The Proliferation of Brands and the Impact on Revenue Management

By Wendy Bingham and David Beaulieu

Total Customized Revenue Management, LLC (TCRM)

Is it just us, or does it seem like hotel chains are launching or buying new brands almost every week? What's behind this surge in hotel brands? Are all these brands necessary? Is the industry spreading its existing brands too thin, or is it genuinely catering to every travel budget and niche out there? These questions highlight how an abundance of choices can overwhelm some travelers and illustrate the plethora of options they must navigate to find the right hotel brand.

By The Numbers

There are over 18 million guest rooms and 1,200 hotel brands worldwide.  CoStar forecasts room demand to reach an all-time high this year.  In fact, hotel occupancy is expected to increase by 2.5% globally and the average daily rate (ADR) is projected to grow by 4.9%.  Statista estimates that 2,707 hotels will open their doors globally in 2024.  This follows on the heels of 1,842 hotel openings in 2022 and approximately 2,480 hotel openings in 2023.  Brand Finance confirmed that Hilton is the most valuable hotel brand in the world with a brand value of $11.7B in 2023 although Wyndham Group has the most properties.  

According to EHL Hospitality Business School, there were over 20 major hotel companies in the early 2000s.  Today, however, the 10 largest groups control a staggering 65% share of U.S. room supply.  The change is due to massive industry consolidation over the past two decades.  A handful of multi-brand conglomerates are now dominating the market across segments from luxury to budget.  EHL further asserts that this consolidation, while advantageous for the hotel chains, can be too time-consuming and mind-numbing for guests to understand.  Consolidation is just part of the equation.  Chains are creating new brands to fill niche gaps in their portfolios, looking to attract very specific types of travelers.

When comparing global chains recently, Accor has over 40 hotel brands.  Marriott offers 35 different hotel brands.  Hyatt offers 24.  Hilton, 22, and IHG has 19.  As you can imagine,  there is some overlap between some brands, even within the same chain at times.

Hotel brands are unique identities developed by hotel chains to set themselves apart in the market. They provide customized services, designs, and experiences tailored to different types of guests. A brand's value significantly influences its market position and guest perceptions, making brand development and management crucial for chains. Hotel-based commercial teams face the challenges of applying these identities effectively in competitive markets. Often, specialized brands may struggle against more traditional offerings, as customers may overlook or not fully appreciate a brand’s uniqueness and positioning; and solely compare properties based on price.  When this occurs, it presents a significant challenge for Revenue Managers. For example, in a competitive market with six or seven different limited-service branded hotels, including one all-suite brand, a Revenue Manager may struggle to price their all-suite property without undervaluing its unique offerings.  At that point, the value of the brand and its unique features are lost or given away to remain competitive with the other properties in the market.

It can get even trickier when a chain launches a variety of brands that seemingly offer the same features and amenities, such as all-suite room products and free breakfast. Take Hilton, for example, with their Embassy Suites, Homewood Suites, and Home2 Suites brands.  While each brand offers essentially the same thing, a suite room product and a form of free breakfast, each brand was created with a different customer segment in mind.  This can be confusing to guests who cannot discern the nuances that separate these brands.  And it can be challenging to Revenue Managers to competitively price these hotels when competing against other brands offering variations of these same features.

A Revenue Manager’s Role with Branding

A Revenue Manager plays a crucial role in branding by aligning pricing and revenue strategies with the overall brand positioning and objectives. Here's how:

1. Brand Consistency: A Revenue Manager tries to ensure that pricing strategies are consistent with the brand's image and positioning in the market. This is easier said than done, as it involves understanding the brand's target market, competitive landscape, and unique value proposition to set prices that reflect the brand's perceived value.  
2. Revenue Optimization: By analyzing market demand, booking patterns, and competitor pricing, a Revenue Manager identifies opportunities to maximize revenue while staying true to the brand's pricing strategy. This may involve implementing dynamic pricing strategies, adjusting rates based on demand fluctuations, and optimizing inventory distribution across different sales channels.
3. Protecting Brand Equity: Pricing decisions can impact brand perception and equity. A Revenue Manager works to maintain the integrity of the brand by avoiding tactics that may erode its value, such as excessive discounting or price fluctuations that undermine guest trust and loyalty.  This can be especially challenging in underperforming markets and assets.
4. Collaboration with Sales & Marketing: Revenue Managers collaborate closely in the commercial team to ensure that pricing strategies align with branding initiatives and promotional campaigns. They provide insights into pricing elasticity, market trends, and other data points to support sales efforts and marketing strategies that reinforce the brand's positioning.

In essence, a Revenue Manager's role with branding involves strategically pricing hotel inventory to maximize revenue while upholding the brand's positioning and reputation in the market. Revenue Managers serve a key role in the commercial team, ensuring that pricing decisions contribute to the overall success and sustainability of the hotel and brand.

The dynamic landscape of hotel branding presents both opportunities and challenges for travelers and industry professionals alike. With an ever-growing array of hotel brands catering to diverse preferences and niches, travelers face the daunting task of navigating through a sea of options to find the perfect fit for their needs. This abundance of choices can lead to decision fatigue and uncertainty, underscoring the importance of clear communication and differentiation within the industry. Revenue managers and commercial leaders play a pivotal role in addressing these challenges by strategically pricing hotel inventories to maximize revenue while ensuring that each brand's unique value proposition is effectively communicated to potential guests. By aligning pricing strategies with brand positioning and guest preferences, revenue managers can help hotels stand out in a crowded field.