The Great Consolidation: How Will Smaller Hotels Survive?

Marriott acquired Starwood in 2016 for A$22 billion. Accor acquired Fairmont Raffles and Swissotel in 2016 for A$4.5 billion. IHG bought Klimpton in 2015 for A$700 million. Wyndam snapped up La Quinta in 2018 for around A$3 billion.

Big mergers have given us some spectacular headlines in the past decade, and the stats have been equally impressive. The Marriott-Starwood merger, for example, resulted in a company with 5,800 properties in more than 110 different countries, and a total room count of more than 1.1 million.

But the increasing strength of big hotel chains has prompted the industry to ask equally large questions. Namely, will hotel market consolidation put the squeeze on independent brands and concepts, or will it create new opportunities for smaller hotels to thrive?

At a glance, it may seem easy for independent hotels to create meaningful distance between themselves and global hotel chains. Travelers want experiences, after all. AirBnb has proven the value of unique, one-off hospitality options. The loyalty base of brands like Starwood-Marriott does not appear to be in jeopardy, but there are still plenty of travelers interested in properties that operate beyond the control of a global corporate board.

The problem is that big brands understand these mechanics very well. That’s why they’ve been reaching into their pockets to launch one soft brand after another, in a bid to capture an ever-increasing piece of the market for independent and boutique hospitality options.

So what’s the solution? How can independent and boutique brands deliver unique, one-off, disruptive hospitality concepts when global juggernauts are intent on franchising soft brands for the very same purpose?

In this case, the solution might be contained within the problem itself.

Take the perennially-unpopular example of the resort fee, which has crept back into the picture as global brands compete with one another. A 2018 report in the New York Times described why resort fees are profitable for hotel chains: They allow (absurdly, one might argue) hotels to raise room rates without doing so by definition. It’s not unlike the budget airline that “nickel-and-dimes” customers with baggage fees and other add-ons.

The resurgence of resort fees is interesting though, because it points to the need for soft brands, and the powerful companies behind them, to compete with one other – which detracts from their ability to actually deliver new and disruptive hotel products.

In other words, big brands can dress up as boutiques, but the more they compete with each other, the harder it is to fool anyone. Their focus goes less toward providing truly innovative and vital services to guests, and more toward doing what they have to in order to compete with one another.

Radisson, another global chain, is taking a more moderate position toward new brands. The company currently operates eight total brands. Ken Green, the President of Radisson’s Americas division, described in an interview with Skift how the unchecked proliferation of soft brands can work against hotel chains on the owner level, who see their own influence and revenues diminished with every new brand.

If most of the bigger chains took a similar direction to Radisson, with a focus on curating the identity of a limited number of brands, independent hotels would find opportunity there. More of the market demand would be available for them to exploit. As it stands, the widescale proliferation of soft brands leaves a different kind of opportunity for independents: Sharpen your focus on innovative services, and the curation of unique identities that seem to elude the endless train of global hotel brand collections.

The soft brands themselves – with names like Motto, Voco, Dolce, Curio – sometimes end up delivering products and fee structures that feel bland and corporate. There’s nothing inherently wrong with this. The point is, it leaves the door open for something different.

Let’s examine these possibilities one at a time.