To capture fussy travelers, hotels change brands

The New York TimesDecember 26, 2012 

In September, a pedestrian walking on Central Park South in Manhattan might have noticed the name Jumeirah being stripped from the marquee of the Essex House, a luxury hotel. The property became a JW Marriott. Earlier, it was a Westin.

The Essex House is not alone changing its brand affiliation. As the recession has eased and hotel occupancy rates have improved, hotel owners have been increasingly changing their affiliations from one brand to a competitor’s – what is known in the industry as reflagging.

According to statistics from Smith Travel Research, a research firm in Henderson, Tenn., nearly 2,500 hotels were reflagged in 2011. While that represents just a 5 percent sliver of all U.S. hotel properties, it was still a 39 percent increase from 2010.

“In the aftermath of the recession, travel patterns have changed,” said Bjorn Hanson, divisional dean and clinical professor at the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University. “Owners think about repositioning, with some trading up, others forced to trade down.”

Five-year leases on properties opened in 2006 and 2007 are expiring now. Typically hotel brands do not own the hotels. Hotels may have a contract with a management company or a hotel owner may have a franchise agreement.

“The new brand promises either lower fees or offers more flexible standards that provide the hotel with ways to be more efficient or have a greater reach in a market,” said Henry Harteveldt, chief research officer and co-founder of the Atmosphere Research Group in San Francisco.

Operators reflag, he said, to take advantage of benefits they are not getting from a current brand.

While experts say most conversions run smoothly, some may hit snags, at least initially.

“The new personnel coming in are competent, trained and supervised,” Hanson said. “But they may not be familiar with the technology or what’s in the drawer at the front desk.”

One brand, Holiday Inn of the InterContinental Hotels Group, began considering a reinvigoration of the brand in 2004. Changes began in late 2007 after guests complained about inconsistency among the properties.

“Guests were saying the lobbies and bathrooms weren’t modern, the beds weren’t comfortable,” said Verchele Wiggins, vice president for global brand management for the Holiday Inn brands at InterContinental.

In the last eight years, more than 1,400 hotels were removed from the brand. About 1,800 were a combination of newly built Holiday Inns and conversions to Holiday Inn. And just more than 1,600 existing Holiday Inns chose to remain with the brand. Each new or existing hotel spent about $150,000 to $250,000 to comply with modernization requirements.

J.D. Power and Associates now ranks Holiday Inn first in its midscale full-service hotel category, up from sixth place in 2009 and 2010.

Although not every rebranding involves a renovation, even a straightforward changeover can be a nuisance for guests. Harteveldt said during one stay at a recently reflagged hotel, he saw a steady stream of hotel personnel in his room as they exchanged room service menus and changed nameplates on the telephone and the brand of shampoo in the bathroom. When he questioned the need for the frequent interruptions, he said he was told, “We’re obliged to uphold the standard of the brand.”

And, while a transformation is under way, convention and meeting managers with contracts for coming events need to check with the hotel to make sure their plans are still in place.

The housekeeping staff may remain with the hotel, but senior managers, including the event manager, the general manager or the chef who designed and approved the menu may leave, said Jim Butler, partner and chairman of the global hospitality group at Jeffer, Mangels, Butler & Mitchell law firm in Los Angeles.

“A property can be very different once a hotel changes flags,” he added.

He urged anyone booking an event to be alert to the surroundings.

“Try to get a feel,” he said, and see if people are smiling or maintenance has been deferred.

And he suggested trying to put a provision in the contract that allows cancellation if there is a change of branding, management or the operating standard of the hotel.

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