Hotel Business Magazine, | The Newspaper For Lodging Decision Makers

Adding new brands is fine, but how about getting rid of a few?

Monday August 11th, 2014 - 1:38PM

As you would expect, our annual franchising issue features several in-depth stories on prominent brand companies such as Hilton Worldwide, Hyatt Hotels Corp. and Vantage Hospitality. In addition, we also provide in this issue an updated version of our annual franchise fees listing (see p. 20).

Owners and operators have come to rely heavily on this chart over the years as they do their due diligence and look at what flags make the most economic sense for them going forward. Pretty much the only real constant on this chart is change as franchisors continue to alter their fee structures. The other thing you might notice is the chart keeps getting longer. While we continue to add brands each year, we never seem to eliminate any.

While we may selfishly complain here that this presents us some challenges in terms of fitting all of the companies in the space provided, the bigger issue is what it means for the industry. We’re all familiar with the old saying, “The hotel industry is not overbuilt, it’s underdemolished.” Well I would argue that there are some brands that need to be demolished.

As soon as industry performance starts ticking up and the economy shows any kind of prolonged improvement, we see new brands emerge. It just comes with the territory and this cycle is no exception. In fact, just about every major brand company has added at least one brand to the mix in the last 12-18 months. Most of them now have anywhere from eight to 12 brands in their respective portfolios.

Can the industry support all these brands? Maybe it can at the moment as the supply/demand fundamentals are as solid as they’ve ever been. But what happens in a few years when supply increases and demand decreases and the overall economy starts the inevitable decline?

To be sure, all of these brand companies have put a lot of time and effort into creating product geared for very specific demographics, whether it’s fitness-minded guests, millennials or women of a certain age. However, the reality is that while some of us in the industry may be able to point out the subtle differences among these brands and who they are marketed to, does the average consumer really understand all that? Or are they just looking for a name they can trust and some points for their stay?

And what about the franchisees of some of these older brands that have been around for 30 and 40 years now. These brand companies may love all their “kids” the same, but that doesn’t mean they all get the same amount of attention. There’s little doubt that some of these owners wind up feeling neglected at times —and that’s to say nothing about the inevitable impact issues that arise.

Of course, while demolishing some brands may make sense in theory, making it happen is another story, due in part to existing franchise agreements. The only way brands ending up going away is by being acquired and consolidated into larger brands. But, in case you haven’t noticed, acquisition activity has been heating up lately. Maybe our list will get a little shorter next year after all.

—Dennis Nessler