With the spread of coronaviruses around the world, the hotel accommodation industry has encountered a huge crisis. But in a turbulent environment, some hotel executives still see opportunities.
The CEOs of hotel groups such as Wyndham, Hyatt and Marriott all mentioned the importance of continuing to invest and expand the hotel brand territory. They believe that the group's revenue growth in the next few years is likely to stem from The transformation of hotels under their respective hotel brands.
This is not surprising. During the economic downturn, many big brands and online travel agencies will use their own brand technology and extensive customer flow advantages to promote themselves to independent hotel operators.
Thomas Magnuson, CEO of the independent operator Magnuson Hotel, said: "In the smaller hotel market, people often come to their front desks with business cards from large companies. At this time, many independent Hotel owners will be influenced by it and be tempted by the popularity of big brands. "
After the brand conversion, will both sides benefit?
In 2015, Cornell University found that there were 260 brand conversions between 1994 and 2012, and there were 2,750 hotels without brand conversions. According to data from the PKF Hotel Research Center, the occupancy rate of independent hotels that have transformed into affiliations of major brands has increased by an average of nearly 7%. Overall, the average occupancy growth rate after conversion was approximately 6%.
But the report also pointed out that, compared with the conversion to a higher-end hotel, the lower level can better improve the occupancy rate and profit. Research shows that when a brand contractor maintains a property within the same level of brand series or switches to a high-end market with higher fees, it usually does not see substantial changes in revenue or profit.
Although this is a good time for brand relocation, it is not an easy task, and financial factors often put pressure on operators. Because the brand conversion needs a certain amount of funds to support, the original hotel needs to be renovated to meet the standards of its new brand. It is reported that the conversion cost of the Ramada Suites in New Orleans to Holiday Inn Express in 2013 was approximately US $ 2.7 million.
Makarand Mody, a professor of hotel marketing at Boston University, said: "Although some independent hoteliers may not be willing, if they want to convert to a new brand, they have to invest money. You are now this new brand. "
No one knows whether the current crisis is the right time to seek new banner ownership
Marriott, Hyatt: With brand protection, we should plan ahead to seize the opportunity
In the next few years, big brands will still be attractive enough for independent hotels, and more franchise agreements will be signed. In addition to their brand awareness, distribution channels and marketing budget, standardization will also be favored to a large extent. During the recovery of the coronavirus, large hotel groups can provide travellers with more guaranteed health and safety standards.
Executives of global brands such as Hyatt, Marriott and Hilton all mentioned the brand conversion plan at the financial report meeting, and also mentioned that the hotel's hotel product portfolio has adopted new cleaning standards.
Past research shows that in the three years after the 2008 financial crisis, Marriott has added more than 13,000 rooms to its product portfolio through brand conversion. This number may also rapidly expand in the recovery of coronavirus, because this global The largest hotel company has acquired more brands after merging Starwood. Its chief financial officer said in the first-quarter earnings conference call: "The group's current brand conversion is more meaningful than last year's downturn. Compared with the 2008 financial crisis, we have a strong portfolio of soft brands. The world is interested in these brands. "
Wyndham CEO Michele Allen pointed out on last week ’s earnings conference call: Wyndham will invest $ 30 million to transform some independent hotel operators into their diversified economies and Medium-sized hotel brand.
Leaders of brands such as Hyatt also hinted on earnings conference calls that once the industry moves from survival mode to recovery mode, incentives such as key funding, fee waivers or other financial assistance may have to be leveraged in the field of competitive conversion. , That is, telling independent hoteliers that the present is a good opportunity to make profit in advance, and missed it will no longer exist.
Opponents: The market has changed, the cost of renovation is too high
But Modi and Magnuson do not agree that independent hotels should be affiliated with major brands.
Once independent hotels pay for renovations in accordance with the new brand standards, they will inevitably face a round of fee collections to maintain consistency with major brand families. Depending on the luxury of the hotel, the initial franchise fee may be tens of dollars, even hundreds of dollars, thousands of dollars. Then there are marketing fees, booking fees, and percentage of total room revenue. With tourism demand so uncertain, this may be difficult to bear.
Therefore, Magnusson believes that there is no need to rely on big brands: if a hotel has a good location, good professional ethics, and truly recognizes the local business opportunities, they will do well on their own. "
Modi said: "Although in this case, some independent hotel owners will be tempted by the huge marketing funds owned by these big brands, but I think this is not a simple process, there are too many market variables at work. "
Magnuson Hotel is already planning its own defensive strategy to contend with big brands: trying to provide some hotel operators with a capital expenditure plan to renovate hotels and get rebates, he pointed out that these costs are not enough Charge half of the fee to the franchisee. But he also admitted that compared with big brands, this is indeed a difficult battle.
