HOTELS BY DAVID CHURCHILL
BRAND NEW
Developing multiple brands is the current name of the game for global hotel chains. But how far can it go?
WHEN FOUR SEASONS OPENS ITS 100th LUXURY HOTEL later this year it will, to many people, mark its emergence as a true global chain, spread across 41 countries around the world. But it will also represent something rather novel in the hospitality world of today: it is the only global chain to have just a single brand name – Four Seasons. Unlike its bigger rivals, the Toronto- based group has eschewed a multi-brand strategy over the past 55 years in favour of growth via developing a reputation for excellence under just the one banner. Marriott International, on the other
hand, has adopted a different strategy to achieve a chain of more than 4,400 hotels in 87 countries. Its growth has come from developing more niche brands than any other of its rivals, with 19 brand identities at present. And it is hungry for more, as shown by its US$12.4 billion acquisition earlier this year of arch-rival Starwood’s 11 brands and 1,300-plus hotels. Marriott’s brand-led strategy is now
the business model of choice for most of the world’s major hoteliers: the top ten global chains by room numbers have some 130 different brands between them. Worldwide, according to hospitality data monitor STR, there are nearly 1,000 hotel brands, with two more added so far this year – Hilton’s Tru and the Unbound Col- lection from Hyatt.
MARKETING TO THE MILLENNIALS And there are more on the way, including a new ‘lifestyle’ brand from presumptive Republican presidential candidate Donald Trump, although it is not expected to carry the Trump name – unlike his other hotels, such as the recently reopened Trump Turnberry golf course and hotel after a
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£200 million refurbishment. Trump is clearly jumping on the millennial band- wagon (those travellers aged from late teens to mid-30s) which is set to play a key role in the travel world over the next few decades: Marriott, for example, estimates that half its guests will be of the millennial generation by 2020. The reasons for this surge in numbers of global hotel brands are down to several factors, ranging from the economic to the way the hospitality industry has been re- sponding to demographic changes. The key driver, however, has been the strong recovery in demand for hotel accommoda- tion in most international markets in the wake of the 2008 financial crisis and reces- sion, leading to record hotel occupancy levels, revenues and profits for many hotel chains for most of this decade. As the world economy recovered so
investors took note, funding an acceler- ating trend for hotel companies to shift away from actually owning their properties to focus on being brand managers and operators. Add to this the potential of new hotels under construction, plus plenty of scope to convert independent properties into ones carrying a brand flag, and this approach encourages hotel groups to develop even more brands. Global room supply remains strong,
according to the latest figures from hotel data specialist STR. The pipeline for new hotel rooms under construction in Europe grew 8.5 per cent in April year-on-year (63,323 rooms from 440 hotels), with most building activity in London; in the US, the increase was 28.3 per cent. Moreover,
for all their seeming
dominance, there is still plenty of growth available to the leading groups. The top ten chains only account for about a third
of the estimated 17.5 million traditional hotel rooms available worldwide (exclud- ing disruptors such as Airbnb), according to research by Morgan Stanley. It points out that none of the ten has a market share of 5 per cent or more and even the combination of Marriott and Starwood to become the world’s biggest hotelier only gives the new grouping some 7 per cent of the global market.
SLOWER RATE OF GROWTH Yet while there are some concerns over the global economic and financial outlook – particularly weakness in the Chinese economy – the issue may be one of a slower rate of growth than any dramatic turndown. The latest HRG global hotel survey, for example, “shows that many hotel groups [last year] simply didn’t achieve the rates of growth that they had been expecting”.
And while Marriott CEO Arne Sorenson admitted to financial analysts during the bid battle for Starwood that “there is a bit more anxiety about what GDP growth is going to look like this year”, he was still willing to pay top price to outgun the Chinese. France’s Accorhotels clearly thinks likewise, recently scooping up the Fairmont, Raffles and Swissotel brands for US$2.9 billion. Other global chains, including Intercontinental Hotels Group, Hilton Worldwide and Hyatt have all been linked so far this year with possible mergers – either as predator or prey. But China remains a key player. In April, Chinese conglomerate HNA Group, which owns China’s fourth largest carrier Hainan Airlines, bought Carlson Hotels from Carlson (parent of CWT) along with its majority stake in Europe’s Rezidor Hotel Group, with the aim of taking full control
BBT JULY/AUGUST 2016 63
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