Hotel Brand Revitalization
Like any commercial product, a hotel brand follows a life cycle. At its maturity, the brand becomes tired in the face of changing consumer preferences, new brand competition floods the market, and brand development stagnates while brand-wide revenue flat lines. Although lodging companies continuously try to promote their brands, at this point in the brand life cycle only two options remain. One extreme measure is to eliminate the brand from the company’s portfolio, ensuring development of that brand remains dormant. An example of this is when InterContinental Hotels Group (IHG) eliminated Holiday Inn Select from the Holiday Inn brand family. The other option, which is more commonly undertaken, is to revitalize the brand through a process that is often referred to as a “rebrand,” a “brand refresh,” or a “brand relaunch.”
Hotel brand revitalization can necessitate a broad range of initiatives, from minor changes such as added amenities, service enhancements, a redesigned logo or slogan, or slight property aesthetic improvements, to more comprehensive brand-wide property improvement plans (PIPs). The goal is to modernize a brand that has deteriorating guest loyalty and awareness from having failed to keep up with the changing tastes and expectations of the travelling public. Instead of developing more properties under the unchanged brand affiliation, a hotel company conducts a relaunch to improve the quality and consistency of the brand in an attempt to re-build brand equity. In response to fast-paced changes in various social, environmental, and technological areas over the past five years, many hotel companies have undertaken multi-million dollar brand refreshes in an attempt to capture the loyalty of today’s traveller.
Major Brand Relaunches and Refreshes
Many parent companies, in collaboration with their owners, have recently undertaken or are currently undertaking property renovations to articulate their new image in an attempt to improve guest satisfaction. Brand-wide PIPs improve guest satisfaction in two main ways. First, they ensure that all the hotels bearing the flag are meeting the same property standards, which standardizes the guest experience across all properties operating under the brand. Secondly, it breathes new life into the brand concept through redesigned elements that reflect the needs and concerns of travellers who are increasingly connected, cosmopolitan, and ecologically conscientious.
The following figure summarizes the timeframe for the major brand refreshes.
The largest brand relaunch occurred between 2008 and 2010 when IHG revamped the look and experience of more than 3,000 hotels within the Holiday Inn brand family (Holiday Inn and Holiday Inn Express), located around the world. By the end of 2010, approximately 1,000 properties (140,000 rooms) were stripped of the Holiday Inn flag. In addition to updating the logo, which hadn’t been changed since the brand commenced 50 years ago, each property underwent extensive enhancements, including new signage, exterior lighting and landscaping, and upgraded lobby areas and guestrooms.
IHG is also innovating in other areas of its brand portfolio, particularly through the repositioning strategy that it has adopted for Crowne Plaza, which is scheduled for completion in 2016. Many hotels have already completed the first two repositioning phases, which entail new design elements and advanced management training. The brand is still working on implementing the switch to plum-coloured items and hallmarks, which will replace the maroon colour that formerly identified Crowne Plaza.
Delta Hotels and Resorts is currently in the process of re-inventing its brand. The company has introduced new brand design standards that are aimed at repositioning the Delta brand as an “upscale guest experience in the four-star hotel category.” The company is implementing a reconfiguration of the public spaces and introducing the newly designed ModeRoom™. As a result of the repositioning strategy, all Delta properties have or will have to undergo a major PIP to meet the ModeRoom™ design requirements. This is a major undertaking for most Delta properties as it involves all aspects of the guestroom furnishings and fixtures. For properties that have undertaken these renovations, the pay-off is being realized in terms of average rate growth potential. Since the brand refresh has commenced, approximately half a dozen properties have left the system, but there are plans to open four new properties across Canada, including the flagship property in Toronto’s South Core, which is to open in late 2014.
Carlson Rezidor Hotel Group’s Radisson hotel brand is in the final stages of its brand-wide renovations with approximately 75% of the more than 130 of its hotels in the Americas having gone through full PIPs by the end of 2013. PIPs, amenity enhancements, and a strong focus on improving guest experience are the brands key components in an effort to push the chain upmarket. Of the Radisson Hotels across Canada over the last three years, 12% were new construction, 53% have been renovated, and 35% are in progress with completion expected in the next 12 to 18 months.
