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Nobody Asked Me, But… No. 60
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Independence for Independents? Rebranding and Rescaling;

Ascend by Choice; Autograph by Marriott; Magnuson Alternative to
Franchising; Independent Collection by Hersha

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By Stanley Turkel, MHS, ISHC
January 6,  2009

1.  Rebranding and Rescaling; Effects on Hotel Performance -  A new study, featured in the August 2009 edition of the Cornell Hospitality Quarterly*, examines the effect of market realities which often force hotel owners to rebrand their hotels or to change their property from one market scale to another.  This exploratory study of ninety-five hotels analyzes whether rebranding or rescaling was worth the expense in terms of financial performance.  Sixty-four hotels in the sample moved downward in market scale (more than half of those from midscale to economy), while twenty-one hotels moved upward, and ten hotels changed brands but not market scale.  The analysis found that on balance the hotels’ financial performance improved in the second year after they rescaled.  However, net operating income diminished in the first year after the changeover, probably due to the expense of making the alterations.  The hotels that moved upward in scale saw higher average daily rates (ADRs), while those that moved downscale generally saw no change in ADR, meaning that they were able to hold their rates even as they moved downmarket.  Rebranding without rescaling had no significant effect on financial performance indicators.

In light of this interesting study, another branding phenomenon is occurring in the hotel industry.  Two major franchise companies, one provider of reservation services and one hotel developer have created new marketing affiliations to attract independent hotels which are unique and distinct in their names, identity and personality.  These affiliations enable independent hotels to keep their own name and signage while utilizing the specific identity, amenity and service resource that work best for them.  The benefits include:

  • Connection to the host global distribution system
  • Reservation production
  • Participation in loyalty programs
  • Global promotion on the host platform and advertising program
*Bjorn Hanson, Ph.D., NYU Tisch Center for Hospitality, Tourism and Sports Management
 Anna Mattila, Ph.D., School of Hospitality Management, Pennsylvania State University
 John O’Neill, Ph.D., School of Hospitality Management, Pennsylvania State University
 Yong Hel Kim, doctoral candidate, School of Hospitality Management, Pennsylvania State University

2.  Ascend Collection by Choice Hotels International -  Choice advertises, “When you become a member of the Ascend Collection, you’re tapping into a worldwide reservation system that delivered more than $2 billion in gross room revenue in 2008.  That’s the business-building power you get from Choice Hotels.  And you get it without giving up your name or distinct style.  You’ll also benefit from our Choice Privileges rewards program with more than 7 million loyal guests around the globe and from our presence on third-party travel sites.  Join the Historic, Boutique and Unique hotels in the Ascend Collection and make the most of your business potential.”

The Ascend Collection fee structure is:

  • Affiliation fee- $375 per room, $30,000 minimum
  • Membership fee- 4% of the proceeding month’s Gross Room Revenues
  • System fee- 2.5% of the proceeding month’s Gross Room Revenues
  • Other fees-  see the April 1, 2009 Ascend Collection Franchise Disclosure Document
  • Term- the standard term of the agreement is 20 years with mutual termination dates at years 5, 10 and 15 of the original date.
3.  Autograph Collection by Marriott - Don Semmler, executive vice president of brand management, says “The Autograph Collection will take the innovative approach of grouping these iconic hotels according to the unique experience that guests are seeking whether it’s a resort, historic hotel, boutique arts or urban edge hotel in a dynamic gateway city.  Each hotel will be highly unique and distinct with its own identity, appealing to a growing segment of our customers who are looking for an experience that an independent hotel can deliver.”  So far, Marriott has not announced their fee structure for the Autograph Collection.

4. Magnuson Hotels Independent Hotel Operating System - Tom Magnuson, founder and CEO this Spokane-based company says, “Magnuson Hotels was established as a low-cost alternative to the franchise model, which can be very expensive…. We offer complete brand power to our member hotels without the costs and requirements of the major hotel brands.”  Magnuson Hotels says that it has signed 400 new affiliate agreements within the last 24 months and is nearing the 1000 hotel mark.  The five-year old company provides independent hotel owners with low-cost access to a worldwide reservations system, hotel supplies and medical savings networks.  The company’s fee structure is based on the number of reservations it delivers to its affiliates who are not bound by long-term contracts.  Customers make their reservations via the Internet and Magnuson’s Hotels computerized reservation system which is linked to 650,000 travel agents.  Additionally, Magnuson offers its affiliates guaranteed priority national and international placement on Orbitz, Travelocity, Priceline and TravelWeb; priority search-engine visibility and targeted advertising on Yahoo, Google, Bing and AOL; and group tour sales and representation via the National Tour Association and other group-tour Web-sites.

