Hotel brand explosion continues as good economic times roll

Jimmy Buffett's Margaritaville plans to debut an "upscale boutique" brand called Compass.
Jimmy Buffett's Margaritaville plans to debut an "upscale boutique" brand called Compass.

Despite the already seemingly endless proliferation of global hotel brands, the race to launch new ones continues.

Last week, InterContinental Hotels Group (IHG) added Voco to the list, which it describes as an informal upscale brand focused on conversions.

On the same day, the French luxury food purveyor Fauchon said it would follow in the footsteps of European luxury brands like Bulgari and Audemars Piguet by entering the hospitality business with the opening of its first Fauchon L'Hotel in Paris on Sept. 1.

Earlier this month, Hilton CEO Christopher Nassetta said his company will be launching two brands this year and another in 2019.

Likewise, Jimmy Buffett's Margaritaville, which has been rapidly expanding in the Caribbean, has announced plans to debut an "upscale boutique" badge called Compass.

And there seems to be no end in sight to this rush by companies to add brands and collections that bring more variety to the market and more guests to their loyalty programs, which are key in the digital age to collecting the data to compete with tech giants like Amazon and Google as they move into the travel space. 

To date, hotel research firm STR says there are some 760 global hotel brands or hotel affiliations that include eight properties or more, compared to about 690 in November 2009. The brand proliferation trend is one that began with the rise of boutique and lifestyle properties more than a decade ago, before the Great Recession, and one that picked up steam even more rapidly in what has become one of the longest recoveries in hotel industry history.

So what is driving the nonstop push by companies large and small to create so many different products? The increasing desire by consumers for new and varied experiences as well as a variety of choices, depending on whether they are traveling for business, as couples, with family or with friends, experts say.

"Companies announce new brands, I believe, to address changing consumer demands and shifting changes in demographics," said Adam Weissenberg, global leader of Deloitte & Touche's transportation, hospitality and services division. "But I also think companies want to be able to offer their owners the full range of brands from economy to luxury so that owners will be able to build any kind of hotel with them."

Given that hotel companies collect fees from hotel owners for every property they flag, "the more hotels you can get with your flag the more fees you get.  So [there is] lots of incentive to have many brands to address all the owners' needs."

The danger of too many brands, Weissenberg said, comes with economic downturns, when no one is building or buying new hotels.

"Then you see which brands have the most customers, appeal, etc., and those brands that don't have scale and recognition may suffer at that point and disappear," he said. "If we look back at the last downturn, a lot of brands that were announced right before the downturn either disappeared or took a long time to get traction."

Among the major hotels companies, Marriott International is the current leader with 30 brands, thanks to its acquisition two years ago of Starwood Hotels & Resorts; AccorHotels has 24 and Hilton has 14.

Voco will be the 14th brand for IHG, which last year introduced the Avid brand and recently acquired a 51% majority stake in Regent Hotels and Resorts.

IHG said Voco was inspired by the Latin word vocare, meaning to invite or to come together. IHG said Voco will "combine the informality and charm of an individual hotel with the quality and reassurance of a global and respected brand."

Amenities include a "locally influenced" treat at check-in; water-saving, aerating showerheads; smart TVs; and flexible bar and lounge spaces that could, for example, serve coffee in the morning and "shareable and classic dishes" in the evening.

IHG said it has signed its first Voco in Australia and that it expects to grow the brand to more than 200 properties over the next decade.

Adding the brand will strengthen IHG's offerings in the $40 billion upscale segment, which is expected to grow by a further $20 billion by 2025, the company said.

"We've talked about the significant growth opportunity we see for IHG in upscale, and Voco will help us deliver against this," IHG CEO Keith Barr said. "We'll work with owners of attractive properties, who appreciate the power and expertise that a global business can bring to the table. Guests will be able to enjoy the appeal of a more individual hotel, alongside the reassurance of a name above the door that they trust."

It's not just the top global players driving the brand explosion. Brands of all sizes are launching offshoots. AMResorts recently revealed plans for the three-star Amigo Hotels & Resorts, marking the company's Europe debut, and Radisson said in March that it was replacing its struggling Quorvus Collection with the premium Radisson Collection. Many are smaller companies, like Fauchon.

Fauchon Hospitality CEO Jacques-Olivier Chauvin, formerly of Relais & Chateaux, said the hotel group was set up earlier this year to leverage Fauchon's 130-year-old legacy as innovators of fine Parisian gastronomy into a five-star, experiential-based hospitality company.

"The strategy is to establish a portfolio of Fauchon L'Hotel branded properties, with a goal of 20 hotels over the next decade," he said. "With Fauchon's legacy in all aspects of the culinary industry, it is a natural next step to open our own hotels. It has been essential for us to define a concept that truly sets us apart, so we are not just another hotel brand."

What sets the brand apart, he said, will be its "gourmet approach at all moments in the guest experience," including an in-room "gourmet bar," which will be stocked with a complimentary selection of Fauchon products, and carefully curated local experiences.

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