Are Dual-Branded Hotel Properties Becoming More Popular?

G round was broken in March on 14 Street in midtown Atlanta for a new building costing $70 million which will house both AC Hotel by Marriott and Moxy hotel — two of the 30 lodging brands of Marriott International, Incorporated.

It is expected to open during 2018; and the two hotels — AC Hotel by Marriott will be comprised of 133 rooms; while Moxy hotel will accommodate guests in 155 rooms — will share a deck-top amenity space that includes a rooftop pool and bar.

Are Dual-Branded Hotel Properties Becoming More Popular?

Two brands of the same lodging company may not be so unusual; but two brands of different lodging companies might seem quirky. Consider the project announced in August of 2015 in which Hilton and Hyatt Hotels Corporation are partners in sharing a new hotel property — to house a Canopy by Hilton and a Hyatt House — with almost 300,000 square feet and 413 rooms, which is expected to be opened sometime during the autumn of 2017 and will be built in a development known as The Wharf on the shore of the Potomac River in southwestern District of Columbia.

Dual-branded hotels is certainly not a new concept. “Dual-brand properties in the Hilton and Hyatt systems are essentially each two complete hotels joined together”, according to this article written back in 2013 by Ed Watkins of Hotel News Now. “Choice Hotels International has a different strategy in which elements of two of its brands (Sleep Inn and the extended stay MainStay Suites) are combined into one property, typically with between 60 and 120 rooms.”

The trend for dual-branded hotels — basically considered an anomaly fewer than ten years ago — has been increasing in recent years; and has even transitioned to “multi-branding” properties consisting of three or more hotel brands. “Developers like the concept because it allows them to tie up the market,” according to this article written by Robert Carr for National Real Estate Investor. “Brands such as Marriott have been known to locate different properties within sight of each other, making two separate owners compete for guests. By going dual-brand, the developer can go after both the select-service and extended-stay hotel customers with one property, with less chance of local competition.”

Purchasers and investors favor dual-branded hotel properties “because of their better chance at cash flow.” According to Carr, “owners like dual-branding because it brings in more guests, operators like it for efficiency and brands are amenable to the strategy, but wary.”

Advantages to Dual-Branded Hotel Properties

Brands and owners see a variety of potential advantages for dual-branded hotel properties and multi-branded hotel properties, according to this article written by Bob Braun of eHotelier:

  • Land Costs Some of the most attractive locations for hotel properties — such as a central location within a major city — are also some of the costliest locations due to a number of factors which include limited land area. Locating two brands on a single site may potentially lead to the more efficient use of that limited land area. “While a particular location might not support a single hotel with 300 rooms, it might be appropriate for two different brands with 150 rooms each.”
  • Construction Costs Similar to land costs, “two hotels located on a single location may be able to share back of the house facilities, fitness areas, pools, parking, and even common areas or front desk space. Moreover, costs related to plans, permits, fees and entitlements can be shared, resulting in greater efficiencies.”
  • Operating Savings Two hotels may be able to share personnel who would otherwise be underutilized — such as engineering or maintenance personnel. Overall lower staffing levels may also be potentially possible by allowing one hotel to “borrow” personnel from another to address higher occupancy.
  • Premium Pricing “While there is little more than anecdotal evidence, brands will often argue that where a lower chain scale property is matched with a higher one” — an upper midscale property with a midscale property as one example — “the lower scale property will see higher rates, rather than depressing the rates of the higher scale.”

Disadvantages to Dual-Branded Hotel Properties

Potential disadvantages for dual-branded hotel properties and multi-branded hotel properties include the following, according to the same article by Braun:

  • Limited Choice Hotel companies — such as Hilton, for example — are loathe to allow their brands to mix with those of other lodging companies. For example, they may insist on separate external entrances — despite sharing a building. This could lead to the potential of fewer choices among hotel brands — “although the proliferation of different brands by hotel companies may at least partially offset that limitation.”
  • Choosing the Brands When two hotel brands are located within the same building, the owner must consider not only which is the right brand; but also how to choose brands which complement each other while simultaneously not cannibalizing the business of each other.
  • Duplication of Services and Facilities Sharing facilities and services could save money between the two brands; but enough differences may exist between brands where duplication of services and facilities is required — leading to two sets of fitness areas, pools, front desks and elevators dedicated to each hotel brand; as well as dedicated personnel to ensure that brand standards are strictly observed for each hotel.
  • Property Maintenance Brand upgrades and improvements may be difficult to coordinate due to  potentially different schedules, which can result in conflicts where the two brands overlap — especially for the aforementioned sharing of facilities and services.
  • Maintaining Separate Identities Keeping guest experiences separate is critical for maintaining the brand identity of each hotel property within the same building — as well as measuring the performance of each hotel. Imagine a Ritz Carlton hotel sharing the same building with a Fairfield Inn as an example. That can be difficult if there is nothing completely physically separating the two hotel properties — which basically defeats the purpose of sharing the building in the first place and could negate any cost savings.
  • Legal Issues “Will it be possible to terminate one brand agreement and not the other? And what are the consequences of that termination on hoped-for benefits of multi-branding? For a management company, will performance standards, including both incentive fees and termination rights, be calculated on the basis of combined performance, or the individual performance of each property? These are questions that need to be addressed, and for which there is little precedence.”

How You Can Benefit From Dual-Branded Hotel Properties

If you engage in a practice called hotel hopping, the benefit to you is obvious: if both hotel concepts participate in the same frequent guest loyalty program, then you can easily accelerate your earning of elite level status.

Earning points in different frequent guest loyalty programs is also easier if the brands of the two hotels are part of different lodging companies if you are active in more than one frequent guest loyalty program.

When two different concepts share the same building, you can try them both more easily if you are staying for two or more nights at a certain location. The larger lodging companies can have up to 30 different brands in their portfolios.

Summary

The concept of dual-branded — and to a greater extent, multiple-branded — hotel properties is an interesting idea of which I have never experienced; so I do not have an informed opinion about it.

Economics seems to be the primary factor in the concept, with no discernible disadvantages to the consumer — but the concept is potentially a winner if those economics translate to more choices at reasonable prices for customers.

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