Does a brand add value to your hotel investment?

Piers Brown By Piers Brown
Uploaded 20 November 2016

Hosted at Brown Rudnick LLP offices in London, Katrina Craig, CEO, UK/EMEA - Hotel Solutions Partnership welcomed attendees from the hotel investment community, highlighting potential headwinds in the market, OTA's and the sharing economy.

Omega Poole, partner in the Real Estate Special Situations Team  and senior member of the European debt advisory for Brown Rudnick LLP London led the discussion with panellists: Xavier Destribats, President for Europe - Kempinski Hotels; Jason Grist, UK Area Manager - Booking.com ; Sameer Kazi, Co-Founder & CEO - BedRock Real Estate Partners Limited; Jason Kow, CEO - Queensgate Investments and Robin Sheppard, Chairman - Bespoke Hotels Ltd

"We will never be one of those mega-hotel brands, we are one of the oldest hotel chains. We are proud to be small, small is luxury. We only have 105 owners" said Destribats when asked about the impact of brand value following the recent Fairmont and Accor, and Starwood and Marriott mergers.

OTA's and hotel brands

The conversation moved to Jason Grist UK Area Manager, Booking.com and the OTA's approach to hotel brands, "Booking.com doesn't focus on the brand of others, it focuses on its own." Poole probed more on Booking.com's approach to customer experience with Grist outlining how the company aims to "scratch below the online surface, to deliver a forensic understanding of what customers want or do. We administer up to 500 online A/B tests a week (to drive hotel booking conversion). Poole asked whether hotel reviews are now more important than the hotel brand in the online booking process? "Customers look at both, together with price, location and reviews" said Grist.

Hotel investor's perspective

Kazi felt a brand's value is based on the risk v return of the hotel investment - "if there's a slowdown in the market, the importance of a brand stands out more. This leads to a heightened investor return with better pricing leading to increased yield. The brand enhances yield whilst managing risk. The value of a hotel brand is less relevant at 7 star and below 3 star levels. At this level there are other important factors like location and price point to consider."

Fellow hotel investor Kow agreed,  adding that a brand offers REVPAR benefits and an increased valuation.

Luxury hotel brand value

Kempinski's Destribats picked up on the value of a luxury hotel brand being not so much about bricks and mortar these days (lots of hotel brands have moved to an asset-light strategy)  but more about the on property guest experience. Destribats outlined how Kempinski is redefining the guest contact 'touches and sub-touches' of the experience, highlighting differing brand standards at each hotel property, "our Bulgaria hotel experience is much more different than that of our Berlin property for instance. Our new loyalty program recognises the guest more and differentiates our product more."

Boutique and lifestyle hotel brand growth

Poole moved the conversation onto the general explosion of hotel brands witnessed over the last few years, particularly in the 'soft brand' boutique and lifestyle hotel sector, asking panellists why. Sheppard put this down to the non-compete clauses many brands include in their owner agreement, perceived as a reassuring benefit. However this has contributed to restricting legacy brand growth over time, hence the launch of soft brands like Autograph Collection by Marriott; M Gallery by Accor and Curio by Hilton.  "There's definitely some brand confusion out there" said Kazi. Kow seemed less concerned, provided the owner focuses on brand "top line growth with bottom line discipline - it's accretive."  

Hotel guest loyalty and brand erosion

The brand conversation moved onto the general lack of hotel guest loyalty, and rise in consumer booking promiscuity driven be the growth in OTA distribution. "I love Booking.com - it's responsible for around 50% inventory, we (hoteliers) shouldn't fight with OTA's" said Destribats, with Grist having the final word, "We do not offer just choice, we offer accommodation for everyone. OTA's have helped level the hotel booking playing field based around data. Booking.com is a marketing platform and we don't differentiate. Booking.com offers all clients the websites and analytics to make pricing inventory decisions, and it's use does erode hotel brand value."

Click here to see interviews filmed at the event with Robin Sheppard of Bespoke Hotels and Jason Grist of Booking.com

 

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