Magnuson estimates that 60% of the hotels affiliated with his company are AAHOA members.  Magnuson’s fee structure:

  • Fees are based on reservations delivered
  • No long-term agreements; get online within three weeks
  • No franchise fees, royalty fees, required renovations, computer system requirements
5. Hersha Hospitality’s Independent Collection -   “We wanted to be a company that built out a collection of independent hotels and then talk about it- as opposed to the other way around,” said Nareen Kakarla, executive vice president. “….It’s a meaningful trend in gateway cities for travelers to want to experience independents so long as they are comfortable and everything works and are unique to the brand experience.”  According to Kakarla each property is locally inspired to offer authenticity as well as a luxury experience.

The company’s three new independent hotels are the NU Hotel in Brooklyn, the Duane Street Hotel in the Tribeca neighborhood in Manhattan and the Independent in Philadelphia.  Two more are in the works in Manhattan: the Union Hotel in Greenwich Village and the 48 Lex in midtown, which will open in 2010.
 

Quote of the Month

“Keep away from people who try to belittle your ambitions.  Small people always do that, but the really great make you feel that you, too, can become great.”
        Mark Twain 

Please take note that Stanley Turkel, MHS, ISHC has just published the book “Great American Hoteliers: Pioneers of the Hotel Industry.” It contains 359 pages, 25 illustrations and 16 chapters devoted to each of the following pioneers: John McEntee Bowman, Carl Graham Fisher, Henry Morrison Flagler, John Q. Hammons, Frederick Henry Harvey.  Ernest Henderson, Conrad Nicholson Hilton, Howard Dearing Johnson, J. Willard Marriott, Kanjibhai Patel, Henry Bradley Plant, George Mortimer Pullman, A.M. Sonnabend, Ellsworth Milton Statler, Juan Terry Trippe and Kemmons Wilson.  It also has a foreword by Stephen Rushmore, preface, introduction, bibliography and index. Visit www.greatamericanhoteliers.com to order the book.
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Contact:

