Can you identify the difference between Tempo, Motto, and Canopy which are all separate Hilton brands? Do you know what chain Atwell Suites is part of, or what differentiates Atwell Suites, Staybridge Suites, and Candlewood Suites? Did you know that there’s a single hotel chain with 44 different brands? Would you know which frequent guest account number to give if you showed up at a Matra, Adagio or Mantis hotel?
Whenever a hotel chain adds a brand, like Marriott’s bringing on City Express as their 31st brand or Hilton launching Spark – a cheaper version of Hampton Inn, with splashes of light purple! – consumers react with confusion. How can we possibly need more hotel brands? Don’t the big chains already have more than enough?
Customers simply do not know which hotel brands are part of which chains, or what each brand stands for. This confusion must mean there are too many brands, yet brands continue to expand which must mean chains must believe doing this is profitable. After all, more brands means being able to open more hotels and attract more developers and owners.
Are There Really Too Many Brands?
Sean O’Neill of Skift interviewed Cornell hotel administration professor Chekitan Dev, who argues that there actually aren’t too many brands.
- There were “about 10 million hotel rooms worldwide and about 300 brands” in 1990 for “a brand coverage ratio of 0.03 per 1,000 rooms.” Thirty years later, in 2020, “there were approximately 17 million rooms and about 1,000 brands for a coverage ratio of 0.06 per 1000 rooms.”
- While the ratio of rooms to brands seems to have doubled,
[O]nly about 20 percent of all rooms worldwide were branded in 2000, meaning roughly 2 million rooms. That gives us a brand coverage ratio of 0.15. In 2020, about 40 percent of all hotel rooms worldwide were branded, so about 7 million rooms — giving us a brand coverage ratio of 0.14.
So, by this refined calculation, the brand coverage ratio has held roughly steady worldwide over the two decades. By this measure, the hotel industry is not overbranded.
Here I think Dev misses the point. The problem isn’t that too many hotel rooms are branded it is the number of different brands (the ‘coverage ratio’ would be the same whether all rooms were under 300 brands or 30) and in particular the number of different brands under each chain. No one can keep straight the number of brands that are part of Hilton versus Marriott, even the executives at those chains.
Why Are Brands Proliferating?
Dev identifies the reasons for brand expansion as:
- “desire for a predictable product and service experience”
- “economies of scale in advertising and distribution”
- “market power in negotiation with buyers”
Chains introduce brands to expand the number of hotels paying them fees. Hotels join brands for leverage with suppliers, sure, but they join brands in order to access a marketing platform to reach potential guests. A hotel can often better compete to attract customers, and therefore fill more rooms at higher prices, if they’re part of a recognizable and desirable brand with loyal members.
Marriott Doesn’t Think They Need Brand Differentiation Or Advertising
And while there’s effectiveness in advertising a brand rather than individual hotel, often brands see little advertising investment. In fact that’s literally Marriott’s justification for brand expansion.
When Marriott acquired Starwood, there was a lot of speculation about whether some brands would be collapsed or ended. That was never in the cards. In fact, then-CEO Arne Sorenson explained that they didn’t even need to spend on marketing for 30 brands and marketing is the biggest expense of a brand.
Normally you think a brand needs to invest in marketing so that customers understand its identity, and build trust in the brand. But Sorensen argued brands don’t even need separate identities. And they didn’t plan to ramp up brand-specific marketing.
Instead, they had a loyalty program. Their members would go to Marriott.com, see what options were presented to them, and choose from those. Marriott bought Starwood for leverage so that their counterparties and customers would have no choice but to deal with them. And the more brands they offer, the more choices of price points and features they offer. Customers may not understand them all, but there’s a niche for everyone.
Marriott’s technology, though, hasn’t always scaled to the number of choices they offer in a given market. Some hotels have seem themselves de-emphasized because there are simply too many options. Poorly-trained phone agents don’t always even find the hotels you’re asking after.
Brands Need To Have Clear Definition And Understanding To Have Value
In order to earn a revenue premium customers need to understand what a brand stands for. They need to proactively want to book a hotel brand over its competition.
At a minimum customers need to understand that a brand is part of a given chain in order for them to choose the brand because of the loyalty program. It’s a very small subset of members, indeed, who could identify each brand as part of the program.
