The Dual-Branded Hotel: Operational Efficiencies, HR Cautions and Future Value
As published in the July 7, 2015 edition of 4hoteliers.com. Reprinted and distributed with permission.
The dual-branded hotel concept is speculated to have a number of origins;
Looking at the hospitality industry as a whole, a comparison that comes naturally is one to dual-branded restaurants. Two restaurants under one roof could be viewed as a close similarity as housing two hotel brands under one roof, but in reality, the two are actually quite different. The level of complexity is the catalyst that distinguishes the two.
Rather, the dual-branded hotel concept seems to have evolved from the premise of “owning all four corners of a highway exit.” A company could own all four corners, yet have different brands from different market segments, or even similar market segments, occupying all four corners.
And so, the evolution of the dual-branded hotel came about; two brands under one roof, or occupying the same piece of property.
As Ginny Morrison, Vice President of Sales & Marketing for Deerfield, Illinois –based Spire Hospitality said, “the success of a dual branded property completely depends on having the right property at the right time, and combining those two with the right brands.”
Spire Hospitality Group is currently developing a dual-branded property in Atlanta that will house a Crowne Plaza Hotel and a Staybridge Suites under the same roof. The location was a key deciding factor when choosing the brands, as was the number of rooms each brand would be allotted. By optimizing the space in this respect, the hope is that the maximum RevPAR will be achieved.
The multi-branded property can realize cost savings when development synergies are recognized. The two brands may be able to share meeting spaces, recreation facilities, parking, and food and beverage operations, therefore reducing construction costs.
Jennifer Cronin, Vice President of Global Development Marketing for Starwood Hotels indicates how such sharing can benefit the guest as well. “The benefit is that they can take advantage of other brand offerings such as the food and beverage operation. For instance, if a guest is staying at an Element and in the same complex there is an Aloft, he or she can have a drink at the XYZ Bar and listen to music. If there is a Sheraton, the guest can have a bite at the full service restaurant or enjoy a glass of wine in the lobby.”
Operational synergies further attract developers to these dual-branded properties. Back of house employees can work for both brands, cutting such employment costs. Arzu Molubhoy, an executive committee member of the Emerging Leaders Council (ELC) of the IHG Owners Association, and the Chief Financial Officer of family-owned Atlantic Hotels Group Ltd., comments that an advantage of having the two hotels come from the same market segment is that property management systems are similar. Front of house employees are then able to work at both hotels as well, saving employment costs even further.
Dual-branded properties are also an innovative and exciting approach to lowering risk. John Lancet, MAI, Director and Partner of HVS's offices in Florida, comments that the properties tend to have higher valuations because of their operational efficiencies. The different brands diversify the demand segments, and this gives developers and employees more flexibility in the work environment.
Human Resources – A Caution
From the development standpoint, dual-branded properties seem ideal, as they are operationally efficient. But these properties can potentially bring their own set of challenges. First, there will always be the challenge of retaining the integrity of each of the brands involved.
Each brand has its own system to completing day-to-day tasks. Issues might arise when brands are asked to combine those systems, and even if they are to remain separate; other challenges come about when the staff is expected to know multiple systems and processes within the hotel.
Keith Kefgen, President and CEO of AETHOS Consulting Group, one of the leading global executive search and human capital advisory firms in hospitality, believes that unless the work environment is specific enough, there will be issues with employment communication and success.
In a scenario where there are two hotels from two different market segments, Kefgen remarked that if the customers cannot be separated, it will be difficult to separate the employees. In other words, employees, whether back of the house or front of the house, are trained to deliver a level of service that is uniquely specific to the market segment they are working in. If there are two different segments, the defining lines of that unique service could potentially be blurred.
Dave Mansbach, CCP, and Managing Director at AETHOS Consulting Group, reminds us of a very simple fact: cross-training staff means learning multiple systems for doing the same type of things. Applying this to the same scenario above, we realize there can be a great potential for confusion in the workplace when employees are expected to constantly change between systems.
Another challenge employees could face is struggling to fully identify with a brand. Learning the systems of the operation is a task that is memory based, but learning brand values and developing such an affinity is something that occurs over time. If employees are expected to go back and forth between different brands, full brand identification might never be achieved. Without that key touch, employees might never reach an opportune level of service that is possible at a single-branded property.
The Ultimate Value
All of that considered, there will come a time when these properties will be positioned to be sold. "What will be interesting to see is what the future holds for these dual branded properties at the time of sale," adds HVS Florida’s Lancet.
"We have not yet witnessed what an owner may need to do when it is time for switching hands, or what the purchaser may need to modify or take into account when looking to acquire a pre-existing asset such as this. Will the value be improved because of the operational efficiencies, or as the market changes, do alterations need to be made internally and physically to the building to keep it relevant to the local market and times, thereby costing more in capital needs? We have yet to see."
An important thought to consider, though far in the future: Will the dual training of the employees add to the value of such properties, or will the market shy away from this concept? We wait and will see.