Buying In

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buying-in

Top hotel companies see Canada as a land of opportunity, and Hotel Indigo, Ascend and Aloft are setting the tone

When Colliers Hotels International announced its annual hotel transaction numbers a few months ago, the news wasn’t positive for those banking on a hospitality real estate play. However, the numbers do reflect a growing appetite in the Canadian marketplace for new, innovative brands. And, for cashstrapped, mother-ship companies south of the border, that has translated into busy franchise investment forums across this country. Here, Hotelier examines three such franchise brand opportunities, which are poised for expansion and success in 2011.

INDIGO-All too mindful that there are enough cookiecutter hotel experiences in the world to fill a baker’s kitchen many times over, and eager to offer guests a taste of the particular flavours of the neighbourhood in which an individual property resides, the  Intercontinental Hotel Group launched Hotel Indigo in 2004, the world’s first globally branded boutique hotel.

“It’s not a typical ‘beige-box’ hotel,” says Mary Dogan, director of Brand Delivery for Indigo. Instead, it’s an upscale branded boutiquehotel that makes great play of the conspicuous absence of a prototype to guide its development. Each of the 37 Indigo hotels currently operating worldwide—among them two Canadian properties, in Toronto and Ottawa, with another in Vancouver set to open in the second quarter of 2011 — is truly unique. The brand ncludes some entries that are new builds, some that are hotel conversions and some that are adaptive-reuse spaces. The Ottawa property is a converted YMCA; Indigo’s Nashville space ishistoric bank building; the Hotel Indigo in Lisbon began its life as a convent.

Each property’s “neighbourhood story,” says Dogan, is given generous play, through artistic touches that connect with its unique features — such as vast in-room murals of buttons and pincushions in its Chelsea, N.Y., property, to acknowledge the premise’s garment-district roots — and with staff education so that employees
can answer questions about the particulars of the geography they occupy.

And, the attributes of an area are explored further, with food and beverage programs that draw on local, seasonal fare; community events that invite locals to fraternize with guests (such as “canine cocktail” Tuesday nights at Atlanta’s Piedmont Park property, where dog lovers abound) and cultural events that recognize localartists (such as the art installations that rotate through Indigo’s Athens, Ga., property).

“Too many of us are business travellers, running from the airport to the meeting room to the hotel,” says Dogan. “Staying at a Hotel Indigo allows you to experience something very different and unique, and it gives visitors a real feeling for the neighbourhood they’re in.”

Currently, Indigo has 59 new neighbourhoods in its pipeline, with much of the activity unfolding outside of the Americas, including set-to-launch products in Glasgow, Taipei, Bangkok, Newcastle, Madrid and Hong Kong. And, the promise of further expansion continues to sizzle, with Indigo execs continuing to actively seek other opportunities globally.

The operation’s franchise structure is the same as any other within the IHG family. Of the 37 corporate hotels, the company manages four and owns one; the rest are pure franchises. And, business-minded folk interested in joining this particular family can do so for an initial franchise fee of US$500 per room, an anual royalty
fee of five per cent and an annual marketing fee of 3.5 per cent.

Of course, for all the unique features to which the Indigo properties can lay claim, they are also blessed for the vast unifying force that connects them: membership in the world’s largest hotel business (by number of rooms), and all of the benefits that association entails.

“You get the best of both worlds,” says Dogan. “The safety, security and confidence of the world’s biggest hotel company, and then the nuances
within each property that are able to really embrace what makes a successful boutique hotel.”

ASCEND – If it ain’t broke, don’t fix it. And, while you’re at it, why not acquire it and enhance its utility, by attaching  it to a known entity through whose association its status can only increase? It’s a philosophy adopted by Choice Hotels, a mid-scale, economy lodging superstar that expanded its portfolio recently with the launch of its Ascend brand.

37 worldwide properties strong now, Ascend has made its name by buying up unique, existing, one-off hotels and improving their stature and appeal by giving their operators access to Choice’s powerful resources, including a huge central reservations system, national advertising campaigns, participation in a global distribution program and an existing connection to a host of third-party OTAs such as Expedia and Travelocity.

“You get to keep your own name,” enthuses Nathan Brady, manager of Loyalty and Communications with Choice Hotels Canada, “but you get to benefit by tapping into our systems.”

Indeed, so mindful is the parent company of honouring the existing individual features of a particular property that it steers clear of even
calling it a “brand,” preferring, instead, the term “affiliation program.”

“With most franchise situations, you’re changing your trade name, moving to the franchisor’s name, taking down your sign, becoming a Comfort Inn or whatever, and it’s all about very specific branding components  hat go with being part of that brand,” says Brian Leon, managing director of Franchise Growth and Administration for Choice Hotels Canada. “With Ascend, it’s totally different. We’re taking hotels that have their own identity, that don’t want or need to change their name to something else, but that want to be able to benefit from the types of resources that a big franchised system like ours has.”

