Cindy Schoenauer re Soft Brands in Canada

By Cindy Schoenauer, Cushman & Wakefield

VANCOUVER — There are a total of 18 soft brand hotel options in Canada offered by nine brands (Accor, Best Western, Choice, Hilton, Hyatt, Marriott, Red Roof, Radisson and Wyndham). That's an estimated 35 soft brand hotels currently in operation in Canada … a number that's growing quickly.

Ascend was the first soft brand to be introduced in Canada in 2009 with the Inn On The Lake in Fall River, N.S. According to Choice Hotels, Ascend is the largest soft brand in the world, in terms of number of properties, with over 230 hotels worldwide. Currently, in Canada, Ascend has 13 flagged properties with a total of 918 rooms, in addition to the 87-room Insignia Hotel which will open on September 16, 2019.

Other brands followed through 2010 to 2017. Marriott launched the Autograph Collection brand in 2010, and the first property to open as an Autograph Collection was the Hotel Saskatchewan in Regina in 2015. Marriott’s Tribute Portfolio was then debuted in 2015. Hilton launched Curio Collection in 2014 and Tapestry Collection in 2017. Best Western launched the BW Premier Collection brand in 2015, and the SureStay Collection in 2016. Hyatt launched the Unbound Collection in 2016, and flagged Spirit Ridge at Nk’Mip Resort in 2017. Wyndham launched Trademark Collection in 2017, and in 2018 flagged both the Plaza Hotel in Kamloops and the Georgian Bay Hotel & Conference Centre with the soft brand.

There are an estimated 35 ‘soft brand’ hotels currently in operation across Canada. In terms of the number of properties, there are 13 Ascend Collection hotels in Canada with one in the pipeline for 2019, followed by eight Trademark Collection by Wyndham hotels, and seven BW Premier Collection properties. Based on number of rooms, Wyndham has the largest number of soft brand hotel rooms in Canada totalling 1,207 units including its newest addition, the 220-room Medicine Hat Lodge, which joined Wyndham in July 2019. This is followed by Marriott with 1,039 rooms of Autograph Collection product, and the Ascend Collection with 918 rooms.

Rate of growth is accelerating

Soft brands have grown to 35 properties in the last ten years with the rate of growth accelerating in the past two to three years.

There are really two main advantages of having a soft brand. The first is the ability to soft brand a hotel that does not fully conform to the standards and imagery of the core brands. This allows the owner/developer of the soft brand to take advantage of the franchisor’s programs and systems while also being able to maintain the unique identity of the hotel structure, location or history.

The second advantage is the use of soft brands which allows the franchisor to 'infill' in markets where their core brands are already represented. This allows brands to increase their distribution and to broaden their appeal to guests or segments they may not currently be capturing.

There are various advantages to the owner. For a hotel owner considering a soft brand versus operating independently, the owner could see an upside in revenues by tapping into the brand’s loyalty program, possible savings in reservation costs through the brand’s negotiated rates with OTAs, as well as lessening the dependence on OTAs through the brand’s proprietary reservation booking system, and revenue management support. Brands also offer owners digital marketing, training, sales, and IT support. Another advantage is that lenders usually view branded hotels as a more secure investment because of the additional support an owner receives from the brand, especially when an owner has little experience in owning and operating hotels.

For a hotel owner considering a soft brand versus a core brand, the owner may see more flexibility in conversion, and potentially lower capital investment costs associated with the brand’s mandated property improvement plan.

Some brands also offer a different franchise fee structure for soft brands which can benefit the hotel’s bottom line and increase value. The franchise fee structure can range from a royalty fee only to a royalty fee paid only on room revenue generated by the brand. In addition to the royalty fee, there can be brand related marketing fees.

Target demographics

Soft brands were not necessarily designed to target a specific demographic or target clientele, however a soft brand gives the owner the flexibility to adapt the hotel to a specific demographic or psychographic through architecture, design, and amenities. The hotel can maintain a strong sense of individuality and independence which would attract a traveller seeking unique and/or customized experiences.

Many of the brands are self-explanatory in their name but some soft brands do not contain their core brand name. There is a soft brand available for any limited-, focused- and full-service hotel falling within the economy to luxury chain scales. The following chart was created through discussions with the various brand representatives, and in using STR’s chain scales.

Many of the brands are self-explanatory in their name, but some soft brands do not contain their core brand name. There is a soft brand available for any limited-, focused- and full-service hotel falling within the economy to luxury chain scales. The following chart was created through discussions with the various brand representatives, and in using STR’s chain scales.

— Orient Express and M Gallery are part of Accor, LXR is Hilton and the Luxury Collection is part of Marriott

— Autograph Collection & Tribute Portfolio are Marriott

— Unbound Collection is Hyatt

—Curio Collection and Tapestry are Hilton (Hilton name is stated in the brand name and logo)

— Ascend Collection is Choice

— Joie de Vivre and Destination Hotels is Hyatt (new acquisition for Hyatt in December 2018)

— Red Collection is part of Red Roof

—Trademark is Wyndham

Gaps in the Canadian market?

As shown in the chart, there are soft brand options in almost all the chain scales. There is a gap in the midscale segment. However, some of the brands can cross over from one scale to another. Autograph Collection, Unbound Collection and Curio Collection range between Luxury and Upper Upscale, while Tribute Portfolio, Tapestry Collection and Destination Hotels range between Upper Upscale and Upscale. The wonderful thing about soft brand hotels is that there is some flexibility in market positioning depending on the age/condition, design, and capital investment in the property, in addition to the amenities and services offered at the property level.

Soft brands work in any market. We have examples of soft brand hotels in resort markets, as well as examples of hotels in surburban (i.e Trademark Collection), urban and downtown locations, across primary, secondary and tertiary markets. In the majority of cases, soft brands are suitable in urban centres where existing hotels or convertible commercial buildings can be adapted to the brand requirements. These often include historic or unique structures which are well located.

Cindy Schoenauer, AACI, P.App., RI, is a Vice President at Cushman & Wakefield ULC in Vancouver, Canada, with the Valuation & Advisory Hospitality and Gaming Group. Her work includes market and feasibility studies, appraisals, portfolio valuations, asset strategy, and acquisition due diligence. She brings over 15 years of industry experience and has specialized in the valuation of hospitality assets in all types of markets throughout Western Canada. Her experience is both with existing and proposed assets, ranging from limited service properties to boutique hotels, full service hotels, and large scale resorts.

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