Stanley Turkel, MHS, ISHC
917-628-8549
stanturkel@aol.com

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Also See: Nobody Asked Me, But No.59 / Who’s Side is the FTC On?; Women Hotel Workers Suffer Higher Injury Rates; A Hole on Park Avenue; / Stanley Turkel / December 2009
Nobody Asked Me, But No.58 / Support the Arbitration Fairness Act of 2009; Hi-tech Hotel Rooms in the 19th Century / Stanley Turkel / November 2009
Nobody Asked Me, But No.57 / 10 Bogus Reasons to Buy a Franchise / Stanley Turkel / October 2009
Nobody Asked Me, But No.56 / “Great American Hoteliers: Pioneers of the Hotel Industry”; The Stanley Hotel; Will Hotel Franchisees Remember? / Stanley Turkel / September 2009
Nobody Asked Me, But No.55 / Exterior-Corridor Hotel Properties; Blackstone Denies Hilton Breakup / Stanley Turkel / August 2009
Nobody Asked Me, But No.54 / Famous Japanese Capsule Hotel; Dunkin’ Donuts Independent Franchise Owners Association; Remember Magic Fingers? / Stanley Turkel / July 2009
Nobody Asked Me, But No.53 / Historic Hotel Theresa: the Waldorf of Harlem; Make Mandatory Arbitration Illegal / Stanley Turkel / June 2009
Nobody Asked Me, But No.52 / At Long Last; New York’s Essex House; Origin of Mother’s Day;  An Annual Feast for Number Crunchers; The End of the Hotel Bathtub?/ Stanley Turkel / May 2009
Nobody Asked Me, But No.51 / Transformation of the Shelton Towers Hotel; One Hotel’s Fate 119 Years Ago / Stanley Turkel / April 2009
Nobody Asked Me, But No.50 / Do You Know About O8A? Do Hotel Franchisees Need Independent Associations?The Best Franchise Advisory Councils / Stanley Turkel / March 2009
Nobody Asked Me, But No. 49 / Slave Trading at the Saint Charles Hotel in Washington DC, Why Are Some Hotel Franchise Companies Defranchising Exterior Corridor Hotels / Stanley Turkel / February 2009
Nobody Asked Me, But No. 48 / New President of Wyndham Ignores the Real Issues; Hotel Franchises Compared to Auto Dealer Franchises / Stanley Turkel / January 2009
Nobody Asked Me, But No. 47 / New CEO of Choice Misses an Opportunity; Lost and Forgotten Hotels; Little Known Hotel Facilities in New York / Stanley Turkel / December 2008
Nobody Asked Me, But No. 45/ Remembering John Curry; Hotel Owners Have The Power / Stanley Turkel / October 2008
Nobody Asked Me, But No. 44 / Hotel Franchise Companies Performance Appraisal Report, a Down-to-earth Assessment of the Hotel Capital Markets / Stanley Turkel / September 2008
Nobody Asked Me, But… No. 43  / Hotel Franchisor Companies Ignoring Critical Franchising Issues,  Marriott Leads the Way with Aggressive Environmental Strategies / Stanley Turkel / August 2008
Nobody Asked Me, But No. 42 / Remembering Jack Craver; World Record-Setting Hotels; At Last: A Major Gaming Facility in the Catskills / Stanley Turkel / July 2008
Nobody Asked Me, But No. 41 / Landmark Belleview Biltmore Resort Saved; Hotel Developers Take Note - the Borough of Bronx in NYC Has 1.5 million Residents and Just One Hotel in the AAA Guide; Boutique Hotel Bandwagon / Stanley Turkel / June 2008
Nobody Asked Me, But No. 39 / Say Goodbye To The UFOC; Dunfey Brothers To Be Honored; The Plaza Hotel Reopens After a $400 Million Renovation / Stanley Turkel / April 2008
Nobody Asked Me, But No. 38 / Super 8 Owners Form an Independent Franchise Association; Why Is There a Bible in Every Hotel Room? / Stanley Turkel / March 2008
Nobody Asked Me, But No. 37 / Remember the Savoy Plaza Hotel?; Is Economic Disaster Imminent; Cuba at the Crossroads / Stanley Turkel / February 2008
Nobody Asked Me, But No. 36 / What the Advertisements for the Largest Hotel Franchise Companies Never Mention - Also Measuring Hotel Brand Value / Stanley Turkel / January 2008
Nobody Asked Me, But No. 35 / Casino Expansion Has Transformed America, Exercise Awareness / Stanley Turkel / December 2007
Nobody Asked Me, But… No. 34 / IHG’s Great Idea, Sound-Proofing Hotels, Best Western Enters the Upper Midscale Segment, How to Convert Confusion Into Order,  Sign at a Tarrytown, NY Inn, 1798 / November 2007
Nobody Asked Me, But… No. 33 / 1957 Murder at the Park Sheraton Hotel; How Much Does A Franchise Really Cost?A Marriage Made in Heaven?; A Good Night’s Sleep at the Benjamin Hotel / Stanley Turkel / October 2007