However more brands means being able to have more hotels in the same market. That grows revenue (eg management fees). More brands means more hotels and rooms, more rooms means more members, more members support marketing of more rooms – and more customers for co-brand credit cards.
And shedding brands would necessarily mean shedding some hotels, either because some properties don’t meet the standards of a brand or because some owners would be unhappy with the change.
There’s A Huge Conflict Between Chain And Hotel Owner, Degrading The Value Of Brands
In 2020 I predicted that we’d see elite promotions (to drive business), full breakfast would take time to return (resistance to cost) and so would housekeeping (resistance to cost), while amenities like pools and gyms would largely return (because the cost to build them had already been incurred). That’s largely been true, and indeed cost reductions at breakfast has been a key theme.
Understand the modern hotel chain as looking to maximize fee revenue from hotel owners, and hotel owners looking to benefit from a chain’s branding to attract customers while spending as little as possible on those guests. When they’re renting the brand, they want the benefit without having to make the investment. The ‘asset light model’ creates a conflict of incentives between brands and owners.
Historically chains required investment and monitored to make sure it was happening. But more recently the monitoring has fallen off, and chains have allowed hotels to skimp either out of sympathy for the plight of the owners or out of fear those owners would leave and they’d have greater difficulty attracting new ones. This maximizes revenue in the short run, but degrades the value of the brand – which is, effectively, the only value of the chain in the long run.
I wonder if we can expect to hear Bernie Sanders complaining about this “terrible” development.
If hotel chains need brains to earn more fees and grant more franchises, why isn’t McDonald’s, Burger King or Starbucks creating additional brands? They aren’t. And their restaurants are much more consistent than most of the hotel chains, despite a similar operating model. Marriott thinks owners and customers won’t go the fifth Marriott or the third Sheraton in any given neighborhood. Yet, we often see Starbucks and McDonald’s a block away from each other.
James N, while I’m not a liberal or a Democrat or a Bernie fan, it is that sort of comment that ruins this blog. Gary has said that he would scrub out purely political comments. Here’s his chance.
FNT Delta Diamond, it’s called lack of focus. It’s called management BSing shareholders with “look how many brands we have.” Nonetheless, consolidation of brands simply won’t occur. The property owners will not want to incur the expense of rebranding all of their 1) toiletries, 2) stationery, 3) signage, 4) etc. Neither does Marriott.
(By the way, years ago, McDonald’s bought Boston Market out of bankruptcy . . . but then sold it.)
With the proliferation of all the brands, boutique hotels and dumbing down of full service properties, I can’t just book a Marriott expecting a good lounge, bed and bathroom. Now I have to call the hotels to verify what is there.
Is there a lounge?
Is it open?
Is the restaurant open?
Where can I eat breakfast?
Do you offer full housekeeping?
Has Marriott renovated your hotel? Does the king room have a bathtub?
Parking fees?
Destination fees?
Any other junk fees?
Even within a specific full service brand, the consistency is gone.
Marriott has way too many choices and minimal good ones.
@FNT Delta Diamond – Actually McDonalds and Starbucks do have additional “brands” (or did in the past). Do you know that McDonalds used to own Chipotle and Boston Market or that Starbucks owns Seattle’s Best Coffee? Also many food and beverage companies have alternative brands or revenue streams.
As for the number of brands, maybe I’m the exception (since traveled extensively since the 80s and kind of an airline and hotel junkie) but I have no problem differentiating the brands at the hotel chains or making an informed decision on where to stay or their offering. Also, Gary isn’t quite right that Marriott doesn’t “brand” hotels. Sure you don’t see a lot of TV adds for St Regis and many other brands but Courtyard has a well known branding (and commercials) with the NFL and if you check their website you can easily see which brands they offer along with which they consider luxury, premium, longer term stay, etc.
I would argue the branding is to also meet all aspects of the traveling public’s needs. For example I see Spark as a downscale move to compete against Choice, Wyndham and Best Western. There are plenty of people that stay in these, IMHO, lower end hotels and there are no competitive brands offered by the major chains (I would consider Fairfield Inn, Hampton Inn, Holiday Inn Express and Hyatt Place as above the typical Choice/Wyndham/Best Western properties).
Brand proliferation is not about consumer choice or a coherent go-to-market strategy. It feeds some internal, structural need, possibly involving powerful franchisees and their wants.
