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
About the author: Stanley Turkel, MHS, ISHC operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services. Turkel’s clients are hotel owners and franchisees, investors and lending institutions. Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management. He is a member of the prestigious International Society of Hospitality Consultants. His provocative articles on various hotels subjects have been published in the Cornell Quarterly, Lodging Hospitality, Hotel Interactive, Hotel-Online, Blue MauMau, Hotel Resource News, etc. Don’t hesitate to call 917-628-8549 or email [email protected].
Please take note that Stanley Turkel 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 greatamericanhoteliers.com to order the book.