“There’s a need for brands to die. There’s just too many.”
The speaker, Ken Greene, is president of the Americas for Radisson Hotel Group, a collection of eight brands. And to be clear, he wasn’t suggesting it was time for any of his brands to go to the boneyard.
He made the statement at the Americas Lodging Investment Summit, held Jan. 28 to 30 in Los Angeles. Most of the 3,000-plus attendees are executives or emissaries from global hotel brands, hotel owners (or owner-managers), franchisees, real estate investment trusts, mergers-and-acquisition specialists, investors, lenders and hospitality consultants. They’re there to evaluate or shop for brands or sell the benefits of brands. (The conference is produced by Travel Weekly’s sister company, Burba Hotel Network.)
Greene got immediate pushback from fellow panelist Michael George, CEO of Crescent Hotels & Resorts, which manages 96 hotels under brands owned by Marriott, Hilton, Hyatt, InterContinental Hotels Group, Wyndham and Radisson. “Brands will continue to grow brands and have their net be as big as possible,” he responded.
The fact is, brands are structurally difficult to kill, even when the brand owner has the will to do so. Most brands don’t own the hotels where their flags fly, and there’s not much they can do if the property owner wants to keep it for the full term of the management agreement.
So even though there was broad post-merger speculation that Marriott would identify brands with similar profiles within Starwood and Marriott and then join them under the stronger of the two, there’s no indication that this is underway.
There are other disincentives to kill brands. Weaker brands can gain strength if allied to a strong portfolio loyalty program. In an interview after the panel, Wyndham Hotels & Resorts CEO Geoff Ballotti told me, “It’s less about the brand and more about the distribution and loyalty platforms.” He drew an analogy to the small airlines that benefit from alliances and also fill an otherwise blank place on an alliance’s world route map. He predicts there will ultimately be only four or five large loyalty programs (and predicts Wyndham will be one of them).
This may explain in part why Greene, with eight brands, might wish to winnow competitors’ portfolios, one of which, Marriott, has 30 brands. Greene himself acknowledges that, even though he made the statement that day about brands needing to die, “in 10 to 15 years, I may have a different perspective.”
Almost lost in the general enthusiasm for high brand birthrates and lengthening life expectancies is the potential for consumer confusion. In a breakout session called “Brand Selection in the Era of Proliferation and Consolidation,” Vesta Hospitality CEO Rick Takach said, “The general public is definitely confused. I have Homewood Suites, and people will ask if it’s a Hilton or a Marriott.”
And it turns out that it’s not just the general public that gets confused. At the beginning of the breakout session, moderator Jonas Niermann, PwC director of hospitality, asked a group of 100-plus hospitality professionals to pick up a piece of paper that was on their seats and draw a line from the logos of hotel collection brands created by Marriott, Hilton, AccorHotels, Wyndham and Hyatt and connect each with descriptions gleaned from the brand parent’s website.
A prize was offered for a perfect score.
The sheets were collected and tallied.
No one got them right.
Also during that breakout, I raised my hand and asked the panel about their perspective on Greene’s statement about brands needing to die. Chip Ohlsson, chief development officer of Wyndham, wouldn’t identify a brand that needed to go away, but he observed, “There are some hotels that need to die. [The industry] is not so much overbuilt as underdestroyed.”
In the end, I think AccorHotels senior vice president of development Greg Doman got it right when he answered my question by saying, “It depends where you are in the cycle. When there’s a downturn, Darwinism will prevail.”
We’re in the 10th year of an economic upcycle, tying the longest period of consecutive growth since records have been kept. In the current economic ecosystem, old trees don’t need to die to let light in for saplings. The soil is so rich that old trees live on and saplings continue to emerge.
How long can this continue? At a general session, Goldman Sachs CEO David Solomon said that attendees at the recent World Economic Forum placed the odds of a global recession beginning in 2019 at only 15%.
For 2020: 50%.
If Doman is right and Darwinism ultimately prevails, who will live and who will die when the cycle turns down? Will those who have scaled up stagger under the weight of too many brands, or will their diversification ensure that wherever consumers turn, they’ll be there?
Or could those less burdened with the costs associated with brand maintenance have the advantage?
Like everyone else in the industry, I’m in no particular hurry to find out who might fill Brandland’s empty cemeteries.
Source: Read Full Article