Brands and Value

Aquestion I've been asked several times since I've been writing this column over the past few years is, “What hotel brands actually contribute to hotel market value?,” sometimes stated as, “Do some hotel brands contribute to hotel market value more than others?” Recently, I sought to answer this question using statistical methodologies and the assistance of Qu Xiao, a hotel researcher from China with a background as a manager with Marriott.

After analyzing more than 2,000 recent hotel sale transactions using the statistical procedure of multiple, linear regression analysis, we found that overall, hotel brand is a significant contributor to the market value of hotels, i.e., hotel sale price. Further, we found that after controlling for other factors that in the past have been shown to be correlated with the market value of hotels, namely the hotels' occupancy percentage, average daily rate, and net operating income or NOI (for a 12-month period), as well as hotel size (number of guestrooms), hotel brand is still a significant contributor to hotel value beyond the effect of all of those controlled variables.

After we arrived at this conclusion, the next logical question became, “Is the overall effect of hotel brand, as a significant contributor to hotel market value, greater for certain types of hotels than others?” Using a statistical technique known as analysis of co-variance, i.e., ANCOVA, we found that brand matters for some types of hotels, but not others. Specifically, brand is a significant contributor to the market value of upper upscale, upscale, midscale with food & beverage, and midscale without f& b hotels, but not luxury or economy hotels.

The final question for this research project may be obvious: Within those hotel types where brand significantly contributes to market value, what brands actually drive hotel market value upward? Again, using ANCOVA to answer this research question, we find evidence that certain brands — Country Inns & Suites, Courtyard by Marriott, Hilton Garden Inn, Homewood Suites, Hyatt, Residence Inn, Summerfield Suites, TownePlace Suites, Westin — do indeed contribute to the market value of hotels above and beyond the effects of occupancy percentage, average daily rate, NOI, and number of rooms. Our conclusions don't necessarily mean other brands don't contribute to hotel market value, but we couldn't find evidence that brands not listed in the table contribute to market value significantly more than average.


John W. O'Neill, MAI, CHE, Ph.D., is a professor in the School of Hospitality Management at The Pennsylvania State University and a licensed real estate appraiser. He previously held unit-level, regional-level, and corporate-level management positions with Hyatt and Marriott. He can be reached at jwo3@psu.edu or 814-863-8984.

Reprints and Licensing
© 2014 Penton Media Inc.


Acceptable Use Policy
blog comments powered by Disqus

Most Recent

More Recent Articles

Career Center

Quick Job Search
Enter Keyword(s):
Enter a City:

Select a State:

Select a Category:



http://lhonline.com/images/bulk_tv_logo.jpg
Franchise Fact File Top Brands
Brand Company Basics Top Management Companies
Owners & Operators Industry Consultants
Industry Associations Industry Events
Design Firms Purchasing Companies
Top Ownership Groups  


http://lhonline.com/images/bulk_tv_logo.jpg

Click here to view all of the Lodging Hospitality Photo Galleries



Accor Best Western
Carlson Rezidor Choice
Hilton Hyatt
IHG La Quinta
Marriott Starwood
Vantage Wyndham







Free Product Information
News and Trends for the Hotel, Motel, and Hospitality Markets.

Lodging Hospitality eReport
Lodging Hospitality electronic newsletters are FREE to requested subscribers.

Lodging Hospitality Resource Center
The Lodging Hospitality Resource Center is the ultimate resource to find products and services to build, equip, and renovate hotels, motels and resorts.

Subscribe / Renew
Visit our subscription center to subscribe or renew your subscription to Lodging Hospitality.

Webinars
Visit our webinars page to view all our upcoming and on demand webinars.

Whitepapers
Visit our White Papers page to view all our current White Papers.