Changing The Future For Legacy Brands
Timing difficult, but Holiday Inn, Sheraton, Wyndham, Radisson try to revitalize.
By Adam Kirby, Associate Editor -- Hotels, 5/31/2008 11:00:00 PM
Growing old is not easy, and that adage certainly applies to hotels. Legacy brands face an ever-changing competitive landscape—it seems like a new hotel brand launches every day—and an evolving customer base that doesn't have nearly the same desires and expectations it did 25 or 50 years ago.
Icons like Holiday Inn, Wyndham, Sheraton and Radisson are trying to change their images to stay viable—and that is no easy task considering current economic conditions and its impact on owners' willingness to make the necessary investment. Nevertheless, these brands realize their futures could be at stake and cannot wait forever. Here is a look at their plans and how owners and franchisees are reacting.
Holiday Inn Overhauls
The dramatic worldwide re-launch of Holiday Inn and its associated flags is a complete re-imagining of one of the industry's great brands.
Along with tangible changes—a new logo, a more contemporary design aesthetic, improved standard amenities—Holiday Inn franchisees are being held more accountable for meeting tougher requirements of quality and service. Operators must pass quality evaluations, including surpassing minimum satisfaction scores, in order to earn the new signage and design upgrades—and to remain a part of the brand.
Holiday Inn executives consider the new look contemporary, inviting and fun. The new logo, featuring the brand's traditional green hue, is meant to be airy, playful and inviting to the eye.
The Holiday Inn re-launch is expected to cost about US$1 billion, including US$60 million contributed by the brand. The brand changes are expected to increase RevPAR 3% to 7%.
The brand spent two years studying consumer feedback and gathering franchisee input before hashing out the relaunch details, says John Merkin, senior vice president of brand management for Holiday Inns in the Americas. Franchisees are eager to embark on the journey, he says. “The most frequent questions have been, 'How soon can I start,' and 'When can I get the new sign?' The franchisees know this re-launch is the right thing to do and that now is the right time to do it.”
John Belden, president and CEO of Memphis, Tennessee-based Davidson Hotel Co., says Holiday Inn's emphasis on consistency will help the brand recapture its glory. Davidson owns and manages Holiday Inn Select Stamford-Downtown in Connecticut. “It's sort of an iconic positioning, whereby a lot of the imagery is trying to take a lot of people back to the roots of Holiday Inn, when they were the king of hospitality,” Belden says. “They are bringing that retrospective feeling into the future and marrying up with the kind of quality that will let the brand compete.”
Indeed, the brand re-launch has received widespread raves from franchisees, says Rick Takach, chairman of the International Association of Holiday Inns, the official franchisee group. Takach, who is president and CEO of Vancouver, Washington-based Vesta Hospitality Group, says the Holiday Inn brand was desperate for a rebirth. “I haven't run into one franchisee who didn't think this was the right thing to do for the brand and for our investments—not one,” he says.
That is not to say the corresponding capital commitment is easy on the franchisees. On a per-property basis, franchisees are typically paying between US$50,000 and US$150,000. However, few franchisees think the capital expense is unreasonable. “Do I like it? No,” Takach says. “But this is not 100% IHG-driven. This is consumer driven and every hotel company is doing it.”
Wyndham's New Personality
Wyndham Hotels and Resorts is keen on strengthening the Wyndham brand's position with Generation X by revamping its décor, personality and marketing scheme. After years of targeting Westin as its main competition, Wyndham now aims to compete more directly with the Sheraton, Hilton and Marriott brands as it eschews pretense and traditional luxury in favor of more Gen-X friendly functional design and technology. The upper-midscale Wyndham Garden brand is also participating in the upgrade effort.
Wyndham commissioned Michael Graves & Associates to completely revamp the brand prototype. Graves introduced the popular Wyndham Smart Chair, a standard guestroom amenity that is a hybrid lounge chair and workstation with pivoting armrest tables, a built-in power source and embedded Internet connections. Other new brand staples include a revamped bedding ensemble, flat-screen TVs and energy-efficient flexible gooseneck lamps.
The upgrades cost between US$3,000 and US$4,000 per room, a total investment of about US$78 million by Wyndham franchisees. The brand is not picking up any of that cost, but Wyndham is seeing full participation despite the weak U.S. economy. Wyndham gave franchisees a heads up about the planned refresh two years ago and advised them to budget accordingly. “We haven't had any owners call us and say they are not going to do this because of the slowdown,” says Peter Strebel, president of Wyndham Hotels and Resorts.
The Michael Graves redesign has already paid dividends for Wyndham Garden Hotel-Austin, Texas. Allan Reagan, managing director of Pomona, California-based AR Hotels, which owns and manages the property, points to the new design as the main reason for several favorable guest reviews on TripAdvisor. As for the corresponding capital commitment, Reagan strikes a tone similar to his Holiday Inn counterparts. “There is a contingent of owners that groan a little bit when it is time to get out the checkbooks, but the more progressive owners realize that there had to be capital reinvestment in their properties,” he says. “The general tenor of the owners is incredibly enthusiastic right now.”
