3. Feed it well
Being strongly backed by a hotel company that already has distribution, a social media presence, and a core base of business is a good start for any new entry. And money helps too. For instance, IHG is building the first Even Hotels with its own funds to demonstrate its commitment. The company did not even come up with a franchising plan until well into the process, Glickman says. Hilton took a similar approach with Home2 Suites, launched early in 2009 at a low point for the economy. According to Bill Duncan, global head of brand management: “Hilton stood behind the brand in the early days when there was no financing for any kind of hotel. Trust is crucial. Having the Hilton name behind us, plus the past performance of our managers, was crucial. And we also had 25 years of success with Homewood Suites behind us.”
In the case of Aloft, having a mega-brand like Starwood behind it provided a powerful boost. “From the beginning, we had the full support of our leadership team and CEO,” McGuiness says. “And we have stayed the course, continuing to invest in the brand.” At Virgin Hotels, which will soon open its first location in Chicago, the mentoring company, Virgin, isn’t a lodging operator but the brand is a powerful one. Raul Leal, CEO of Virgin Hotels, says the hotel product comes out of a culture that has created companies in a variety of industries, from airlines to financial services. “We’re known for customer services, value for money, fun, and an upscale quality. Our customer base includes frenzied fans who are at the end of the day are lifestyle consumers carving consumer experiences.”
Virgin is in the enviable position of already having a huge customer base of loyal fans, Leal says. “We as hoteliers salivate over that. It will drive so much business to our website, which will cut the distribution costs that have become an issue for the industry.”
4. Play well with others
Developers need to understand that sometimes their objectives and those of the brand managers may not align completely, Dev says. While developers are typically looking for a brand that will maximize the value of their asset, brand managers may be more concerned about the brand footprint or the number of key markets it’s in. Sometimes, developers will be offered a sweet deal to buy a brand at lower than market terms, just so a brand manager can get representation in a market. This is not always a wise choice, Dev says. “I have learned that the three key prerequisites to picking the right brand come down to the fit between the market opportunity and the brand position, the brand’s strong track record of performance or, for new brands, the brilliant strategy, and finally, the clear specification in the agreement of what ongoing support will come from the brand.”
Hanson agrees, saying: “Many brands launch with the goal of market penetration, which is a brand perspective, and different from return on investment, which is the developer’s perspective. Either can be successful, but ideally there will be a balance of the two.” For Home2 Suites, the initial spark for the brand actually came from the development community, Duncan says. “About 20 owners of Homewood and other brands came to us and said they saw a niche. We were not interested initially, but when we looked into it we did see the need. We met with the developers regularly and built out the first cardboard model. We then had customers and operators walk through and fill out the model. Since then, we’ve barely had to re-engineer anything.”
“We built out several working rooms and got input from ownership groups, operators of competitor hotels, and others,” Glickman says. He adds that IHG has made mistakes in the past on brand launches and so has its competitors. “We wanted to learn from all of that. In fact, we consider our first two hotels as beta products and will use feedback on them to continue our growth.”
Figuring out the interests of the owner is key to B Hotels, says CEO Ayelet Weinstein. Since B was conceived as an alternative to traditional brands, she says, it allows hotel owners to enter into more flexible relationships. “The brand initiatives and requirements, starting from the construction and renovation process and through the touch points of the operation, are being exercised with the return on investment and the interests of the owner in mind.”
5. When in doubt, convert
A linchpin decision for any new brand is whether to aim for newly built properties or to plan for conversions. A good example of this is Aloft, which started with a 90 percent concentration of new builds but plans to reduce this to 75 percent, McGuiness says, as the brand moves into markets like Brazil and Europe where space is at a premium.
Another consideration, according to Hanson, is creating a design that is adaptable to another brand.
“If you’re a developer,” he says, “you want to be able to convert to another brand if it comes to that.”
IHG made a conscious decision to position Even as highly flexible for conversions, Glickman says, by creating a kit of parts that could work in almost any location.
Glickman compared this approach to Starbucks. “Whether it’s a freestanding store, airport location, or drive-through, it’s instantly recognizable as a Starbucks,” he says.