Nobody Asked Me, But… No. 31 - Rhode Island Improves Franchise Rules, What’s Up With Canada? Conversion of a Jail Into a Hotel, The Richest (and Poorest) Places in the U.S. / Stanley Turkel / September 2007
Nobody Asked Me, But… No. 31 - Blackstone's Acquisition of Hilton, The Art of Groveling, The Origin of Franchising / Stanley Turkel / August 2007
Nobody Asked Me, But…. No. 30 / Impertinent Questions In Search of Pertinent Answers: Carbon monoxide detectors, exterior-corridor properties / Stanley Turkel / July 2007
How American-Owned Can You Get?, ISHC's CapEx 2007 Report, The Bowery Hotel / Stanley Turkel / June 2007
Hotel Franchising and State Laws, Is Immigration Important? Save the Biltmore, The Good Old Days, Quote of the Month / Stanley Turkel / May 2007
Nobody Asked Me, But - No. 27 / Hotel Franchise Agreements: Mediation, Arbitration or Litigation? / Stanley Turkel / April 2007
Nobody Asked Me, But - No. 26 / Energy Usage and Potential Savings; Great Art in Hotels; Lifestyle Hotels; The Minimum Wage Issue; Quote of the Month / Stanley Turkel / March 2007
Nobody Asked Me, But - No. 25 / Guestroom Design & Amenities, Get a Human, Best Luxury Hotels in the U.S., Turnpike, The Pineapple as Symbol of Hospitality, Fair Franchising / Stanley Turkel / February 2007
Nobody Asked Me, But - No. 24 / Loose Cannon, Fair Franchising, Manhattan Hotel Profits, Hotels of the Future, Interesting Miscellany, Quote of the Month / Stanley Turkel / January 2007
Nobody Asked Me, But - No. 23 / Biting The Hand That Feeds You?, By The Numbers, Shortage of Hotel Rooms, There is No Free Lunch, Iron Laws of Business Travel, Happy New Year / Stanley Turkel / January 2007
Nobody Asked Me, But - No. 22 / Smart Elevators, Tony Marshall’s Memorial, Women in the Hospitality Industry / Stanley Turkel / December 2006
Nobody Asked Me, But… No. 21 / The Drake Hotel in New York, Fair Franchising is Not an Oxymoron, By the Numbers, Another Secret Underground Shelter, Passing of Anthony G. Marshall / Stanley Turkel / December 2006
Nobody Asked Me, But… No. 20 / Turnabout Is Fairplay, Secret Underground Shelter, By the Numbers, Genuine Fair Franchising/ Stanley Turkel / November 2006
Nobody Asked Me, But… No. 19 / International Society of Hospitality Consultants, Great Miami Hotels, Reduce Carbon Monoxide Emissions, Turn Gray Into Gold / Stanley Turkel / November 2006
Nobody Asked Me, But… No. 18 / John Q. Hammons, Save the Belleview Biltmore, Chinese Tourism, CFLs, Ernie Byfield, Guestroom Entertainment in 1905 / Stanley Turkel / October 2006
Nobody Asked Me, But… No. 17 - AAHOA's 12 Points of Fair Franchising, Protected Territories, / Stanley Turkel / September 2006
The Newest Independent (and Oldest Partially Independent) Franchise Association in the Hotel Industry / Stanley Turkel / September 2006
In Hotel Franchising, Reality Trumps Wishful Thinking / Stanley Turkel / August 2006
Nobody Asked Me, But… No. 14; Impact Studies, Stretching Segments, Short-Stay Rentals, Smoke-free Marriotts, Franchising in China, Save the Belleview Biltmore Hotel / August 2006
The U.S. Population Age 65 and Over is Expected to Double in the Next 25 Years; What Does this Mean for the Hotel Industry? / Stanley Turkel / July 2006
Nobody Asked Me, But… No. 12; Portman, Women Homeowners, Minimum Wage, Tipping, Brooklyn Bridge, Chinese Tourism, Impact Studies / Stanley Turkel / July 2006
Do Hotel Franchisees Need Independent Franchise Associations? / Stanley Turkel / June 2006
Nobody Asked Me, But… No. 10 / Chinese Tourists, Gasoline Prices and Alternatives, GLBT Segment, Travel Agents, FAC's, Manhattan's Record Breaking Year, Impertinent Questions / Stanley Turkel / June 2006
Nobody Asked Me, But… No. 9 / Blang, Bathtubs, Best Green, Arbitration, Best Western, AAHOA, State Franchising Laws, VFR / Stanley Turkel / May 2006
Nobody Asked Me, But… No. 8; Bathtubs, Smokefree Hotels, Maps, Saving Water, Nevada Revenues, H.P. Rama, Ritz-Carlton, Statler Service Code, Mother’s Day / Stanley Turkel / April 2006
Nobody Asked Me, But….No. 7 / Stanley Turkel, MHS, ISHC / March 2006
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