A big part of that franchisee enthusiasm, Reagan says, can be attributed to the 2006 decision by the former Cendant Corp. to adopt the Wyndham Worldwide name for the entire company. That move showed an important corporate commitment to the brand. “They are betting their whole company's goodwill on the fact that they can turn this brand around,” Reagan says. “It is more than just refreshing it—it's a whole re-imagination of the brand. This new Wyndham is really nothing like the old Wyndham of the Fred Kleisner era.”
Starwood Focuses On Its Icon
Sheraton Hotels & Resorts has launched a multi-year initiative to improve the quality across its more than 400 hotels, including US$1.3 billion in renovations and US$400 million in brand initiatives. Sheraton also has some US$2 billion worth of properties in the North America pipeline and expects to average a new opening every 12 days worldwide this year. Additionally, Sheraton expects to renovate 50,000 guestrooms and redesign more than 100 new lobbies as part of the brand refresh.
Sheraton made a splash a year ago when it revealed plans to make Microsoft's new interactive tabletop multi-user computer, Surface, a standard lobby amenity. Surface serves as the centerpiece of Sheraton's evolving lobby prototype, known as the Link@Sheraton. Link is set off from the rest of the lobby by latticework and unique furnishings; besides Surface, Link features computer workstations, Wi-Fi and 42-inch flat-screen televisions in a living room-style environment, with rocking chairs, community tables and botanical scents.
Beyond the lobby, Sheraton is bucking an industry trend by expanding and enhancing its Club Lounges. The lounges are getting Microsoft Surface units, plus more TVs, computers, F&B options and a few massage chairs. The enhanced Club program is generating nightly room premiums of as much as US$100. On the F&B side, Chef Jean-Georges Vongerichten has been tasked with creating a new slate of restaurant concepts for Sheraton.
For the guestrooms, George Wong Design has created three distinct design templates with nature-inspired color palettes. The upgraded guestrooms feature new bedding with higher thread-count sheets, a new line of bath amenities from Bliss, Starbucks coffee, Tazo teas and new proprietary television content.
Sheraton has launched a partnership with the fitness company Core Performance to create customized training and nutrition programs for guests. Sheraton also has a deal with exercise equipment manufacturer Life Fitness to place the company's premium workout machines in Sheraton fitness centers.
Sheraton put together a committee of owners to advise the brand on the refresh effort. The goal was to breathe life into a brand that had been woefully inconsistent—to elevate Sheraton to the level of quality of sister Starwood brand Westin, says Hoyt Harper, Sheraton's senior vice president for brand management. Sheraton is letting properties adopt the new design and amenities on a flexible timeline, but Harper says owner participation and enthusiasm has been outstanding. To nudge the process along, Sheraton is offering incentives for accelerated participation, in the form of additional marketing support and cash grants.
Boston-based Pyramid Hotel Group has pumped US$65 million into the five Sheraton properties it owns in the United States. Pyramid COO Jim Dina says the cost, offset some by the brand's incentive package, has been well worth it. “It really is incredible to see what has happened in the lobbies,” says Dina, who sat on the brand refresh advisory committee. “Before, they were non-useful spaces. Now, I don't care when you go into the hotels, there is always someone living in the lobby, and it creates a new atmosphere in the hotels. It feels more alive.”
Radisson Closes Quality Gap
Following three years of cleaning up and discarding underperforming properties, Radisson Hotels & Resorts is embarking on a major effort to close the gap between the upper-upscale Radissons of Europe, the Middle East and Africa and the upscale Radissons of North America.
Carlson Hotels Worldwide's legacy Radisson brand is working to redefine itself within the Americas through a redesign and stronger customer service, to bear more resemblance to its overseas hotels. It has spent more than US$500 million in North America on renovations and new construction since 2005, and now a more complete brand redesign is in the offing.
Radisson has commissioned design firm Brennan Beer Gorman Monk, New York City, to create a new design package for the Americas that takes the best ideas from its EMEA counterparts, ideally raising brand quality and overall consistency. “Our EMEA product has done a very good job of focusing on the guest experience, from a service standpoint and from a tangible, physical experience,” says Wendy Nelson, executive vice president and managing director of Carlson Hotels Real Estate Co. “We're not necessarily trying to match what we have done in EMEA, but we are trying to take that same focus and bring it to the Americas and Asia.” Details of the new design, including additional renovation costs and revised brand standards, haven't been finalized.
From an assets standpoint, Carlson is looking to acquire additional properties in strategic North America locations, which it would brand as Radissons. The company is targeting acquisitions in the near term for Washington, D.C., Boston, New York, Chicago and San Francisco, plus other high-visibility airport locations. “Now that everybody else in the industry is moving to asset-light, we recognized that to maintain the stability of our brand, we need cornerstone assets that we control for the long-term,” Nelson says. “The way transactions are happening, we are losing franchisees because properties flipped hands, and we don't think it represents the brand well to keep leaving major cities.” New acquisitions will likely be among the first properties with the new design scheme.
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