Soft-Branding; What Is It and What Isn’t It?

With Hyatt as the latest global entrant into the world of “soft branding,” the time is right to discuss the inner workings of this concept for hotel owners and operators.  Today, with Marriott, Starwood, Hilton, and Hyatt all playing in this relatively new arena, it is apparent that the concept of soft-branding is here to stay; however the jury is still out on how to best use this strategy to one’s advantage.

One of the first questions that developers & owners delve into when considering hotel projects is that of branding.  “What brands are already in the market,” “what brand is best suited to my asset,” “what brand will ultimately enable my hotel to perform up to expectations,” are the types of challenges that must be answered when addressing this important issue.  Until recently, the question of “which brand” was relatively straightforward, with all of the usual suspects, plus the occasional more obscure flags, eager for consideration.  In 2010, however, all of this changed with the introduction of Marriott’s Autograph Collection.

Simply stated, “soft” brands such as Autograph, Curio (Hilton), Tribute (Starwood) and Unbound (Hyatt) offer their owners all of the perceived benefits of the full-blown brands, without the potentially overwhelming cost of physical conversion of the building.  If you own the right type of iconic, unique asset, you no longer have to accept the fact that your hotel may never be a Marriott, Hilton, or Westin (if that is what you aspire to), because with the soft-branding now offered by these flags and others, you may qualify for admittance to these collections without undergoing an extensive brand-directed PIP (Product Improvement Program).  So far, so good, yes?

It’s important to understand that the soft branding option that we are discussing here is not a reduced cost option.  While every license and management agreement negotiation is exactly that, a negotiation, an affiliation with one of the soft brands now being offered by the global flags will likely cost owners as much as a traditional Marriott, Hilton, or Starwood flag.  That being said, soft-branding may still be a viable option for your asset.

The proliferation of boutique and lifestyle hotel brands in recent years has been well-documented.  According to Lodging Magazine, for “lifestyle properties 300 rooms and under, demand grew at an annual average pace of nearly 20 percent from 2009 through 2014—far above the rate of overall U.S. hotel demand growth of 4.2 percent.”  It is now an accepted fact that soft-branding via the global powerhouses offers a legitimate option for certain properties in certain markets, which makes the branding due diligence process for owners far more complex.  In the recent past, an upscale or luxury asset that could never be affiliated with a global brand was faced with few options; existing as a straight ‘Independent,’ that is with no brand affiliation whatsoever, or perhaps existing as a soft-branded “member” of a collection of properties, such as The Leading Hotels of the World, Preferred, and the like.  Today, the soft branding playing field has grown far more crowded, meaning that owners need to work that much harder to discern the differences between the various options. 

What to do?  If your asset has the potential to meet the requirements of one of these soft brands, you would of course be wise to study this option just as you would study more traditional branding options.  Affiliation with a soft brand will ensure connectivity to the brand’s global booking engine (a good thing), the opportunity for representation by the brand’s global sales network (potentially a good thing), as well as numerous other benefits afforded those hotels branded in a more traditional sense.  Such an affiliation would not represent a cost savings opportunity in comparison to more traditional branding, as management or license agreement negotiations typically start from the same place as a hard branded scenario. 

In summary, soft branding via the global powerhouse brands is a very real option worthy of owner/developer consideration in certain cases.  Yes, the ultimate questions of “should I brand?” and “what brand is best for my asset?” have now become more complicated, but the good news is that the final answer to these questions now may be far better for the ultimate success and value of your asset.  Stay tuned for future discussion on the impact of soft branding on the guest, as the benefits of this concept may not always be as obvious to our customers.