The move into voluntary receivership by Dutch chain Golden Tulip is a clear example of the impact of recession on weak brands.
While it might yet linger on through a merger with smaller compatriot Apollo Hotels, ultimately the brand needs to be taken out by a larger rival that offers a credible distribution system.
Golden Tulip runs 60 hotels directly, many on leases, and has a further 720 franchises or affiliates. The current crisis has been caused by the directly run hotels, particularly the leased properties which are exposed as trading conditions weaken.
Apollo, through parent European Hotel Management, has 10 hotel properties in the Benelux region and is currently developing its fourth hotel in Amsterdam.
It has teamed-up with Dutch private equity firm H2 Equity Partners for the discussion involving Golden Tulip. Apollo currently has three Golden Tulips in its portfolio.
Golden Tulip established global reach initially through an approach more like that of a consortium than a franchise operator. It counts around 75,000 rooms under its flag but many of these properties are using the name to access a GDS code rather than plugging into a system that delivers a significant volume of guests in its own right.
The low fees charged – understood to be less than 2% of turnover in some cases – means the company has lacked the resources to establish itself as a brand.
Any new owners that emerge should have the courage to dump the pseudo-franchise company and focus on building a credible company out of the managed and leased portfolio. The really sensible move would be to adopt an international brand.
The scale of the problem facing Golden Tulip is demonstrated by the current dismembering of the Real Hotel Company in the UK.
Travelodge this week swooped on three former Purple hotels, the new brand Real had been attempting to establish. The UK hotels, in Sheffield, Derby and Tewkesbury, were all leased. Plugging them into the distribution system of the UK's number two economy brand is expected to significantly boost the performance – which it will need to given the demanding leases.
Although Whitbread had an option to acquire any of the remaining 11 Purple properties it wanted when Real went into receivership in January, it has now passed on all of them.
Separately, Christie & Co is selling off six former Real properties on behalf of owner Danish fund Ejendomsinvest. Three of the hotels, all formerly branded Stop Inns, are being offered as freeholds. The three others – one Stop and two Qualitys – are available with a lease or management contract.
The end of the Purple brand was commemorated on its official website (http://www.purplehotels.co.uk/). The brand launch had been a brave attempt to compete in a market dominated by Premier Inn, Travelodge and Express.
Many of the properties had formerly been Sleep Inns, which shows that a big brand name is not enough without significant distribution in a particular territory.
Whoever picks up the pieces of Golden Tulip will have plenty to consider. In particular, the viability of continuing as independent brand must be under question.
Paul Harvey, Travelodge's development director, said after the Purple acquisition that he expects to buy more going concern hotels as struggling hotel owners are forced to sell. The strongest national and international operators have not had such a promising environment in which to grow for years.