It all reminds me of the worst of General Motors’ badge / platform engineering era. GM had tons of high-paid badge strategists making complex charts justifying the existence of a Chevrolet Citation AND a Buick Skylark AND a Pontiac Phoenix AND an Oldsmobile Omega. But they were virtually the same car, marketed in parallel only because nobody had the guts and sense to pare the GM division and model lineup. Hotel empires with 20-30 brands are not so different; nobody has the guts to rationalize things.
Why are there more brands? Two words
Licensing Fees
So many brands basically means there are no brands. Guests can no longer have a set of expectations based on the brand. I no longer bother. One needs to research the location they might choose or possibly be very disappointed with the stay.
@AC: Yes, I’m aware that McDonald’s, Starbucks, Pepsi and Coke have additional brands or enterprises within their corporate holdings. But you don’t see Starbucks marketing Seattle’s Best as
“Seattle’s Best by Starbucks” nor do you see Pepsi marketing Mountain Dew as “Mountain Dew by Pepsi.” Likewise, McDonald’s doesn’t have a fast-food brand with exactly the same food as McDonald’s but branded something else to collect additional franchise or license fees.
@AC – Love the take on the lower-end brands. I’ve had similar (let’s call them “feelings”) about the lower-tier brands but never organized them so succinctly as you just did. Our family vacation often takes us (by car) to Colorado or other rural areas and there are so many situations where I’m looking for lodging and thinking “Fine, I have to reset my expectations here because clearly there’s not even a Fairfield or even lower-end Hampton End or Hyatt Place within 100 miles”.
But then once I do, it’s frustrating that none of my points currencies (or hard-earned loyalty tiers) apply to a single hotel in the available pool of hotels. Then I look at the prices of those “cheap” hotels/motels ($100+ per night) and wonder why in the world Marriott/Hilton/Hyatt/IHG don’t want to be playing in this space! I think the rationale you laid out makes perfect sense for them trying to get into those places.
Isn’t a big driver for more brands the ability to increase a chain’s density in market’s where exclusivity agreements with owners would otherwise prevent it? i.e. Hyatt wants to open a new hotel in San Francisco but exclusivity agreements with owners of Hyatt Centric and Hyatt Regencies in the area mean those brands can’t be used. More brands with overlapping offerings means Hyatt has options in these cases without running afoul of these agreements.
@David P:
Actually, most of the time you have to research the owner, franchisee or management company as bad owners or bad management companies tend to have the same problem across properties, irrespective of the brand or chain.
Perfessor egghead need to get out more.
While the proliferation of brands has gotten out of control, my issue is with the lack of consistency and standards. The large companies like Marriott utilizing an “asset lite” strategy only have their brand to market (and their loyalty program). When each location is licensed out and you have an issue, Marriott just blames the licensee. The large chains don’t really have any skin in the game anymore. Which is ridiculous…every McDonalds or Starbucks has to adhere to standards set by the company. Not sure what the answer is but with Hotels owned by REIT’s, operated by Franchisees and Branding inconsistent at best…the customer experience has greatly diminished.
Awww. I took Hospitality Marketing from Professor Dev when he was just a new assistant professor in the Hotel School. I work on the investment side of hotels and its fascinating how people are both brand specific loyal (i.e., Hampton Inn/Fairfield Inn) and/or portfolio loyal (Hilton/Marriott/IHG etc). All these new brands are aimed at getting a competitve edge on every sliver of the market. It may not make immediate sense to the average consumer, but it can be quite effective when looking at the bigger picture, especially leveraging the reservations systems. For a while the trend was capturing the “unique” market–think Hilton Curio or Marriott Autograph. Guests get a more interesting property with the familiarity of the overall portfolio name. Now its all about who can do inexpensive the best. Luxury will always have a place and there definitely is a difference between a St Regis and a Ritz Carlton. The older legacy names will survive on name recognition and boom, you have 30 brands.
I also agree some of this is getting around exclusivity restrictions of existing properties. Bottom line, a well run property will do just fine even with a new brand entering the market from the same portfolio company. There certainly is some “weeding out” going on, but ultimately that should benefit both the guest and the portfolio as substandard (but not necessarily violative of contract standards) properties are replaced by newer ones.
Viewing my own patterns–if I’m in small/micro town USA (too small for a Hampton Inn or Fairfield or even a Holiday Inn Express) and need a hotel room and my choices are a Days Inn or a Spark. I’m booking a room at Spark.
