From premium economy hotel brand, Spark by Hilton to Accor’s stylishly curated Handwritten Collection, the past few months have seen a proliferation of new brand hotels in the U.S. These new hotel brands are causing a stir in the hospitality sector with many questioning whether the industry can equally sustain both new and old brand hotels.
As the market adapts to the changing face of tourism, we see certain trends emerging. Investors and hotel owners are keen to capitalize on the latest developments, while those holding onto existing properties are seeking ways to keep up to date. The challenge is determining how to balance the appeal of a modern, cutting-edge brand with the nostalgia of more established counterparts.
While it’s impossible to predict the long-term impact of these new entrants, hotels must decide how to keep up with the trends, remain competitive, and sustain their presence in the industry. Read on as we explore the dynamic between new and old brand hotels, so you can make better decisions when it comes to investing in hotel property.
How New Brand Hotels Affect the Market
The impact of new brand hotels on older, more established brands have generated much debate. On one side, there is a fear that the new entrants will steal market share from the older brands and erode profitability. On the flip side, some argue that newcomers expand the overall tourism market and may lead to increased demand for both new and older brands.
Here’s a breakdown of the impact new brand hotels have on old brand hotels:
An emerging worry is that new brand hotels will push out older, more established brands. By creating competition for existing brands, newcomers will dilute occupancy rates for older brands.
What we observe is that the competition is forcing old brands to stay relevant by upgrading their range of amenities and services. For instance, Marriott Hotels recently launched the Marriott Bonvoy loyalty program that rewards guests with 10 points for staying at any of their properties, regardless of whether it’s a budget or luxury hotel.
New Opportunities For Both New and Old Brand Hotels
Shifts in the hospitality and tourism industry always bring new opportunities such as access to additional customers. They also bring a wealth of new amenities, services, and features that draw in travelers, increasing occupancy rates.
Well-run new entrants can provide a successful model for other business owners in the area to emulate. This could lead to the introduction of innovative ways to attract customers.
It is speculated that new entrants may drive up prices in the industry, as they may not be susceptible to the same market forces as older brands. This could lead to a decrease in profitability for established hotel brands as well as for new entrants.
Examples of New and Old Brand Hotels
New brand hotels:
1. Moxy: A relatively new brand by Marriott that focuses on contemporary design and social experiences, with locations in major cities such as New York, Chicago, and Los Angeles.
2. Tru by Hilton: A modern and affordable brand with locations in over 30 states across the U.S. They offer simplified amenities and modern, tech-focused design that targets the younger traveler.
3. Hyatt Centric: An excellent boutique hotel for both business and leisure tourists looking for a pleasant stay with first-rate amenities.
Old brand hotels:
1. Hilton Hotels: A well-established hotel brand that has been around for more than 100 years, growing to become one of the largest hotel chains in the world. They offer accommodations to suit various budgets and preferences, from luxury resorts and full-service hotels to budget-friendly options.
2. The Ritz-Carlton: A luxury hotel brand that was founded in 1983. Now part of Marriott International, the brand is known for its high-end amenities, exceptional service, and luxurious accommodations, catering to affluent and discerning travelers.
3. Accor: Founded in 1967, the multinational operates over 4,800 hotels, resorts, and residences in 100 countries worldwide. They have a portfolio of brands that include Sofitel, Pullman, and Fairmont, among others.
Understanding The Similarities and Differences
Tru by Hilton and The Ritz Carlton are two hotels that represent the old and new hotel brands in the hospitality industry. While both offer accommodations for travelers, they differ in several ways.
● Brand recognition: These brands have established a reputation in the industry. The Ritz Carlton is known for its luxury offerings, while Tru by Hilton is known for its trendy design and affordable pricing. Both are part of hotel chains that are well-known and respected in the industry.
● Quality standards: Both brands have high standards for the quality of their services and accommodation choices. Whether you are staying at a budget-friendly Tru or a luxurious Ritz Carlton, you can expect to be treated with respect and care.
● Loyalty programs: Both brands offer loyalty programs to reward repeat customers with exclusive perks and benefits.
● Design: The design of the two brands is quite different. The Ritz Carlton emphasizes luxury and elegance in its design, while Tru by Hilton has a more contemporary, youthful design.
● Target market: Tru by Hilton targets millennial travelers looking for affordable accommodations with a focus on technology and social spaces, while The Ritz Carlton caters to luxury travelers after an exclusive and personalized experience.
● Pricing: The Ritz Carlton is known for its high-end luxury experience that comes at a premium price. Tru by Hilton, on the other hand, is designed for the budget-conscious traveler.
● Amenities: The Ritz Carlton offers a range of upscale amenities, including fine dining restaurants, spas, and concierge services, while Tru by Hilton focuses on providing modern amenities like tech-focused guest rooms and a fitness center.
Preferences of Travelers: Does the Brand matter?
When it comes to choosing between old and new hotels, travelers’ preferences vary depending on their priorities.
Some travelers prefer old and established hotel brands, with a reputation for quality and reliability built over many years. They may also have a strong loyalty program that offers benefits to frequent guests, such as free room upgrades, complimentary breakfast, and spa packages.
On the other hand, newer brands bring a fresh and modern experience that often appeals to younger travelers or those seeking a more contemporary and trendier atmosphere. New hotels often have more advanced tech features like contactless check-in/out, keyless entry systems, QR ordering from hotel rooms, and smart room controls, which enhance the guest experience.
In terms of brand recognition and reputation, established hotel brands may have an advantage over newer brands, particularly among older generations who have more familiarity with these brands. However, newer hotel brands may have an edge among younger travelers who prioritize a modern-infused atmosphere.
Overall, both old and new hotel brands can be appealing to travelers, and the decision ultimately depends on individual preferences and priorities. Factors like location, price, amenities, and guest reviews also play a significant role in the decision-making process.
The Importance of Hotel Branding
Hotel branding is one of the most viable strategies hotels apply to establish a unique identity that resonates with their target audience. Here’s why you should invest in hotel branding:
Stand Apart From Competitors
Branding is essential for hotels to distinguish themselves from their competitors. It leaves a distinctive and memorable image in the minds of consumers. This is achieved through various branding elements, such as the hotel name, logo, tagline, and visual identity. These elements are carefully crafted to reflect the hotel’s personality, values, and target audience.
Strong hotel brands drive revenue growth by attracting travelers, which increases occupancy rates. Customers are often willing to pay more for hotels that they perceive as being high quality and trustworthy.
Builds Trust and Credibility
People are more likely to choose a brand they are familiar with over competitors. They trust the brand they know to provide a certain level of quality and service.
Enhances Connection With Customers
Hotels with a strong brand easily establish a loyal customer base by creating an emotional bond with customers. There are multiple ways to accomplish this including around-the-clock customer service, personalized experiences, and ambiances that appeal to travelers.
Find a Hospitality Industry Expert
Ultimately, the success of any hotel lies in its ability to balance the benefits of both new and old brands. With modern technology and traditional methods, hotels must strive to provide an experience that meets the needs of customers and maintains a competitive edge.
Prospective hotel real estate owners and investors must assess the effects of newcomers on established brands to accurately assess their investment opportunities. We help analyze macroeconomic trends, market research, and operational performance to help you determine the success potential of a new brand. Contact us today to talk to one of our experts.