Why Do Hotel Companies Have So Many Brands? – New Yorker Magazine

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Why Do Hotel Companies Have So Many Brands?

Is it really a problem to have so many brands? Marriott is, after all, the world’s leading hotel company. Two years after the merger, Marriott has shown it’s possible to live and thrive with 30 brands, even if your customers don’t really understand them all.

This is because the hotel business is quite different from airlines or automobiles or other brand-centric industries. Hotel brands do matter. But they matter more to hotel owners than to hotel customers. And if customers form strong enough loyalty to an umbrella hotel brand like Marriott, they may never need to develop a clear grasp of the underlying brands; they can rely on the company to help them navigate.

Marriott, like the other big hotel companies, owns very few of its own hotels these days. The hotel owners enter into multiyear contracts with companies like Marriott allowing them to use a specific brand.

“If we had not merged with Starwood, would we be trying to build 30 brands from scratch?” Marriott CEO Arne Sorenson asked, rhetorically, on Marriott’s November 6, 2016, earnings call, the first after the Starwood merger closed. “I think the answer is probably not. At the same time, having done this deal, the 30 brands all exist. They all have substantial capital that has been invested in them, particularly by the hotel owners who have made deliberate bets about which flag they put on their hotels. And we don’t have the power to, nor the desire to, try and convince them that those bets have not been good bets.”

That’s the first thing about Marriott’s brand challenge: It can’t easily get rid of any of its brands even if it wants to. The hotel owners won’t let them.

Click here to read complete article at New Yorker Magazine.