Choice and Wyndham are a mess. Best Western is complicated.
To Best Western’s credit, they de-flagged most of the really old Best Westerns (think roadside motels with exterior entrances to rooms). This was around the same time that IHG also de-flagged most of the really old Holiday Inns. Most of the de-flagged Best Westerns and Holiday Inns became Quality (Choice) or Magnuson properties.
Best Western has a very weird portfolio. In the United States, I view Best Western as a collection of independent hotels that just uses a common booking platform. I don’t even think Best Western mandates a certain brand of bedding or a certain toiletry brand. Most U.S. Best Westerns don’t have a bar or restaurant and most lack a gym as I don’t believe those are required. Internationally, there are some nice 4-star hotels in Europe operating as Best Western.
Most Holiday Inn Expresses are newer than most Holiday Inns, but not having a bar as part of the Holiday Inn Express concept is a huge flew.
On paper, Hyatt Place is probably the best limited-service major hotel brand because every property is supposed to have a bar and some meager food offerings. Being able to get a glass of wine at the end of a long day is a huge advantage over Marriott’s Fairfield or Hilton’s Hampton Inn. Especially in secondary cities, where the only bar may be local Outback chain. The problem is most Hyatt Places are outdated dumps operated by Aimbridge.
@Allison – I think it will be interesting to see what happens to all the brands when Marriott stops developing new properties.
Aloft and Moxy are so specific in that they’re geared toward whatever marketers said millennials wanted from a hotel circa 2005-2010. Is that a viable concept in another 5 or 10 years? Already we’re seeing W properties starting to look out of place in the year 2023.
Considering the huge costs associated with owning and operating a traditional full-service hotel like a Marriott, Westin, Hyatt Regency, or Hilton, it’s hard to see developers wanting to build new full-service properties outside luxury brands since the average Courtyard or Hyatt Place is probably more profitable than the average Marriott or Hyatt Regency. I suppose the only advantage of a full-service property are meetings and events, which are extremely profitable. But then you need staff. And getting enough staff in many markets is a huge problem.
@Luke- yes, evading exclusivity agreements to add rooms to a market is a huge driver in brand proliferation. Gary gets at that a bit here:
“However more brands means being able to have more hotels in the same market.”
but it’s explained in more detail elsewhere like here:
https://skift.com/2023/01/16/why-hotel-companies-keep-adding-hotel-brands/
“On the “supply side,” one factor driving the rapid proliferation of brands is that some brands have given up their market rights to owners in particular geographic locations. As a workaround, global hotel groups sometimes try to penetrate a local market further by introducing other brands.”
Personally, I wouldn’t mind if there was actual differentiation between the brands. I think all of them do it well at the high end. Suppose you compare a St Regis to a Ritz Carlton. I think they are well differentiated.
On the other hand, what the heck is the difference between Townplace Suites, Springhill, or Fairfield Inns? I’ve literally googled it to try to figure out what the difference is as the price is almost the same. Just do a quick search near MCI Airport. There is a point where there are too many brands and MCI and Marriott is a great example.
@Mikey B — I firmly agree that adhesion to brand standards would have more value than giving birth to more and more niche brands. A lot of branded hotel properties either have subpar / aging physical facilities or flatly refuse to provide the value proposition mandated at the corporate level. In 2022 I had stays at one Hampton Inn where the staff and physical plant were absolutely five-star … and another where everything was boldly deleted from the usual slate of services, even lob by coffee — it was like we were dogs in a kennel. There’s your crisis: operators ignoring the operating manual, with corporate seemingly unwilling or powerless to intervene. If a Spark is run like an HI or Comfort Inn or anything local managers decide on a whim, there’s no point to the segmentation exercise.
““economies of scale in advertising and distribution””
The Professor is not making sense. Economies of scale mitigate against brand proliferation.
Other than the fact that Motto, Tempo and Canopy are in three different price classes maybe, just maybe, Hilton and Marriott and others are trying to have a product specialized for different guest archetypes and you don’t have to particularly identify with all of them yourself? By the same token you could say General Mills has too many brands of cereal. Why don’t they just release Cinnamon Toast Twix with Lucky Charms marshmallows in it and consolidate the 3 brands?
@ Lee…Lighten up, Francis!
