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Shuffled Not Shaken Out: How Hotel Giants Will Handle All Those Brands Post-Coronavirus

Saturday, April 4, 2020  
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Shuffled Not Shaken Out: How Hotel Giants Will Handle All Those Brands Post-Coronavirus

Skift - April 4, 2020

Coronavirus travel fears have temporarily shuttered many hotels around the world. But when those doors reopen, the trend of rampant hotel brand expansion seen in recent years may take on a different look.

With the rise of alternative accommodation competitors like Airbnb, hotel companies began to add brands that appealed to different price points as well as different tastes. Marriott wound up with 30 brands following its 2016 merger with Starwood. Hilton launched its 18th brand, the “affordable lifestyle” Tempo, earlier this year. Accor operates 39 different hotel brands around the world.

IHG CEO Keith Barr cautioned against brand buildup becoming brand bloat. Analysts said the trend would be vulnerable in a downturn. The current coronavirus downturn is greater than almost anyone could have predicted, but that doesn’t necessarily mean the industry is on the cusp of a wave of brand extinction.

“A hotel company is going to have to look hard at how to recover all those brands,” said Makarand Mody, a marketing professor at Boston University’s School of Hospitality Administration. “That said, the decision to lose a brand is still a big one.”

With occupancy at many of the world’s hotels in the single digits, hoteliers and major hotel companies today are focusing more on survival than looking ahead. But once travelers begin to return, major hotel companies will have to reassess their brand portfolios and recalibrate what each flag stands for.

Brands with uncertain futures like W Hotels and even Marriott’s planned rejuvenation of Sheraton could be particularly vulnerable in the current downturn, Mody said. Marriott de-flagged five W Hotels in two years before coronavirus impacted the hotel industry, and the hotel giant wasn’t far along in its planned brand overhaul to Sheraton properties.

But long-term contracts with hotel operators make shutting down an entire brand arduous for major hospitality companies. Instead, the company could decide to cool off on introducing new brands or extend the timeline given to operators to invest and adapt to new brand standards.

“The amount of effort and investment put in to creating a brand, especially one of scale like Sheraton, creates a scenario where, if you do decide to retire the flag, the big danger is all your franchisees are now out on the open market,” Mody said. “Operators would have no obligation to stick with you as Marriott. They then become open for poaching by the IHGs or Hiltons of the world. That could be why a company is hesitant to retire a brand.”

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