Additionally, in 2012, Carlson launched a new hotel prototype and brand identity for its Country Inns & Suites incorporating its new generation design specifications. Country Inns & Suites is offering owners reduced royalty, marketing and renovation fees – a reduction of five percent, for hotels that have 80 or more rooms, are built or converted to the brand’s “Generation 4” specifications, and open under the Country Inns and & Suites flag within a two year period of signing the license agreement.
Choice Hotels International has revamped the look of Comfort Inn, which aims to please the upper midscale guest through its “Redesigned and Redefined” program involving brand-wide guestroom upgrades, a new breakfast plan, and the “first impression” lobby experience. In 2013, the focus was on guestroom improvements, especially new bedding priced of $200 per bed. Although the brand’s logo remains unchanged, nearly 70% of Comfort Inn properties are expected to have completed a PIP by 2015, when nearly 400 of its approximate 2,000 properties are also expected to have their flag removed.
Hilton Worldwide initiated the rebranding of DoubleTree with a contemporary logo redesign and a name modification, adding “by Hilton” to the DoubleTree name. The investments put into the brand include the Sweet Dreams™ sleep program, a signature breakfast program, and property design enhancements. On a global scale, there are approximately 140 DoubleTree Hotels in the pipeline, four of them in Canada with the recent opening of the DoubleTree by Hilton Toronto Downtown.
Coast Hotels began revitalizing the Coast brand through a new logo featuring its now signature fuchsia colour, which is a switch from the formerly standard blue. The look of the brand had not been updated in the 40 years that it has been in existence, and the new logo will be featured on all new hallmarks and signage. The brand relaunch will also include property improvements and FF&E upgrades, but there are no plans to remove any Coast flags from properties as part of the refresh.
Wyndham Hotel Group is following on par with the reinvigoration trend at stake of its brands hotel operating performance. Howard Johnson is looking to introduce its newly imagined brand with redesigned test properties to appear in the US in late 2014, and changes are to start being implemented at franchised properties by 2015. Changes will be made to the logo, the exterior design, and the FF&E, complemented by the brand’s iconic orange accents. Howard Johnson’s tiered brands – Howard Johnson Inn, Howard Johnson Express, and Howard Johnson Plaza, will be eliminated. The company is pushing ahead with plans to refresh its Microtel Inn & Suites by Wyndham and Travelodge brands – two economy brands that will look to advance their market share with new lobby and guestroom designs.
Intentions behind a Relaunch
A relaunch allows a brand to celebrate its long-lived history and culture while demonstrating to customers that it is in alignment with and sensitive to contemporary trends and tastes. These changes are vital in staying relevant and ensuring future growth. The goals of a hotel brand-wide relaunch are to improve brand clarity, maintain or improve scale position, standardize and tighten the product through the elimination of underperforming properties, and evolve new design concepts to meet shifts in consumer demands.
Improve brand clarity
Establishing brand clarity is an ever-present challenge for hotel companies with several franchises. Each brand in a company’s portfolio attempts to create value through offering distinct services and amenities, but these features may be unclear to the average price-focussed traveller. Rates may be $20 more for a full-service property than a limited-service property within the same brand family, but that rate justification must be communicated to the consumer in order for them to understand the value proposition. For instance, IHG looked to further differentiate the upper midscale full-service Holiday Inn brand from the upper midscale limited-service Holiday Inn Express brand over the course of its relaunch. Changes were made entailing colour differentiation – Holiday Inn decked out with its signature green while Holiday Inn Express exhibited hallmarks bounded in blue. Apart from contrasting services and amenities, Holiday Inn Express has been standardized with having less meeting space for new builds and conversions ensuring the full-service Holiday Inn product remained the primary driver of meeting and group demand within the brand’s family.
Maintain scale position
A brand allows a hotel to stand out within its own chain scale segment. Once a brand begins to lose market share, however, it is at risk of falling to a lower scale segment (such as midscale to economy). A brand relaunch can turn the tide on this descent and reposition all the hotels in the brand at a higher point on the chain scale. For example, the Howard Johnson brand is currently part of the lower end of the midscale segment, and Wyndham is looking to regain market share within the segment through the brand relaunch. Any brand in this situation requires extensive capital injections into its properties, giving owners an opportunity to reposition their properties within the market without changing brands.
