🏨 INFINITE BRAND THEORY

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Marriott Corporation is about to unveil its 32nd hotel brand. Why do hotel holding companies operate so many brands? And what does it mean for the future of consumerism?

BRAND BINGE

The world’s largest hotel holding companies are playing a wild game, creating more hotel brands than ever, faster than ever.

At the same time, another trend is quietly taking over the industry: the rise and rise of “extended stay” hotels.

The hotel business is changing before our very eyes. And its proliferation of brands has clues for what the future of consumerism could look like.

DIVERSITY IN SIMILARITY

Many of these “brands” are actually hard to tell apart: On-site restaurant? Check. Pool? Check. Fitness center? Check. Small mini-market? Check. OK, You’re in a Hilton Garden Inn. Or is it a Courtyard by Marriott? Maybe you’re in a Four Points by Sheraton.

Plot twist: these brands actually aren’t meant to differentiate from one another so much. Rather, they’re meant to differentiate themselves from their sibling brands, owned by the same company.

See Hilton Garden Inn occupies a different space than Tru by Hilton, DoubleTree by Hilton, or Embassy Suites by Hilton.

Stay with me.

Each brand in these portfolios targets a (very) specific customer segment. A expense account executive, or a wealthy holidaymaker, might prefer the luxury of a Waldorf Astoria, a growing global brand that’s also owned by Hilton. A budget-conscious family in America might opt for a Hampton by Hilton. Having more brands lets hotel holding companies cast a wider net, capturing more customers.

More brands equals more options and more customers captured. But those customers are not who you think.

GUESTS AS GOODS

As regular readers of this newsletter know, the hotel industry’s real customers are not us guests.

No no no. Hotel holding companies’ true clientele are property owners, the folks who own the buildings.

We guests? We’re the product that hotel chains deliver to these property owners.

Yep, hotel brands, with their myriad offerings and different identities, are not built for us, but for property owners —who understandably aim to maximize their revenue per square foot, while minimizing their cost per guest.

Repeat: the best kept secret in hospitality is the fact that you and I aren't the customers, we’re the product.

CHOICES, CHOICES

How’d we get here, exactly?

Well, step 1 was large hotels firms moving to what they call an “asset light” model.

If you’re a big hotel company, going “asset light” —ie., getting rid of your buildings and simply franchising or licensing your brand to a property owner instead— greatly reduces your capital investment requirements, which gives hotel companies higher profitability, a more stable cash flow, and way lower risk —a compelling combination. Experts agree that not actually owning the buildings is a smarter path.

The other side of that equation is step 2 to how we got here. Imagine you’re a property owner, navigating through a diverse roster of hotel brands you could choose for your new building.

Every single one of those brands comes with a different set of promises —and expectations, in the form of service requirements and fee structures.

Choose a high-end luxury brand for your building, and you're looking at significant investments in amenities and staff training. Opt for a budget brand, and you may save on upfront costs but face the challenge of way higher guest turnover.

UNTIL…

Wait. What’s this here, at the back of the deck? That’s the golden middle ground: extended stay hotels.

These brands promise solid revenue, lower operational costs, and offer an attractive proposition to an under-served demographic of long-term guests—ie., essential workers on extended assignment, or individuals/families bridging time between homes.

It's a tempting blend, and one that many property owners in the US are finding harder and harder to resist.

LOYALTY

There’s yet another vector here to be aware of. Loyalty points.

Most people know that “points” are the holy grail for every frequent traveler. But they’re actually more valuable for hotel brands than you might think. Sure, consumers can exchange them for free nights and upgrades but really, they are a not so subtle way for holding companies to keep guests inside the network.

Adding more and more brands to their mix gives hotel holding companies a broader base for offering these coveted points. In other words, more brands means more “on ramps” for guests to enter or return to their loyalty programs. If each new brand is an additional channel for guests to accrue and use their points, then each new brand also makes it less likely that guests will venture outside the network for their next stay.

This is especially valuable in the extended stay segment, where the duration of each stay multiplies the potential points haul.

PEAK BRAND?

So, can hotel companies keep adding more brands to their portfolios? Or are we nearing “peak brand”?

Fate v Future believes that the extended stay model will to continue to grow, reshaping both consumer and landlord expectations, as well as operational standards across the industry.

The extended stay model’s lower operational costs and sturdy profitability make it a compelling proposition, and their lower price point is perfectly timed for our current era of consumer belt tightening.

NICHE EVERYTHING

I see an interesting parallel between the hotel industry and the media sector. As I’ve written, gone are the days of the mainstream pop culture, where mass market appeal was the goal.

Today, every single platform is pushing what’s essentially a personalized stream of content at us. News, music, television, social media — everything in media is becoming more and more niche.

It’s also happening in fashion. Shein is known to make as few as a dozen pieces of a style as it assesses what’s popular and what’s not. Now, something like this is happening in the hotel industry.

INFINITE BRANDS

It’s all inspired a new concept that I’m calling the "infinite brand theory." It suggests that there really is no limit to how many different, nuanced brands a hotel holding company, a fast fashion firm, or any other large organization can develop.

Why? Well, as mentioned, each new brand is an opportunity to meet a specific segment's unique needs or desires. And with AI’s capabilities growing exponentially, this level of customization and brand proliferation can be done more efficiently and effectively than ever: AI's data analysis skills will be able to identify new niches. Then, its creative abilities can help develop the distinct brand identities to cater to them faster than ever.

If this trend continues —which looks likely— look for a future where every one of us has our choice of brands that increasingly feel like they were tailor-made just for us.

I’m here for it. I mean, how could I not be?

More:

Marriott launches its 32nd — and most affordable — brand »»

The hotel industry isn't very good at building brands. Like seriously »»

9 best mid-tier and mid-level hotel brands and chains (June 2023) »»

Asset-light business model: strategies for hotels during the pandemic »»

Written by Jon Kallus. Any feedback? Simply reply. Like this? Share it!