Some of the rationale mentioned by Leon and Brady, is echoed at the property level, too. “There were a few major deciding factors for us,” starts Christian Cyr, general manager at the Chateau Moncton. “Firstly, we’re very proud of our name. We’ve been the Chateau Moncton for 12 years, and we wanted to keep it that
way. Secondly, we’ve always been strong locally, but not as well known outside of the Maritimes, so we wanted to cast our net a little wider, and, thirdly, our customers were always asking about a points system, but we could never create one for ourselves at a sustainable rate. This partnership allows us to do just that,” he adds.

For the parent company, the strategy allows access to a collection of  upscale hotels that otherwise wouldn’t find a home inside its nominated lines. Choice picks its additions to the Ascend family — which launched a couple of years ago in the U.S. — according to their qualification in at least one of three categories:
whether it is unique, historic or boutique. In discreet markets, says Brady, hotels compete on a property-by-property basis.

Ascend hotels have taken shape in Canada since launching here a year ago with two properties in New Brunswick (the Chateau Moncton, the Chateau Saint John,) and the company’s Canadian first, Inn on the Lake, in Halifax, as well as the historic Hotel Royal William in Quebec City.

The response thus far, says Leon, has been outstanding, according to enthusiastic guest feedback. Of Choice’s close to 300 Canadian properties, the three Ascends that have been on line for the last few months have all scored inside the top five percent. Guests point particularly to service,  a reality Leon credits to the passion individual property managers have for their work.

Cyr, too, says the results have been positive since his property became fully integrated in October. “It’s been very good so far,” he says. “We’ve seen a steady increase in occupancy, which we can’t complain about in our market. We tend to know most of our customers very well, and I’ve certainly noticed a
bunch of new faces, so it’s obviously working,” he adds.

Ascend franchisees pay a four per cent royalty, along with 1.25 per cent in marketing and 1.25 per cent in reservations. Having established a presence in eastern Canada, Choice continues to actively look for partners in pursuit of a presence across the country that focuses more on the larger urban markets where they’ve identified pent-up reservation demand.

ALOFT – Starwood launched Aloft in January 2006 as an entirely new type of offering in the select-service segment — a slice of the lodging industry that’s enjoyed impressive success in the last decade. The goal? To pull off the same category-killing miracle it achieved with W Hotels in the latter days of the ’90s. The tandem positioning is intentional, with Aloft making no secret of its affiliation with “the mother ship,” as Scott Duff, Starwood’s senior director of Development for
Canada and Alaska, calls it. The W Hotels name is prominent under all Aloft branding.

But, the extension, says Duff, “allows us to bring style with a steal to a lot larger market,” with the benefit of lessons learned through the W experience. Prominent among them are the power of design and the value of offering something fresh to the industry. While Aloft’s select-service positioning means its properties are smaller and feature more limited-service offerings and meeting spaces than its full-service counterparts, its sleek, modern look is highly reminiscent of W. “This certainly does not look like your grandmother’s spare bedroom,” says Duff. “We are the anti-floweredbedspread people.”

More than that, the programmatic aspect of the public space here is very important, with the lobby — or “remix,” as the corporate lingo goes — designed as a space not to be transitioned through, but lived in. That goal is accomplished through abundant lighting, captivating visuals (think art and televisions galore) and an overall design that’s reminiscent of someone’s living room.

The bar, w xyz, invites guests to stop in for a burst of socializing on their way in or out of the place. “We see huge opportunity to create destination bars in hotels again,” says Brian McGuinness, Starwood’s senior vice-president, Specialty Select Brands. They’ll do so, he says, through a combination of music programming, live performances,  signature seasonal cocktails and dynamic personnel staffing the place. “We hire for attitude first, aptitude second,”
says McGuinness.

The Montreal airport location, which opened in June 2008, was the world’s first Aloft. After that, they sprouted up every week or so, including a property in Beijing, which opened in time for the Olympics. Among the 44 current locations, there are Alofts in Brussels, Abu Dhabi, England, India, Thailand and a huge pipeline percolating in China.

“This is a concept you’ll see several hundred of, at some point,” says Duff. Getting there will be an exercise in franchising and third-party management. Though there are some select adaptive-reuse projects out there, Aloft was conceived as a new-construction product — the only way, says Duff, to see through innovative design aspirations, from its exterior, guestroom and public-space point of view.

Considering the strong economic headwinds into which the oldest hotels opened, says Duff, the fact that the brand is close to its market share objective is impressive. Up next? Further expansion, particularly considering the financing channels are starting to unlock. In Canada, a second Aloft is breaking ground in Vaughan, Ont., a third is being executed in Laval and another is planned for Calgary.

The franchise structure includes an initial application fee of $60,000, an ongoing royalty fee based on guestroomrevenue of 5.5 per cent and a nominal program fee that allows Aloft properties to tap into Starwood’s massive machine, including everything from reservations to marketing. “That’s been an important part of the engine for launching these hotels,” Duff acknowledges. “Loyal Starwood guests.” Taken together, these three new ventures represent a
new chapter for the hotel industry in this country and abroad. With the support of their towering parent companies, Indigo, Ascend and Aloft enter an evolving  marketplace that has proven itself ripe for change.

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