Why Hotel Chains Operate So Many Brands

Hey Insiders,

Ever wondered why a single hotel company owns dozens of different brands under its umbrella? It's not uncommon for a major player in the hospitality industry like Marriott, Hilton, or InterContinental Hotels Group (IHG) to boast anywhere from 15 to 30 different brands. This might seem excessive at first glance, but this strategy is rooted in keen market insight and business acumen. Let’s explore why hotel chains spread their bets across so many brands.

Catering to Every Traveler

The primary reason hotel chains diversify their brand portfolios is to cater to the broad spectrum of consumer needs and preferences. Travelers vary greatly in their budget, the purpose of travel, preferred experiences, and expectations:

• Budget-conscious travellers might look for cost-effective options like IHG’s Holiday Inn Express or Hilton’s Hampton by Hilton.

• Mid-range travellers often prefer brands that offer a balance of comfort and value, such as Marriott’s Courtyard or Hilton Garden Inn.

• Luxury seekers might opt for high-end brands like Marriott’s Ritz-Carlton or IHG’s InterContinental.

By offering multiple brands, hotel chains can target specific market segments more effectively, ensuring they have something for everyone.

Strategic Market Coverage

Another advantage of having multiple brands is the ability to cover more market territory. This strategy prevents any single brand from becoming overextended and losing its identity. For example, a city might have several hotels from the same chain but under different brands, catering to different areas and demographics, thus maximising the chain's market reach without cannibalising its own sales.

Fostering Brand Loyalty

Hotel chains use their variety of brands to tie into powerful loyalty programs, encouraging guests to stay within their network. For instance, Marriott Bonvoy members can earn and redeem points across a vast portfolio from budget to luxury, which encourages travellers to book within the Marriott spectrum, regardless of their budget or destination.

Operational Flexibility and Risk Diversification

Each brand in a hotel chain’s portfolio operates under a business model that best suits its market segment. This provides chains with the flexibility to adjust to economic changes and varying consumer trends. Moreover, economic downturns affect market segments differently. Having multiple brands allows a hotel chain to stabilise its financial performance since not all brands will be affected equally.

Franchising and Expansion Ease

The franchise model, predominant in the hotel industry, is another reason for brand diversification. Different brands attract different types of investors and franchisees, each with unique market insights and capabilities. This approach enables hotel chains to expand their global footprint more rapidly and with reduced risk.

By the Numbers

• Marriott International operates over 30 brands, with more than 8,800 properties in 139 countries.

• Hilton has 22 brands with over 7,530 properties in 118 countries.

• IHG boasts 19 brands across more than 6,000 hotels globally.

These numbers not only illustrate the massive scale of these corporations but also underline the extensive reach and influence each has across diverse market segments.

The Bigger Picture

The strategy of managing multiple brands allows hotel chains to leverage cross-brand data to gain insights into consumer behaviour, preferences, and trends. This data-driven approach helps them to innovate and remain competitive in a fast-evolving marketplace.