Preferred Hotel Group has secured a tranche of new deals that suggest the big brands are no longer the default option for independent hotels. In London, the umbrella brand has scooped two luxury hotels as they deflag, cutting ties with Kempinski.
And in a major international deal, Spanish hotel group NH has signed Preferred to act as a marketing partner for 20 of its NH Collection boutique properties.
The latest defectors from big brand affiliations are the Stafford and the Bentley, two luxury hotels in London formerly wearing Kempinski branding. The moves indicate the big brands cannot be sure everything will go their way. And, at least at the luxury end of the market, independent hotels, far from being in demise, remain in good health and continue to have a place in the market, set against their branded rivals.
Announcing in August it had mutually agreed to terminate its contract with Kempinski, the Stafford’s management then revealed the tie-up with Preferred. The 105 room hotel in central London had been running with Kempinski branding since 2010. In addition to signing with Preferred, the hotel management has also retained the services of individual sales agents covering the east and west coasts of the USA, and new PR agencies.
“It was important for us to take the time to identify partners that first and foremost share our service and business values,” said Stafford general manager Christine Hodder. “We are confident that the new partnerships will only strengthen the Stafford’s position in the key markets.”
The Bentley will also be losing its Kempinski branding to go independent under the wing of Preferred. Further Preferred portfolio additions in London include the new Beaumont, the newly launching Exhibitionist and the Hotel Xenia, which was previously listed with Great Hotels of the World. In total, these will bring Preferred’s London portfolio up to 11 hotels, across its six sectoral brands.
At Spanish group NH, the decision has been taken to harness the Preferred marketing machine specifically to support the development of US feeder markets for its boutique properties. An initial 14 hotel and resort properties in Spain, Italy, Mexico and Argentina are joining immediately, with a further six hotels in Germany, Belgium and Holland joining in early 2015. Currently, NH has 23 hotels in its NH Collection, so just three will remain outside the agreement.
The move builds on an existing relationship which has seen Preferred promoting the Hesperia in Madrid, Donnafugata resort in Sicily and Grand Hotel Convento in Amalfi, and these will now sit within the NH Collection.
While part of NH’s portfolio, the properties feature little NH branding and have been marketed with an independent look and feel.
“With a strong foothold in key markets, especially across the Americas, and a proven track record of successfully supporting some of the world’s finest luxury hotels and resorts, Preferred is the ideal partner to support NH Collection’s entry into the luxury hospitality sector,” said NH chief commercial officer Rufino Perez. “This new brand will offer consumers truly extraordinary experiences that they will want to re-live thanks to world-class products and services, a carefully developed offering, and exceptional attention to detail.”
“We allow and encourage all our hotels to leverage their individuality – we’re a very flexible and cost-effective option,” said Susan Devine of Preferred Hotel Group. Preferred currently represents more than 650 properties around the world, and in the second quarter of 2014 added a further 12 properties. During the quarter, it also delivered a 23% increase in reservations revenue and 20% rise in bookings for member hotels.
The Stafford is unusual in hiring additional representation, as most signings rely on Preferred to deliver all the sales and marketing support the property needs.
Preferred signs both newly opening independents, as well as conversions previously with other big brands. In 2013, it signed up 11 properties which deflagged from hard brands, including a former Waldorf-Astoria in Florida, a Crowne Plaza in Beijing and a departing Hyatt Regency in California.
Devine said the move to Preferred was not down to a market failure with the big brand, often it was when owners and operators were looking for a different relationship that retained the unique feel of their properties. “It has a large part to do with that independence.” Contracts, too, at typically three to five years, are notably shorter than the often 20 year commitment demanded by the big brands. “Again, we’re driven by performance.” Preferred claims a 92% renewal rate from its hotel members.
Preferred laid out its case very clearly in a research report earlier this year which compared its member hotels to a peer set. Across 50 European members, over a five year period, the data suggested Preferred delivered an average 14% revpar outperformance, with a 1.2% edge on occupancy and a 12% uplift in average day rate.
The company’s pitch is very much about supporting sales and marketing of a property. Quality assurance, a sales presence, a central distribution platform, and niche marketing opportunities are included in the platform’s offering to member hotels. Preferred does not itself have direct relationships with OTAs, for example but, said Devine “we provide a revenue account director that helps partner hotels position themselves online”.
Preferred has also recently successfully launched a points based loyalty programme, iPrefer, replacing an earlier programme. “It had been a benefits programme for some years prior,” said Devine, and this gave a platform from which to launch. “It has allowed us to be more competitive than the hard brands, it’s more flexible than other programmes.” The scheme sets out to reduce customer acquisition costs, compared with the use of OTAs and to date has attracted more than 1.1 million members.
Preferred says that members spend, on average, an extra GBP70 per booking at participating hotels, than non-members. At the new additions from the NH Collection, guests will have the option of both iPrefer and the NH rewards programme.
HA Perspective [by Chris Bown]: The demise of the independent hotel – predicted by many – may be happening. But at the luxury end of the market, a number of softer brands that are providing a flexible level of support to independents, appear to be making headway.
Preferred’s rivals include Small Luxury Hotels, Leading Hotels of the World and Design Hotels, which Starwood has cleverly bought into; most appear to be signing more members than they are losing. While the big brands demand a long-term commitment, the consortia brands offer flexibility. It seems they are also fleet of foot, being able to test something, then tweak it and improve it, while the big guys are still having meetings and planning.
The recent report from the Hospitality Asset Managers Association pointed out that brands are charging relatively more than they were, in franchise fees and other customer acquisition costs. Study author Frank Camacho warned hoteliers to examine relationships, to ensure they continue to provide an economic benefit. It seems an increasing number are doing just that.
NH, meanwhile, has used a market test to see what Preferred can deliver to three of its luxury hotels, and it clearly likes what it sees. The agreement allows it to tap into a marketing platform with strong representation in the US, feeding American clients into hotels that it has been judiciously refurbishing, under its new strategic improvement plan. Why try and build your own inbound marketing machine, when you can do a flexible deal with Preferred’s existing infrastructure? At NH, which is still duty bound by its lenders to keep to a tight financial plan, the move clearly made sense. Could a similar approach be used when looking to enter other new markets?
The major brands are busy launching their affiliation brands: Hilton’s Curio and Rezidor’s Quorvus recently launched, joining Marriott’s Autograph in a bid to grab the attention of independents. They have some stiff competition, it seems.