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From Hotel Rivals to Allies
Amid signs that their industry has finally turned a corner after two dark years, hotel executives have begun to plot strategies for better times ahead. But those strategies differ, depending on whether they are running a big chain or independent hotel.
Major chains like Marriott and Starwood are increasingly focusing on expanding abroad, as tight credit markets make it tough for developers to build hotels in the United States. They are also experimenting with teaming up with independent hoteliers, a strategy that departs from their core business of managing brands.
Though these relationships vary, the idea is that a chain welcomes independent hotels into the fold – mainly by providing access to its reservation system and millions of loyalty program members – in exchange for what is basically a franchise fee. But unlike franchisees, the hotels that sign onto the partnerships remain independent and do not have to meet rigid brand standards.
The current financial climate has forced the hands of both the big chains, which have remained profitable even during the downturn, and the independent hotels, which have been struggling to survive without the deep pockets of their big competitors. Pairing up allows the chains to grow without building and the independents to attract more guests.
“One of the reasons for this is the decline of construction,” said Bjorn Hanson, a professor in the hospitality program at New York University. “Public companies want to keep growing. A way to not dilute the brand is to create a separate group under the parent company umbrella.”
While some hotel executives bristle at the umbrella brand image, it fits the stormy weather the industry just passed through – though dark clouds still loom.
Occupancy rates in the United States, though starting to improve, are expected to end the year at 57 percent, about 6 points below the long-term average. Room rates are flat or declining, and the fragile economy is still damping travel.
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