Guilherme Cesari,

The idea of a "dual brand hotel" came to light when an entrepreneur decided it was time to reposition his 600-room property in the market. During preliminary studies, it became obvious a hotel that size would be too big to fit into its primary market area.

The solution found to save the business was to reposition the property as a hotel that would serve two brand names - each of which would work within a different price range. This meant that half of the rooms would operate under a mid-scale hotel brand and the other half under an economy hotel brand, both of them managed by a single major hotel company.

After implementing the idea, this new concept proved to be effective not only in solving isolated problems like this particular one, but also provided an alternative way to present a new product in the hospitality market that can be highly profitable.

The Concept

There are cases in which the dual brand hotel is composed by brands oriented to different market segments (long stay, commercial, convention, etc.) in the same price tier. However this article is focused on the cases in which each brand of the hotel is oriented to a different price range, as it is shown on the picture below.

The idea proposes the construction of a single building with two distinct sections. These sections would house two different hotel brands, which in turn, would be recognizable by their distinct style and packaging.

Although the lobby and reception areas of each hotel would not share the same space (due to the fact that they serve different publics), the administration offices and hotel service sectors can occupy the same area. This allows for two hotels to be operated from the same building.

Advantages

There are three major advantages offered through this type of product:
  1. The costs for implementing and operating the hotel are significantly reduced due to the fact that part of the staff and structure (service sectors and administration offices) are shared by the two hotel brands.
  2. The investor's risks are considerably reduced due to the fact that a single enterprise can be positioned within two distinct markets.
  3. The large amount of rooms offered by the enterprise as a whole, offers the capacity to deal with and attract a greater volume of guests to the same location. Under normal circumstances, one hotel brand would not jeopardize the other. Having said that, one hotel brand can naturally generate interest and even public demand in the other one if, for example, one of them is fully booked.

The Key to Success

The brands included in such an enterprise must clearly represent hotels which operate in different price tiers. Here is an example of how this could be done taking from globally recognized hotel brands:
  • Accor: Mercure / Ibis
  • Choice: Quality / Sleep Inn
  • Marriott: Marriott / Courtyard
For this concept to work, it is fundamentally important for the hotel brands chosen to already have a clear identity within the market place. Otherwise, there will be no distinction made by the public - causing the brands to overlap - and the whole purpose of the enterprise to fall through as it will be viewed simply as a big hotel working under the same name - not being able to generate the typical benefits of a true dual-brand hotel.

In Brazil, many dual brand hotels have been successfully developed, a large majority of them using the brands of the Accor Group. The first dual brand hotel of the country, using the brands Mercure / Ibis, was inaugurated at the end of 2003 in the city of Salvador. The hotel, a concept conceived by HVS São Paulo, is today delivering excellent results to its investors.

Guilherme Cesari, is a Senior Associate at HVS International's São Paulo Office. Since joining the company in 1999, he has conducted various valuations, feasibility studies, consultancy, and strategic counselling assignments in Brazil, Argentina, and Peru. Guilherme holds a BS in Business Administration and an MBA in Hotel and Tourism Management from EAESP/FGV (Business Administration School of São Paulo/Fundação Getúlio Vargas). More...

HVS International is a hospitality services firm providing industry skill and knowledge worldwide. The organization and its specialists possess a wide range of expertise and offer market feasibility studies, valuations, strategic analyses, development planning, and litigation support. Additionally, HVS International supplies unique knowledge in the areas of executive search, investment banking, environmental sustainability, timeshare consulting, food and beverage operations, interior design, gaming, technology strategies, organizational assessments, operational management, strategy development, convention facilities consulting, marketing communications, property tax appeals and investment consulting. Since 1980, HVS International has provided hospitality services to more than 10,000 hotels throughout the world. Principals and associates of the firm have authored textbooks and thousands of articles regarding all aspects of the hospitality industry. Click here for more...

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