Investment in a New Brand Takes More than Money

Brand building isn't a seat-of-the-pants process

Imagine having a set of large posters taped side-by-side on a wall. Now take three darts and throw them at the first poster containing 15 color squares. These three darts just selected the color scheme for a new brand. Repeat the dart-throwing selection process with posters containing interior and exterior design elements, guest propositions and finally, key market locations. Congratulations: The newest hotel brand in the market has been created. If only creating a brand and making it successful was this easy.

At times, hotel companies and the brands they create just don't get it. There's more to building a brand than a “if you build it they will come” mindset. Some appear to be more focused on words than substance. They sometimes cross over into the realm of over-promising and under-delivering with lofty brand propositions and unrealistic development targets, all in an attempt to wow developers into viewing them as innovative trendsetters.

While having great intentions, in too many cases industry players create a new segment without research that points the way. They end up creating brands that completely miss the mark or creep into their established brands, which force them to abandon the concept to the detriment of the franchisees that have already signed up.

Let's go back to 1990 and look at raw data provided by Smith Travel Research and analyzed by Peggy Berg, principal of The Highland Group in Atlanta. In that year, 65 hotel brands had hotels open, of which none had hotels open in 2007. In a span of 17 years these brands became extinct. But there is one statistic that is even more staggering. In 1990, there were 24 hotel brands that were introduced some time prior that had no hotels open as of that year and in 2007 they still didn't have any properties. They, or let's say the concepts, came and went.

But it certainly wasn't all talk. There were great growth stories for the industry as well. There are 54 brands today that have more than six hotels open but had none in 1990, totaling 2,290 hotels with more than 272,000 rooms. Even more impressive is that 78 brands gained properties and rooms from 1990 to 2007 — 22,226 hotels, up from 8,992.

There's certainly a reason for this growth — particularly when working with the franchisee community. There are three key elements that hotel companies must be responsive to for brands to grow and become part of the hotel landscape. If not, hotel brands tend to flounder and eventually fade away.

Sponsorship

It is critical that the brand being created has the support from its parent hotel company for the long haul. If done correctly, the sponsorship of a new brand can create value for the brand while driving higher returns for the owners. Providing support for franchisees can include an e-commerce strategy focused on building brand awareness, a worldwide reservation system with websites that can accommodate guests in their native language, a global sales team, available marketing dollars for advertising campaigns, brand sponsorships and promotions, and a flexible loyalty program.

Consumer proposition

A brand can't be successful if it doesn't know who its target guests are and thus will not be able to deliver on its brand promises. Will it take time to find the target guest as the concept is being developed? Of course. But research on the front end is vital when developing the brand's hallmarks and proposition — in the end making sure the brand is able to rise above the noise of competing brands in a given segment by appealing to guests and satisfying their needs.

Investor proposition

It's no secret that driving owner returns depends on clear brand positioning, consistent quality and a contemporary image. However, this is easy to forget if there is a drive to launch new brands with no clear strategy for the concept and its distribution into the market. A hotel company owes it to its franchise community to do the due diligence prior to launching a brand, and not be blinded by lofty expectations and goals. This group is most at risk if the hotel company doesn't fully support the new brand in its infancy.

These three key elements help companies focus their development of new brands. IHG with Hotel Indigo is a great example prior to opening the first hotel in late 2004. The company conducted the research that directed the building of the brand, and since its launch IHG has cultivated Hotel Indigo with a strategic approach to its design, development and service.

It's important to keep in mind that the key elements are not for new brands only. Legacy brands need attention, too. Despite being successful and proven, these brands can die if the hotel company doesn't evolve the strength and appeal of the brand to fit the needs and wants of the present-day guest.

For example, IHG conducted the industry's largest piece of consumer research over a two-year period encompassing more than 100 different brands and more than 18,000 people. This research is the foundation for the changes IHG is making to the Holiday Inn brand today.

Unlike companies that make soft drinks or candy bars, hotel companies don't have the luxury to simply pull products from store shelves when ideas don't connect with consumers while they move on to the next big idea. Real estate, a building and most importantly, a franchisee can't simply be pulled from the shelves as the hotel company moves on to its next brand concept. Building a new brand takes time and support and should not be expected to happen overnight. There is a greater commitment that takes place and franchisees should expect and receive the support of the hotel company for the long haul.


Jim Anhut is senior vice president, franchise development, the Americas for InterContinental Hotels Group. His career with the company includes the development and launch of two brands: the extended-stay Staybridge Suites and the boutique product Hotel Indigo. He is a third-generation hotelier with more than 25 years of industry experience.

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