The Rise of Hotel 'Collection' Brands

Following a glut of boutique and lifestyle hotel brand launches during the past few years, major industry players are embracing a new darling, the collection brand, in order to achieve a similar effect. So far, 2017 has played host to two such brand launches already. In January, Hilton introduced Tapestry Collection, an upscale complement to its upper-upscale Curio by Hilton collection brand. Then in June, Wyndham Hotel Group announced The Trademark Hotel Collection for three- and four-star independent properties.

Collection brands, or soft brands, which bring independent hotels into a major chain's system without altering the core identities of the properties, are nothing new. Choice Hotels International launched its upscale Ascend Collection brand in 2008, and Marriott International added its Autograph Collection brand in 2010. But what have changed in recent years are consumer tastes, as well as business conditions for hotel owners.

Consumer Changes

The increase in travelers who desire authentic, local experiences, and are willing to turn to alternative channels like Airbnb to get them, have challenged hoteliers to think differently about their hotel products. "People used to prefer money well spent; now they want time well lived," AccorHotels CEO Sebastien Bazin said during the New York University International Hospitality Industry Investment Conference.

Thinking differently has taken a few forms, from the previously mentioned launch of boutique and lifestyle brands to acquiring alternative lodging companies, as AccorHotels did with Onefinestay, to introducing on-property food and beverage options that cater to the local market.

But even a property's connection to a major brand can repel some travelers, according to Marriott chief development officer for North America full-service hotels Noah Silverman. "What we want, in many ways, is to underbrand the hotels from the traditional Marriott badging so that those independent travelers that may get turned off by the big brand don't," he said. "At the same time, we want the pipeline of Marriott Rewards customers to be able to find [these hotels] and use their points."

While the root idea of any collection brand is to be unique, hoteliers find that these brands appeal to consumers more broadly than first anticipated. Choice chief development officer David Pepper said Ascend Collection, with about 130 hotels in its portfolio as of March 31, contributes the most reservations in Choice's system. When Hilton launched Curio in 2014, the company expected the brand to appeal mostly to leisure travelers, according to global head of Curio and Tapestry Mark Nogal. But the brand also has captured interest from business travelers who similarly are looking to embrace new experiences.

Hotel Environment Changes

The onboarding of independent hotels by the major chains is as much about the large companies wanting to meet consumer demand as it is about the pressures facing small hotel owners and operators.

The hotel industry pays the highest commissions to online travel agencies, and that expense is only growing. According to CBRE, commission payments from U.S. hotels to intermediaries, which include OTAs and travel agents, rose 6.8 percent last year. Industry margins also are declining, even as U.S. lodging revenue climbed to its highest level ever in 2016, $199.3 billion, according to STR. Those factors place particular pressure on small operators.

Best Western Hotels & Resorts VP of owner relations Michael Morton said that in working with independent hoteliers for the BW Premier Collection, he found some were getting 40 to 50 percent of their bookings from OTAs. By joining with a larger company with scale, he said, independents "are going to see significant platform savings."

Similarly, as the lending climate for hotel development tightens, independents can have more success if they're affiliated with a brand. "When they go for financing or refinancing of their project, an affiliation with a brand is very attractive," Morton said. "Lenders see value in that."

Most soft brand agreements also bring other perks to the table for independent hotels, such as loyalty customers, staff training, revenue management systems and improved purchasing power. "A lot of owners come for the distribution and business delivery and then they understand all the other parts of the value proposition that we provide," Choice COO Pat Pacious said. "And that's really helped keep them in the system and build more hotels with us."

What to Expect

While each company sets its own standards for hotels that want to join their collection brands, it's mostly a laissez-faire agreement designed to give independent owners autonomy. "[Owners] don't want the 800-pound gorilla of the brand coming in and telling them how to run their hotel," Pacious said.

Pepper said Ascend sets no brand standards, instead requiring only that each property provide an experience on par with an upscale hotel. Morton said Best Western requires BW Premier Collection properties to maintain a AAA/CAA three-diamond hotel rating or above and a TripAdvisor customer experience rating of 4 or above.

That hands-off relationship, Kimpton Hotels & Restaurants CEO Mike DeFrino said, makes collection hotels attractive to many owners but "a completely different beast" from branded boutique hotels. "There's complete inconsistency in product delivery; there's no standardization," he said. "To call a collection a brand is almost contradictory."

What travelers can expect is more soft-branded hotels. In June, Marriott International announced it intends to grow its three global collection brands—The Luxury Collection, Tribute Portfolio and Autograph—20 percent this year and almost 50 percent by 2019. Ascend, which already boasts the largest portfolio of any soft brand, had 57 hotels in its pipeline at the end of the first quarter. Similarly ambitious plans are underway for Hilton's Curio and Tapestry and Wyndham's Trademark.

And there's still room to grow, through both new-construction properties and the existing supply of hotels. Independent hotels account for almost a third of the total U.S. room supply, according to STR. Forty-one percent of that inventory sits in the upper-midscale segment or higher. In Europe, where the ratio of independent to chain hotels flips, there are even more opportunities for companies looking to grow their collections.