@FNT Delta Diamond
Can I ask you to elaborate further on your opinion about W Hotels being out of place in 2023? Just asking because it’s by far my preferred brand. I gladly spend a hefty premium on W hotels over the less expensive competition (whenever I am in a location with one) because I appreciate and enjoy the offbeat, quirky, funky, fun feeling that W hotels seem to combine with luxury
@TravelingNewYorker – not @FNT Delta Diamond – but there are really two different categories of W, some are quite stale and no longer hip at all, they haven’t had a refresh in years. Cool requires constant investment and update.
Hi Gary,
Thanks for linking to my interview with Prof. Dev and for your analysis. Great to see the many insightful reader comments.
At one point, you write:
Here I think Dev misses the point. The problem isn’t that too many hotel rooms are branded it is the number of different brands (the ‘coverage ratio’ would be the same whether all rooms were under 300 brands or 30) and in particular the number of different brands under each chain.
So, I’m not Prof. Dev, but I would like to paraphrase what he said in the article here.
You and I often hear people say, “There’s too many hotel brands.” But what does that mean?
Dev tried to unpack it.
It’s not that there are too many worldwide. There is room for more.
The problem is mainly too many “copycat” or meaningless brands.
As your commenters point out, there are too many brands where there’s too little enforcement of brand standards (partly because of the asset-light model). There’s no meaningful consistency across brands.
Prof. Dev explains one reason for this phenomenon. He says (and I’m paraphrasing) that hotel companies sometimes create brands that are meaningless just as a legal workaround to be able to put more portfolio properties in a destination without breaking contracts with current franchisees and other owners. (Dev uses one lawsuit as an example.)
You wrote: “No one can keep straight the number of brands that are part of Hilton versus Marriott, even the executives at those chains.”
Hmm… That strikes me as an exaggeration. That’s not been my experience in reporting on this. Execs at the big five companies seem able to rattle off descriptions of their brands without trouble.
I partly feel there’s a cognitive bias issue here. One of your commenters picked up on this. A person probably is only going to “vibe” with one brand. Maybe a few. So in that person’s mind, those brands are “real” and “work.” But all the other brands seem like noise in that person’s eyes.
Partly the brands aren’t always aimed at consumers per se (to oversimplify) but to appeal to developers and owners. One recent new brand was created so the new-build hotels would require less staff because of a combination of the number of rooms, lack of a meaningful lobby or perks, minimized furniture to reduce cleaning times. From the perspective of a consumer, that limited-service brand is basically just a box with beds in it. But there’s a particular band of predictable revenue that a developer could expect from that design, compared with other brands, which might require conversion or much more investment in infrastructure or ongoing operational costs.
I totally agree that the loyalty program is the main reason why many owners or franchisors sign up for brands, and I agree many consumers find the brand names of hotels to be increasingly meaningless and lacking any clear signal helping in making a booking choice. On the other hand, you might be shocked how, as one of your commenters put it, knowing that there will be always be a bar (or chocolate chip cookies, or gym equipment, or a wine hour, or waffle maker to entertain a child of a certain age, or instant-sign-on-reliable Wi-Fi) can be a lure.
So, Gary, you srote: The problem isn’t that too many hotel rooms are branded it is the number of different brands (the ‘coverage ratio’ would be the same whether all rooms were under 300 brands or 30)
I disagree. Prof. Dev didn’t say too many rooms are branded, only that the brands overlap. Dev calculates the coverage ratio as Brands/Number of Rooms Branded. So if the brands change then the ratio changes! 1000 rooms under 300 brands gives us a coverage ratio of .3, 1000 brands under 30 brands gives us a ratio of .03. This ratio’s consistency over time underscores the point that the statement “there are too many hotel brands” that other people have often made is over-simplistic. Generally, market forces (your best buddies, Gary) will determine that if there are too many or too few brands. Too few brands—for example, in the late 1990s when the number of hotel rooms increased rapidly–will lead to more brands being created. If there are too many brands, especially in a severe and protracted economic downturn, some brands will disappear. Given your economic principles, I think we should predict that the brand bloat you see, to the extent it’s there, can’t last for long, if it’s not really serving a profit-maximizing purpose, and hotels can’t drive profit unless the brands resonate with consumers.
Sorry for the long-winded answer. As you know, I’m an old, and also long-time, fan of your blog.
Agreed on the W.
Sean