boutique Travel Hospitality PR based in NYC for 15 years.ÊWhile heading up Trica Jean-Baptiste Communications, LLC. she represented some of travel’s leading hotels, resorts and tourism units:ÊRocco Forte Hotels, Star Hotel’s the Michelangelo Hotel, St. Giles Hotels New York, Hotel St Barth Isle de France, Rosewood Hotels’ Caneel Bay and Little Dix Bay, Hotel Esprit St-German (Paris, France); Dubai Tourism and Scotland Business Tourism Unit, Brussels to name a few.