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A Soft Brand, New Management, or Both?

Courtesy Luxury Hoteliers Magazine:

A luxury hotelier with an underperforming independent hotel has several options available to him or her to improve performance without giving up independence.  Assuming the asset is in good condition and is competently staffed, the most significant options available are to acquire a soft brand, engage a management company, or both.

Soft brands have been around for over half a century — Relais & Châteaux just celebrated its sixtieth anniversary.  Others have also been around for decades and include Leading, Preferred, and Small Luxury Hotels.  Recently the big brand families have jumped into the soft branding business: Choice has Ascend, Marriott has Autograph, Hilton has Curio, and Starwood recently announced its version of a soft brand, Tribute.  For the uninitiated, a soft brand is essentially an opportunity for a hotel to have an affiliation with a group or collection typically requiring a certain number of amenities at a certain quality level without the brand getting into the details the way that a hard brand (e.g. Ritz Carlton, Four Seasons, St. Regis, Waldorf=Astoria, etc.) would do. Perhaps of greatest significance is that the soft brand allows the hotel to keep its own unique brand identity alongside or even above the soft brand’s.

Before the era of online reviews and rankings, the greatest value of a soft brand for an independent hotel was a third party “seal of approval” that a consumer could rely upon to be assured of a certain level of quality and inclusion in a widely distributed print hotel guide. This “seal of approval” has little value today since we know that more than eighty percent of affluent travelers check online reviews and rankings before making a hotel booking decision, and cumbersome print guides have been made obsolete by the internet.

In today’s world of complex online marketing, distribution channel management, and revenue management, the most valuable thing that a soft brand provides a member hotel is access to their online marketing tools, distribution channels (GDS, lower, negotiated rates from Expedia and the like, etc.), and central reservations (CRS).  However, these tools are only helpful if the hotelier knows how to use them.  It is often the case that an hotelier invests in membership with the soft brand expecting that the tools will be provided and then, voila, the reservations would start pouring in.  Unfortunately, this is simply not the case.

A tool is only as good as the hand holding it. To be effective, websites and distribution channels require a lot of quality content, constant updating, and rate positioning that makes sense strategically. This is where the need for quality management comes in.    Although most third party management companies do not, there are a few that specialize in independent hotels and out of that specialization have necessarily had to develop not only the teams of talented, well trained professional managers who perform revenue management and online marketing, but actually have websites built, content developed, and manage inventory and rates to appear in appropriate channels and at the appropriate times.  These are complicated disciplines that have become a vital part of our industry in just the last fifteen years and that can overwhelm an hotelier whose time is better spent managing the hotel’s facilities and employees and interacting with the guests.

It is arguable that if one does not engage a qualified management firm to implement, manage, and optimize the tools that the soft brand provides, that one is wasting valuable financial resources on the cost of membership.  The hotelier’s dilemma is this: does the hotel need one or both?  The answer depends upon the hotel’s competitors and number and type of customer or market segments upon which the hotel needs to rely for optimal business performance.  One example of a successful resolution to this dilemma is Cheeca Lodge, a luxury hotel located in the keys of Florida.

Not long after the great recession began, Cheeca Lodge, like most hotels at that time, was struggling to reach its revenue goals.  The number of available customers had been reduced by the recession causing hotels with limited distribution infrastructure and online marketing to lose share to better equipped hotels even if of lesser quality.  The owners considered a soft brand, but decided instead to engage Charlestowne Hotels, a management firm that specializes in the operation and revenue optimization of independent hotels and that possesses the competencies earlier mentioned in this article as essential for the success of independent hotels.  Cheeca Lodge chose to continue to be owner-operated but turned to Charlestowne for what it refers to as Revenue Optimization services (i.e. online marketing, e-commerce, and revenue management).  In the twelve months following full implementation of a more robust distribution infrastructure and Charlestowne’s online marketing and revenue management, Cheeca enjoyed an increase in RevPAR of 76%.  This example demonstrates that the impact of implementing and effectively managing a modern distribution infrastructure for a hotel cannot be over stated.

In this case and others like it, had the owner opted to join a soft brand, while the tools could have been provided, they would have been faced with the dilemma of how to effectively implement the tools and the ongoing management of them.  This begs the question, if one can get the tools and the management from one firm, why make the investment in both the soft brand and the management firm?  The answer to this important question brings us back to the issue of market segments and competitors.  A hotel in a market with no high-end Marriott flagged properties (Ritz Carlton or JW Marriott) may see a good return on investment by joining Marriott’s Autograph Collection and benefitting from demand by Marriott customers coming to the subject hotel’s market which is lacking other high-end options from Marriott.  On the other hand, if there is a Ritz and a JW in the market, but they are often sold out, then there is yet again an opportunity for positive ROI by having Autograph and getting Marriott customers who are unable to book into the Marriott brands with no vacancies.

These are only a few examples of the many variables to be considered.  The decision to join a soft brand or to hire a management firm are important and complex.  Most hoteliers would benefit from inviting a soft brand representative and a qualified management firm representative to analyze his or her situation and present their cases.  In some situations, an hotelier may benefit from having a qualified consultant guide that process.  The International Society of Hospitality Consultants is an excellent resource for qualified consultants to address branding and management questions.  Whatever the process an hotelier undertakes, due diligence is vital to avoiding a costly mistake.  Perform the due diligence and decide accordingly, and the upside, as in the case of Cheeca Lodge, can be transformational.

 

See this article in of Luxury Hoteliers Magazine here.

Posted on May 27, 2015

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