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VOL. 126 | NO. 195 | Thursday, October 6, 2011

Hoteliers Seek New Identities, Better Branding


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Several Mid-South hotels are in the midst of rebranding, and more are anticipated through next year.

The hotel rebranding trend has taken off since 2010 and includes reflagging to completely new brands as well as conversions to new identities within the same brand.

“The whole purpose of rebranding is to get a more clearly defined identity and improve position in the market,” said Chuck Pinkowski, hotel consultant with Pinkowski & Co.

The rebranding process can be expensive, as hoteliers might have to replace things such as beds, shower heads, carpet, televisions, soft goods, toiletries, stationery, signage and other items.

A major factor in the increase of rebrandings is the lack of available financing for new development, said Jeff Higley with Smith Travel Research.

“The financing for new development in the hotel industry is virtually nonexistent. Lenders just aren’t very active in this kind of environment, so the focus is being put on refurbishments and conversions,” Higley said. “It has also been a number of years since many hotels have undergone redesigns.”

Many brands began enforcing their product improvement plans earlier this year when the economy was reported to have improved. Property owners either had to improve the physical quality of their properties to meet the standards of particular brands, which in some cases can be costly, or switch to another brand.

“So a lot of hotels are using this opportunity to change brands and possibly move up the chain scale,” Higley said. “Plus, publicly traded companies have to keep investors happy with unit growth, and the only way to show growth when there is no lending for new construction is to convert existing properties to their brands.”

Higley compared the hotel industry now to 2003, when a large number of conversions followed two very poor years after 9/11. Financing returned in 2004 and 2005, and Higley said he expects the same thing to happen by 2013.

“The trend for reflaggings and conversions will probably continue through 2012, and then financing will kick into gear and development will start again in 2013,” he said. “It’s a very cyclical business in many aspects, and this is one good example.”

While remaining under the same brand, Best Western has spent the past two years splitting into three hotel types – Best Western, Best Western Plus and Best Western Premier – meant to appeal to different market segments. The hotels also share one flag and one membership structure but are just different types hoteliers can use to identify their properties, Best Western representative Owen Clark said.

The 32-room Best Western Plus Gen X Inn, a boutique hotel on Madison Avenue, identified itself as a “Plus” last year, and the 108-room Best Western Galleria Inn & Suites Hotel near Wolfchase Galleria will likely begin identifying as a Best Western Plus early next year.

“We are already qualified with most of the amenities to be a Best Western Plus, such as a business center, indoor pool and upgraded breakfast bar,” said Noni Bakshi, general manager at the Best Western Galleria Inn & Suites Hotel. “We plan to upgrade our room packages, breakfast items and Internet capacity, as well as signage and other items before the conversion is completed.”

The Holiday Inn Select Downtown on Union Avenue will complete a conversion to simply Holiday Inn by the end of the year. Cost of the conversion will be between $500,000 and $1 million and will include new furniture and signage.

“After many years, Holiday Inn decided the ‘Select’ tagline really didn’t do much for their properties, and in many cases, it created confusion with consumers,” Pinkowski said.

Other rebrandings are occurring around Memphis.

Noble Investment Group is in the process of completely rebranding the former Holiday Inn at Interstate 240 and Poplar Avenue into a 230-room Marriott.

Noble recently purchased the property for $7.5 million, shut down the hotel and gutted the building. Everything within the building will be redesigned and rebuilt from scratch.

“When they finish, it will be like a brand-new Marriott instead of a 35-year-old Holiday Inn,” Pinkowski said.

Nearby, the 126-room Four Points by Sheraton completed its rebrand in April. The property was formerly the Park Place Hotel for several years and a Comfort Inn prior to that. When the hotel switched from Comfort Inn to Park Place Hotel, it lost its affiliation with the large chain’s reservation system, and occupancy levels plummeted.

“The Park Place Hotel was an independent battling in a chain-dominated market. A new management company came in and recommended they put a brand on it,” Pinkowski said.

The switch proved to be a smart move, as occupancy levels have doubled since April.

The 280-room Doubletree Hotel Downtown Memphis rebranded several years ago from a Radisson Hotel and experienced significant increases in average daily rates and occupancy.

Interestingly, the owners of Downtown’s 124-room Benchmark Hotel (formerly the Best Western Benchmark Hotel) also decided to drop their affiliation with a brand name a few years ago. The property is now up for sale.

Another rebranding in progress is the 245-room Cedar Hotel on Brooks Road, formerly a Clarion Hotel for a short time and originally a Ramada Inn. The current product improvement plan will help the new owners reclaim the Clarion Hotel brand name. The property had been in foreclosure, and Clarion had pulled its name from the hotel.

PROPERTY SALES 36 154 6,546
MORTGAGES 34 94 4,129
BUILDING PERMITS 201 554 15,915
BANKRUPTCIES 43 126 3,396