Hotel owners are cashing in on strong brand identity. "Having a recognized brand name has been important for two to three key reasons," says Mark Woodworth, an executive vice president in the Atlanta office of PKF Consulting Inc. The strong brand boosts guest frequency, lender confidence and sale prices. The capital markets have come to believe that you must have a regionally or nationally recognized brand name to be successful.
Often, the brand can play a significant role in lending decisions. "Brand value is critically important to lenders," Woodworth says.
"The right brand, without question, increases the value," agrees Donald W. Wise, president and CEO of Wise Hotel Investments Inc. in Corona del Mar, Calif. For example, if you look at two identical properties - a Marriott and maybe a hotel at the same level, with a less-established brand - the Marriott will trade at a higher value. "The premier brand will bring a higher value," Wise says.
Industry statistics support the fact that strong brand identity does have a significant impact on a hotel's value. Franchise affiliation built value for properties in the economy segment, as well as both limited- and full-service, according to a study by the Hotel/Motel Brokers Association based in Kansas City, Mo. The budget segment was the only property type in which franchise affiliation was not a guarantee of greater value.
For example, prices for properties flying the Super 8 flags increased by 18.8% in 1998 compared to 1997 pricing. In the full-service sector of the economy segment, prices for properties flying the Days Inn flag increased by 7.6%. Overall, franchised economy properties sold for 20.7% more than independent properties in this segment, $27,126 per room for franchised properties vs. $22,479 for independent economy properties, according to HMBA.
Brand affiliation served to increase value for mid-market properties by 4% in 1998, while the decrease for independent properties in the segment was 26.7%. Strong brand awareness had a big impact on values within valuation stakes. The price paid for Holiday Inn Express properties increased by 18% in 1998, while prices paid for Quality Inns increased by 53% in 1998, according to HMBA statistics.
Flags added significant value to sale prices on first-class properties. Franchised hotels sold at prices greater than non-franchised hotels by 26.5%. For example, Sheraton Hotels were disposed of at values 49.9% higher in 1998 than in 1997, while values of Marriott properties increased by 25.6% to an average sale price per room of $147,484, according to HMBA.