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Rebranding A Hotel?

What you need to know.

Thursday, May 10, 2007
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Steve Belmonte's Hospitality Solutions LLC
Steve Belmonte's Hospitality Solutions LLC
For "Everything Franchise"

by Laura Jorgensen

With springtime comes spring cleaning, spring fever, and the springtime motto, “out with the old and in with new.” Spring brings regeneration and growth, the hope and joy of beginning a new relationship or partnership. During this season, hoteliers may be considering a brand change, but experts agree that the allure of a new business venture should not outweigh business acumen.

ALB recently spoke with Steven Belmonte, president & CEO of Hospitality Solutions LLC and also president, partner and CEO of the Lexington Collection by Vantage Hospitality, about what hoteliers should consider before rebranding.

According to Belmonte, the first question to ask is why do I want to rebrand? The second question is will my existing brand work for me in its current location? If the answer is maybe, then an hotelier should consider the cost of conversion. For example, Belmonte estimates that a typical 100-room roadside property, properly rebranded, will end up costing around $100,000. With this in mind, what, he asks, does a hotel owner hope to accomplish?

In his experience, Belmonte has found that hoteliers frequently decide to rebrand for a few common reasons, such as having a relationship with a particular franchise company; seeking a new image, better fees, concessions or returns; complaints about not getting enough business or return on investment. He explains that, “The triggers are lack of profit, disenchantment with the brand or its management, or that there is another flag courting the hotelier to switch brands.”

To this, Belmonte cautions hoteliers not to rebrand arbitrarily but to remember to do the research and ask: “What will this new brand do for me when I go to sell this hotel? Will it help me sell the hotel? Will it make the hotel more desirable to a potential owner or will that brand encumber my ability to sell the hotel somewhere down the line?”

Hoteliers should make sure they have established clear-cut reasons for leaving their current flag. With that said, they should also remember that the cost of rebranding may include stiff termination and liquidated damages fees from the franchisor, plus fees if you fail to rebrand in a timely manner and reidentify all logo items (i.e., directional signs, highway signs, hotel signage, folios, stationary, and toiletries).

Belmonte reminds hoteliers that they have to buy a complete new inventory of items printed with brand logos and, “that alone can come with a staggering price tag that would negate any commonsense business approach to rebranding because it may be cost prohibitive.” But for a new owner, reflagging his/her newly acquired property can help the hotel’s reputation. The new owner may need to clean up the local image and start afresh instead of trying for a few years to rebuild the hotel’s reputation by quickly reflagging and renovating.

Branding up from an economy product to a mid-tier product can increase business because of the added business services and amenities which will appeal to a higher room rate clientele. Franchisees who have branded up could see increases in business and return on investment, but they must consider what market demand will bear and withstand: “Often hoteliers are in a very weak market and the truth is that everyone is doing poorly. Rebranding might not be the answer. Consider the niche requirements of the market and think about differentiating products through local offerings, promotions, services and/or amenities in order to get a larger market share. Maybe it’s not a brand issue, but a management issue.” said Belmonte.

Have hoteliers done their due diligence and research? Belmonte has found that typically hoteliers believe they are doing less business than what they really are and that, “often hotel owners are unaware of what their market share should be.” Hoteliers may think they should be doing better, but they must remember to analyze the market’s data to determine what that fair share should be before assuming that they are not doing enough business.

When transitioning from a former brand to a new brand, hoteliers will more than likely be hit by timing issues, causing a lull in business therefore, try to plan the rebrand transition to eliminate downtime Belmonte recommends, because hotel owners can get caught for a period of time with no affiliation and end up losing a lot of business.

Also, after completely reflagging a property, the business may suffer a significant decrease until the hotel property has been incorporated and integrated into the brand’s reservation system, Web site, third-party directories, Internet marketing programs, and tour and travel divisions. Belmonte says that this downtime might take anywhere from six to eight months: “It’s kind of a (financial) one-two punch – you have the de-identification costs and ordering all the supplies for the new brand that’s the left jab and then you’ve got your right hook when you rebrand. It is very typical to have a slow period until that new brand is fully operative.” According to Belmonte, “Hoteliers just don’t foresee these expenses. It’s the cost of integration that you have to foresee, budget and prepare for in the event that you are contemplating a brand change.”

Before signing a contract to rebrand, hoteliers should, according to Belmonte, take some time to talk with current franchisees about the brand: “Take a directory, pick ten random locations and talk to the hotel owner. Tell the owner that you are thinking about buying that brand and ask if he/she is happy with that brand. Ask if the brand is delivering reservations and treating that franchise well because your entire financial future is tied to the success of your brand.”

About Hospitality Solutions LLC

Hospitality Solutions LLC, Randolph, N.J., provides new franchise agreement negotiations, franchise termination and liquidated damage claim negotiations, mediation, expert witness, litigation support, motivational speaking, market studies, feasibility studies, on-site analysis, ownership and development assistance, and tax credit and benefits services to the hospitality and service industries. Company President and CEO Steven Belmonte also serves are President of The Lexington Collection, Vantage Hospitality’s new membership brand hotel in the upper-mid to upscale lodging segments. Prior to founding Hospitality Solutions LLC, Belmonte served as former President and CEO of Ramada Hotels, Chairman of the American Hotel & Lodging Assn.’s Educational Foundation, and serves on the Board of Directors of Arlington Hospitality Inc. and the Industry Relations Committee for the Asian American Hotel Owners Assn. For more information, call (973) 598-0839, email stevenbelmonte@aol.com or visit www.stevenbelmonte.com.
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