Column: Dual-branded hotels – a double winning asset class

By James Buckley - Monday, April 16, 2018 12:41

The dual-branded hotels sector, where two hotel brands occupy one site, has exploded over the past decade. Across Europe and the US there are 50 projects or 100 hotels, representing 16,000 rooms, set to open by December 2018, writes Eduard Elias, partner & co-founder, Cycas Hospitality

One of the main challenges facing investors and developers is the shortage of land suitable for hotel development. Then there is the question of what sector of the market to target? By offering two brands, such as an extended-stay hotel and a limited or full-service hotel, on one site it is possible to capture a wider range of the market at different price points.

This also reduces risk; while a 400-room hotel with one brand may generate insufficient occupancy, two different brands serving different but complementary segments of the market could be far more viable.

There are also the space and operational efficiencies offered by a dual-branded hotel. For example, an on-site gym and swimming pool can be shared by the customers of both hotels, saving the cost of building two separate facilities. Back-of-house facilities can also be shared.

For developers and investors there is the benefit of scale in relation to construction costs, while with more rooms on the same or even reduced footprint compared to two separate hotels.

This is reflected in that the majority of projects in our pipeline are dual-branded, such as IHG’s Crowne Plaza and Staybridge Suites which opens in Manchester later this year.

The core to the success of designing and running a dual-branded hotel is retaining brand identities and values. Although there are many efficiencies to be made by pooling resources, dual-branding will not work unless customers are getting the brand experience they expect. For example, this means separate entrances and independent check-in desks.

Choosing the correct mix of brands takes considerable research. It is important that the brands are different enough to be distinctive, but they also need to complement each other. For example, we have had considerable success with our Holiday Inn and Staybridge Suites dual-branded hotel in Stratford, London. The Holiday Inn element provides a full-services hotel, while Staybridge Suites is an extended-stay hotel, with both brands being not too divergent in terms of quality, services and cost. It is the facilities that set them apart, so there is no risk that these brands will cannibalise each other’s businesses.

For dual-branding to succeed it is essential to get the management right, and it takes a special kind of manager to understand the unique challenges of successfully running such an asset. Get it wrong and both brands can suffer, but get it right and investors can reap the inherent efficiencies and synergies of dual-brand hotels.

Although dual-branding has potential pitfalls, its benefits still present an overwhelming case for investors, operators and customers. Providing more efficient land use and better revenue, cost and risk optimisation, dual-branded hotels are an exciting asset class that is extremely attractive to investors.

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