How Does the Proliferation of Brands Impact Guests and Revenue Management?
By Tom Engel Principal, T.R. ENGEL Group | July 23, 2017
Co-authored by Elizabeth Karakachian, Marketing Co-ordinator, LHL Communications
The hospitality industry is abundant with more than 270 hotel brands globally. Nevertheless, this whopping number is not stopping Marriott, Hyatt, IHG, and Hilton from expanding their portfolios with even more new brands. Theoretically, broadening the supply of brands is favorable for generating revenues from various distribution networks, loyalty programs and supply channels. But just how useful, helpful or even good is all this for the customer? Has the hotel industry gone mad by over-saturating the market with brands that are not all that different from each other?
Emergence of Brand Segmentation
Some of today's biggest hotel brands started off as family run businesses with a single location. It took a bit of time, hard work and some luck for these companies to expand into the global enterprises they are today.
Hilton, for example, started with a 40-room hotel in Cisco, Texas and quickly grew through acquisitions. Marriott, started with a Motor Hotel in Virginia in 1957, and then 40 years later purchased its initial interest in The Ritz-Carlton Hotel Company LLC (in 1995). Obtaining established hotel brands allowed companies to instantaneously widen their portfolio without having to embark on new construction or the creation of a new brand. INSTANT GROWTH.
Ultimately, lodging companies focused on growth within every supply and target market. As a matter of fact, the moment a new target market was introduced, companies, without any apprehension, created new concepts to distinguish itself. In 1998, Starwood Hotels & Resorts launched its edgy, high-end boutique hotel W New York. According to JetSetter, many critics believed this was a terrible business decision, stating that customers wanted familiarity and predictability over uniqueness, and a property which had no name recognition would be detrimental. In fact, W Hotels became one of the most successful brands in the industry and now operates 46 hotels in 24 countries. This opened the doors for many hotel chains to introduce their own boutique collections in the following years. Today, creating new lifestyle brands are still a focal point for our industry.