Weighing up the Pros and Cons of Soft Brands
Updated: Jun 27, 2018
Today’s AP voice is from our managing director Beate Christeleit.
At Amistad, we have seen a substantial increase in the number of “soft brands” in the past few years. While there are obvious benefits for independent hotels, it’s worth taking a deeper dive into the benefits and disadvantages and other possible options, such as hotel representation companies.
Let’s start with the basics of what we define as a soft brand. Some well-known examples are Marriott International’s Autograph Collection launched in 2010, or The Luxury Collection acquired by Starwood Hotels & Resorts in 1998. The theory behind soft brands is that independent hotels need to raise their market profile but want to stay independent and untethered by the bureaucracy of mainstream franchises. For a fee, global chains allow these boutiques to retain to the brand while benefiting from a much larger network and infrastructure (technology, loyalty programme, training, etc) which enables them to raise their profiles and attract new customers. Independent hotels also benefit from being in the same club as other like-minded organisations.
It’s clear to see the benefits of such an arrangement for large franchises. As consumers are demanding unique, tailored experiences, they are eschewing well-known brands for smaller, lesser-known independent hotels that provide these experiences. Rather than creating numerous independent hotels of their own, global chains have taken the option to align themselves with independent hotels. This results in lucrative new revenue, an opportunity to enter new markets or gain market share and to target clients who would otherwise not consider the large franchises.
But what’s in it for independent hotels? Not as much as you might initially think. Let’s break down some of the myths around the benefits of soft brands.
1) Access to support: This marketing support often includes many hidden costs and is quite restrictive. Independent hotels are usually restricted in how they track returns on advertising spend and how they run their media campaign. Also, the fees that independent hotels pay mostly goes towards raising the profile of the large franchise rather than dedicated marketing support for a specific hotel.
2) Driving profit: When you consider the vast fees that independent hotels pay to join a soft brand (application fee, fees per room, royalty fees, annual membership fees, costs for marketing support), it’s worth asking what the return on this investment is and whether this money could be used in a better way that drives profit.
3) Joining a loyalty programme: Independent hotels pay an average loyalty fee of 4% for each booking received through a loyalty programme. And redemptions of loyalty rewards are usually paid based on the lowest available rate, which reduces profitability.
4) Booking power: Data gathered from over 25,000 hotels by TravelClick Demand360 suggests that in 2017 soft brands underperformed independent hotels in all segments related to occupancy rates. These differences were starker for luxury segments. One powerful alternative source for driving bookings is OTAs.
Independent hotels have so much to offer all types of travellers and Amistad is enthused about championing them. We don’t think independent hotels need to join a soft brand to raise their profile. One option is getting assistance from a hotel representation company that could act as an extension of your sales and marketing team and be your champion to your audience. We’re always happy to speak to hotels about their current plans, what we’ve seen in terms of strategies that work for independent hotels and how we can help.