Eliminate underperforming properties
Part and parcel of a brand relaunch is the de-flagging of underperforming properties that fail to meet the new product standards. Underperforming properties undermine brand equity—the added value endowed by the brand name. As much as hotel owners and developers steer clear of having their properties appear too “cookie cutter,” guest loyalty is derived from consistency throughout the brand. As such, one poor hotel can ruin the flock.
A property can be determined to be underperforming by comparing its performance to that of its competitive set, but guest satisfaction scores also measure a hotel’s ability to retain guests. In order for a property to maintain its flag during a refresh process, many franchise companies look to guest satisfaction scores to ensure consistency throughout the brand in the eyes of the guest. For example, in 2012, in the midst of its refresh process, Choice Hotels asked guests how likely they were to recommend the Comfort Inn brand to a family member or a friend. If the average response at a hotel fell below 7.2 out of 10, it was likely that the property would be eliminated from the Comfort Inn system.
For the owners that make the cut, they are left with two options: make the necessary expenditures to ensure that the property lives up to the new brand standards, or transition the property to an alternative brand. In some cases, a property may not require a full PIP if it is relatively new or recently underwent renovations before the brand-wide initiative commenced. Instead, it will likely require less capital investment with the addition of a few hallmarks and signage changes.
In the scenario of a property leaving the brand’s system, owners are typically forced to transition the property to a lower-scale brand. In some circumstances, a franchise company may provide an exit strategy for an owner involving a downgrade to another brand within the company’s portfolio. For instance, if the market is fitting, Choice International may suggest converting a Comfort Inn into an Econo Lodge—an economy-scale brand that would require a smaller capital investment than the investment to enhance the property to Comfort Inn standards.
Meeting the needs of a changing demographic
Franchise companies are adjusting their brands in response to the expectations of the Millennial generation (ages 17 to 35) through added amenities and technological advancements. In 2011, the number of Millennials in the US reached 79 million, ahead of the Baby Boomer population (ages 48 to 66) of 76 million. By 2030, Boomers will have shrunk to 56 million. If a brand is going through a refresh process, it is essential to hit all the key interest points of the modern-day Millennial traveller and prepare for the traveller to come.
While travelling for business, Millennials are more likely to work within the “coffee shop culture”— a “third space” apart from their home or work space that reflects a more open, social concept. Newer brands like Starwood’s aloft already cater to this concept, but more established brands within Hilton, IHG, and Marriott’s portfolio are updating their properties, particularly through the lobby, to adhere to this trend.
While travelling for leisure, Millennials are looking for a more authentic local experience. While “cookie cutter” ensures brand consistency, Millennials are looking to immerse themselves in something they have not yet experienced. Franchise companies are thus forced to negotiate between the need for brand consistency and the appearance of uniqueness, which is sometimes answered in fresh ways. For instance, Coast Hotels, capitalizing on the fact that it operates on a smaller scale than the major franchise companies, has adopted a new slogan, “refreshingly local™,” to reinforce both the differentiation within its properties and the special value of each location.
Results of Brand Revitalization
A franchise company anticipates that its hotel owners see the value of injecting capital into their properties and how this directly translates into both improved guest satisfaction and increased revenue.
Following IHG’s relaunch for the Holiday Inn family, the brand was immediately seeing 3% to 4% improvements in customer satisfaction scores, translating into 7% RevPAR gains in properties that had upgraded to the new signage and service levels. Today, Radisson is seeing the correlation between property renovations and revenue with a 5% boost in RevPAR and 2.3 point increase in RevPAR penetration amongst its recently updated hotels. Similarly, Comfort Inn is capitalizing on increases in all categories while the outlook remains optimistic for the refresh to wrap up. The company hopes to justify a $16 push in ADR at the conclusion of the brand-wide relaunch in 2015.
Ideally, a hotel franchise company works with each of its owners through the brand revitalization process to ensure that the necessary brand and property enhancements enable enough ADR and occupancy growth to produce a worthy ROI, thereby avoiding any flags being pulled. However, each market varies, and some branding initiatives are not feasible investments for hotel owners.
A full-fledged brand relaunch requires time, capital, and the compliance of owners. Hotel companies juggling a wide-range of brands within their portfolio must distinctly position each of them in the eyes of the consumer in order to maximize market share. With the changing interests of the modern-day traveller, hotel companies will continuously need to update brand standards and re-identify themselves amongst an increasingly competitive environment.