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Dual-Branded Hotels Present New Opportunities

Dual-Branded Hotels Present New Opportunities

Ten years ago, Choice Hotels opened the doors of a property in Norfolk, Va., that placed the Sleep Inn and Quality Inn & Suites brands under one roof. It featured a separate lobby and mostly autonomous public spaces for each brand, but a shared pool and back-of-the-house operations. The dual-branded nature of the hotel helped it attract leisure guests at different price points, but it was the operational efficiencies of the model that turned heads in the corporate offices. At the time it was a one-off project, says Mike Varner, senior director and head of domestic brand management for Choice Hotels International, but soon the company saw how a streamlined version of this project could be used to attract both transient and extended-stay guests to the same location.

“The idea for dual-branded properties lay dormant until we actually started having franchisees come to us and say, ‘I get calls from people who are looking for an extended-stay room, but I don’t know if there is enough demand in this market for a whole hotel,’” he says. “We started hearing the same thing from multiple people, across the country and in different market types. We figured there was probably something to the idea.” So last year, at Choice Hotels’ annual convention, executives unveiled a new prototype that gives hotel owners and developers the chance to build dual-branded properties consisting of the Sleep Inn and Mainstay Suites brands.

With this new product, Choice joins other major industry players, such as Hilton, Marriott, and Starwood, on the dual-branded bandwagon. These two-pack projects are popular with hotel companies and developers because they offer substantial economies in terms of building costs, space savings, and operational efficiencies, while allowing hotel owners to capitalize on two different customer segments at the same time. Varner says that in 2012, Choice signed five deals to develop two-pack properties in states such as Montana, Mississippi, and Pennsylvania. He expects at least three of the hotels to break ground this year. Citing examples from the fast food world—such as the partnership between Kentucky Fried Chicken and Taco Bell—Varner has confidence that the Sleep Inn and Mainstay Suites prototype will fill a niche for hotel owners and developers. “Essentially, you’re combining the best of both brands in an operationally sensible way to meet the needs of very different travelers.”

Sharing for Savings

One of the most alluring aspects of dual-branded properties is the efficiency that comes from combining lobbies, fitness centers, meeting rooms, pools, and even back-of-the-house spaces such as administrative offices, employee break rooms, laundry facilities, and storage. “In dual-branded properties there are a lot of areas that can be shared,” says Craig Mance, senior vice president of development, North America, for Hilton Worldwide. “That creates large economies of scale from both a construction standpoint and an operational standpoint. For instance, you can have a similar entrance and parking area, you can share a monument sign, and you can use the same meeting rooms and pre-function space for both hotels.”

Hilton Worldwide currently leads the industry when it comes to developing two-pack, and even three-pack, properties. The company currently has 14 dual-branded properties open in the U.S. and Canada with another 15 hotels approved or under construction. Recent openings include dual-branded Hilton Garden Inn and Homewood Suites properties in Atlanta, Ga., and Shreveport, La.

“The brand folks were a little iffy at first because individual hotels have so many prototypical assets that are inherent to them,” says Mance. “But they’re big proponents of [two-pack properties] as long as the integrity of their brands is protected. It makes a whole lot of economic sense for the owner and the operator.” Not only do combined spaces cut down on construction costs, but dual-branded hotels also require a smaller staff and fewer employees than two separate hotels. “You’re able to combine some of the senior management level positions at the property so you don’t have to have two separate teams and it allows you to cross-utilize staff,” says Gerry Chase, president and chief operating officer of Newcastle Hotels & Resorts. Newcastle is currently developing a dual-branded 180-room Courtyard by Marriott and Residence Inn hotel as part of a mixed-use development called Armory Square in downtown Syracuse, N.Y. When the property opens in May, it will mark the first new-build hotel to open in Syracuse in 50 years.

With all the overlapping functions and spaces associated with dual-branded properties, Chase says it is important for hoteliers to keep each brand clearly defined and differentiated. Most two-pack properties feature separate entrances and many also offer different front desks and elevator courts. But amenities belonging to just one brand—such as free breakfast or use of a business center—could cause some operational hiccups. “Make sure that there isn’t guest confusion among the two brands,” says Chase. “There needs to be good communication, proper training among the staff, and effective implementation of the signatures that are important to both brands.”

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