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Converting Your Hotel Brand Now Can Put You Ahead of the Competition

If you ask business leaders to describe what drives the most successful organizations around the globe, they will likely mention concepts such as market insight, organizational adaptability, new product development and customer service. While these ideas may seem to best define a resilient technology company, they are actually quite relevant for hotel owners and operators across nearly every segment of the industry.

Consider this: through the inevitable economic and geo-political fluctuations that regularly impact travel and tourism, the most profitable and enduring properties have been guided by owners and management teams with real market awareness – those who understand when and how to revise their strategies, re-imagine their properties, and restructure their operations.

These hotels have consistently found the right moment to adapt by aligning with new hotel management partners, launching new services and raising capital to upgrade physical structures.

Finally, they have excelled at predicting the needs and desires of travelers in general, and their guests in particular – an example of great customer service in action.

So what does adaptability, market awareness and customer focus look like for hotel owners today? Of course, the answer will vary by region and segment, but one approach has increasingly worked for properties wanting to stay ahead of the competition – and in sync with guest desires: brand conversion.

While the conversion strategy is not new, it will likely take on new importance in the months ahead, especially in markets where economic and political changes are on the horizon. It will also be a critical strategy in places where new construction is poised to oversaturate the market with guestrooms.

A well-publicized report by the Center for Hospitality Research suggests just how financially effective conversions can be – when they are well-planned and executed and involve the right hotel management partner. The report’s analysis focused on 260 U.S. hotels that converted brands (independent to brand, and brand to brand) between 1994 and 2012, and the results demonstrated improved occupancy, revenue and profit for those that found a strong alignment with their new partner.

Ultimately, the most successful cases occurred when the converting property matched well with the concept of the new brand, and when the new brand itself held a position of relative market strength, with proven hotel management skills.

A close look at one region and one segment in particular suggests that older properties that may be nearing their natural cycle of renovation and upgrade should begin now to explore the benefits of converting to a strong brand partner. In the Mexico/Caribbean and Central/South America regions, resort properties – and particularly beachfront resorts – are seeing signs of potential changes on the horizon.

For instance, STR’s June 2017 Pipeline Report shows a 43.8% increase in rooms Under Contract compared to June 2016, meaning that in the near future existing properties will face significantly greater competition from newly-launched and potentially well-marketed hotels. This includes a 2,000-guestroom casino hotel in Montego Bay, Jamaica and AMResorts’ upcoming Breathless Playa del Carmen Resort & Spa featuring 700-guestrooms and suites currently under development in Mexico.

There are other signs that beachfront properties in this region of the world, along with other upscale hotels, may be headed for the next big brand conversion movement. While new resorts have been launched and more are coming, properties in some countries are already seeing market weakness. According to the latest data, the Central/South America region is seeing declines in occupancy, average daily rate, and revenue per available room.

Given the market signs in the Mexico/Caribbean and Central/South America regions, the real question for existing hotel owners is not if they will need to act boldly to stay competitive, but when. Considering recent events in Hong Kong, where a downturn in tourism has sparked a surge in hotel conversions and sales, the answer to the “when” question is clear: before the market turns, before the competition makes the move, and before it is too late.

In Hong Kong, travel declines were so dramatic, and so many properties rushed at once to react, that many hotels have been forced to convert to condominiums and offices – leaving the hotel business behind. Clearly, those properties with foresight, market awareness, and the willingness to adapt are best poised to succeed.

For owners of existing hotel properties who are considering a brand conversion, here are some of the key questions to ask:

Are you following the marketplace, and your competition?

Property owners and hotel/resort management teams understand how to read the data. They know how to gauge the pipeline of new guestrooms – and future competition. Still, the trends can be subtle, making it difficult for many owners to act before the market turns.

For instance, in the Caribbean marketplace, occupancy, average daily rates and revenue per available room are down over the past year, but showing signs of a slight rebound. However, there is no guarantee that this movement will continue, and given the history of the market and the number of new rooms coming online, it is more likely than not that a downturn is coming.

As a hotel owner, you need to take action before the market turns. The process of carrying out a conversion to a new brand and an experienced hotel management partner can take several months, and your goal should be to reposition your property early, and to see a return on your investment and improved occupancy as quickly as possible.

Are you listening to your guests?

Converting your property to a strong brand with experienced hotel or resort management leaders can bring lasting benefits: improved marketing support, a strong network of travel leaders to drive occupancy and rates, and the vision and tools to upgrade your services and your site.

But choosing the right partner means understanding what really drives guests to visit your region, and your property. Ultimately, you may want to use your brand conversion to change the way that you deliver services and experiences.

In the Mexico/Caribbean region, for instance, guests are increasingly driven to the all-inclusive model, and existing beachfront resorts that are looking for new resort management partners will need to understand how a change to an all-inclusive approach can boost business.

Is your property ready for renovation?

Hotel and resort owners and managers understand the value that a renovation can bring. If planned and implemented well, property renovations can bring strong financial benefits. The right brand conversion partner can bring the vision and support you need to make an effective renovation happen quickly and efficiently.

Are you considering a brand conversion for your property? Let us know at algdevelopment@applelg.net.

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