As hotel companies have got better and better at understanding and then segmenting their audience, they’ve needed to come up with ways of widening what a property can offer.
That partly explains the rise and growth in dual-branded hotels. And although there are various definitions of what they constitute, there are some commonalities.
“When it comes to hotels, more often than not dual-brand properties contain separate entrances, front desks and elevators for each brand, providing a stand-alone appearance to the guests, but share back-of-the-house operations, guest amenities such as meeting space, restaurants or pools, and sometimes even staff,” said the authors of a 2016 HVS report looking at the trend.
For this type of offering to work the developers need to be confident that there is enough of a market for the two or more brands. The most common approach is to pair a full or limited service hotel with an extended stay.
Hotel management company Cycas Hospitality was one of the early pioneers of the dual-brand strategy in Europe, thanks in part to the vision of its founder John Wagner.
Current CEO Matt Luscombe says the brand has become pretty adept at rolling out the strategy.
“If you can take one big hotel and turn it into two smaller ones and really differentiate the experiences, you can then tap into a much broader range of potential customers and the minute you do that you start being able to apply different pricing strategies and commercial strategies and suddenly you’re on to a winner,” Luscombe said.
One of the turning points for Cycas, came before Luscombe joined, when Wagner struck a deal with IHG to develop a dual-branded property close to the Olympic Stadium in London. The idea was to combine a Holiday Inn with Staybridge Suites.
“Quite a lot of thought went into it at that point in time in terms of making sure there really were two very distinct guest experiences, so the public areas were on two different floors and it was really genuinely two very separate hotels, two very different propositions but both benefiting from the demand drivers in the location and the halo of being part of the Olympic games,” Luscombe said.
Post-Pandemic Changes
The cost-effectiveness of dual-brand properties has always been hotly debated. A study by the Cornell Center for Hospitality Research published in 2020 found that it wasn’t necessarily true that they were more efficient than their single-brand relations.
“Although dual-brand hotels achieve some savings in undistributed expenses, for example, administrative and general (A&G) and maintenance, they incur higher IT and marketing expenses. As a result, gross operating profit margins are slightly lower in dual-branded hotels than in single-branded hotels. In sum, we document limited operating efficiency gains in dual-branded hotels compared to single-branded hotels,” the authors said.
The initial idea behind the concept was to double up in key areas but as Luscombe points out “the reality is that’s not needed.” The Covid-19 pandemic has forced hotels to cut costs and one of the ways they can do that is by getting rid of roles, where rightly or wrongly they see duplication.
If this persists, dual-branded properties might end up becoming a more efficient option. In any case it is not a trend that is slowing down.
In March, Wyndham announced the first groundbreaking of its new La Quinta and Hawthorn Suites dual-brand hotel concept in Pflugerville, Texas.
The idea being that owners can target both the business transient and extended-stay demand within any given market. The company has 36 other locations in its pipeline.
Another recent example is IHG Hotels & Resorts, which recently opened its Crowne Plaza Nice - Grand Arenas and Holiday Inn Express Nice – Grand Arenas in partnership with HPVA Hotels. (These properties are more separate than the Wyndham example but IHG still calls it a dual brand.)
IHG’s product differentiation is more subtle than Wyndham’s Crowne Plaza is full service upscale, whereas Holiday Inn Express is economy limited service.
“Nice’s Éco-Vallée business district has so much to offer current and future companies wishing to set up in Nice and we are looking forward to being able to host those coming for a business trip or a holiday on the coast. We are confident that guests will be able to find the accommodation that best suits them, whether that be at the Crowne Plaza or the Holiday Inn Express,” Eric Talou, General Manager of Crowne Plaza Nice – Grands Arenas and Holiday Inn Express Nice- Grand Arenas, said.
What Next?
The logical next step is stepping up the type of brand offerings available at properties. We’ve already seen some triple-branded projects and sites that combine a mix of parent companies – although these are trickier to achieve.
“Conventional schemes have centred on the full service, select service, limited service and extended stay segments. New forms, however, could also consider luxury, lifestyle or soft brands as part of a hotel pairing, yet not without challenges,” HVS said.
There’s also the possibility of combining non-accommodation brands to improve the overall offering such as Accor’s Wojo co-working business.
Then there are the companies that contain different types of accommodation within the same brand, for example The Student Hotel, which brings together student accommodation, hotel rooms, co-working, meetings and events.
“We’ve had conversations with various developers about using our extended stay knowledge to move into co-living and co-working,” said Cycas’s Luscombe.
The possibilities are almost endless and for investors they remain an attractive option thanks to their efficiency and diversification but there are things to keep in mind.
“The largest trade-off comes with the shared back-of-house space; while it allows a reduction in development and operating costs, it also ties the hotels together in such a way that they might need to permanently trade or exit as one company,” HVS noted.