Independent Owners See Value in Soft Brands By Bryan Wroten - February 24 2016. Assistance through a downturn, tapping into reservation systems and wooing lenders are a few reasons owners see value in soft brands for their independent hotels.
REPORT FROM THE U.S. - When Rockbridge Capital bought The Campbell House in Lexington, Kentucky, last year, the company’s plans were to have the independent hotel join the Curio Collection by Hilton soft brand.
“We bought it from another developer that had done additional renovation, and it was a little bit more complex and required more capital,” said James Merkel, CEO of Rockbridge. “We stepped in and bought it and completed the transformation of the property to a Curio.”
Merkel said company executives decided to soft brand the hotel in December to properly position it. His company based its strategy to focus on independent hotels that offer unique experiences on trends in the market and the desires of consumers.
He said company leaders aren’t projecting a downturn, and The Campbell House is in a market that has seen a strong rebound and fundamentals.
“We don’t invest in hotels to try to time the market,” he said. “We invest in hotels to generate strong risk-adjusted returns over time.”
The Smith family, however, saw a soft brand as a way to help its hotel after a downturn. The family purchased what would become the Hotel North Woods in Lake Placid, New York, when it came up for auction about 10 years ago, according to Tracy Smith, one of the owners of the hotel. The family owned the property for about a year or two before the recession hit, which delayed renovation plans for about six years.
“It really just came down to finding financing during the downturn,” she said. “It wasn’t available.”
The family started to look into soft-brand options a little more than a year ago, Smith said. Family members wanted some security moving forward with the uncertainty about the economy, she said. Soft branding would also give them access to loyalty programs, and Smith said independent properties can’t compete with the big brands when it comes to those programs. Brands’ central reservation and booking systems and global marketing initiatives were other attractions, she added.
The family decided to join the Ascend Hotel Collection by Choice Hotels International and officially became a part of the collection in October 2015.
FEBRUARY 2016 HOTEL NEWS NOW
“A lot of resources went into developing the property, but we also wanted the branding and voice and vision of who we were moving forward,” Smith said. “What was great about the Ascend Collection is that Choice allows them to have their own brand vision and voice with the power of a larger company.
“They allowed us to stay unique and distinct in the market on our own terms while taking advantage of the Choice name, power, partnership and technology.”
The Smiths saw an immediate uptick in reservations because of the new distribution channels and membership program now available to them, she said. Although it’s not the only reason, the hotel has had to rely less on online travel agencies for reservations, she added.
“Overall, business is up since becoming a Choice Hotel member,” Smith said.
From brand to soft brand
Some owners also are converting their properties from brands to soft brands.
Shai Zelering, managing director of operations and asset management for Thayer Lodging, Brookfield Hotel Properties, said his company has taken three of its previously branded properties and turned them into independent properties to join soft- brand collections, the latest of which is the Annapolis Waterfront Hotel for Marriott International’s Autograph Collection.
A growing number of guests don’t want to go to “X-brand” in Europe, South Africa or Oklahoma, Zelering said. They want to experience those places for what they have to offer.
“What independents always had to offer is high attention to detail and the dedication of owners to create that experience,” he said. “Hotel chains realized there is value in that and started creating a lot of options.”
Zelering said he has the ability to take a hotel and associate it with a distribution channel and bidding power of a large chain, adding credit to his property. That makes it easier to present projects to lenders because they like to see solid distribution behind projects.
“I pay lower fees on the procurement side because I have a large brand negotiating on everybody’s behalf,” Zelering said. “There is scale available to operators they didn’t have before.”
Along with the Annapolis Waterfront Hotel, formerly the Annapolis Marriott Waterfront, Thayer Lodging conversions to soft brands include: The Highland Hotel in Dallas, Curio Collection by Hilton, previously The Hotel Palomar by Kimpton Hotels & Restaurants; and the Diplomat Resort & Spa Hollywood, Curio Collection by Hilton, previously the Westin Diplomat Resort & Spa.
“These are unique assets,” Zelering said. “They have unique attributes and are distinct in their own regard. We wanted to highlight that and associate with a soft brand with tremendous engines behind it.”
The Annapolis property is a historic building in the downtown area, and it serves much better as an independent hotel, Zelering said. Guest satisfaction scores have increased by about 50% to 60% since moving to the Autograph Collection, he said.
“These are less-structured brands where there is room for creativity,” Zelering said. “There is room for a little bit more out- of-the-box thinking and more entrepreneurial spirit.”
FEBRUARY 2016 HOTEL NEWS NOW