While most hotel executives have long been bullish on robust brand expansion, many are singing a different tune during the pandemic.
When asked about the health of hospitality’s brand ecosystem during a June panel hosted by New York University, Hilton president and CEO Christopher Nassetta was quick to acknowledge that the sector “probably will have fewer brands,” given the sheer depth and breadth of negative impact from Covid-19.
“I do think that when you wake up in two or three or four years, some things will be different,” Nassetta said. “Not every brand is going to make it to the other side. I’m not necessarily saying big brands, but there are thousands of brands of all sizes around the world, and this is a global crisis. There are going to be winners and losers.”
Nassetta didn’t go so far as to say any of Hilton’s 18 brands are at risk of going bust.
But analysts are certainly wondering which flags industry-wide, if any, could be jettisoned.
“Ask every major hotel company, and they’re all predicting their peers will lose some brands,” said Bjorn Hanson, a hospitality consultant and adjunct professor at New York University’s Tisch Center for Hospitality, Tourism and Sports Management. “But when you ask them if their brands will be affected, they all say, ‘absolutely not.’ And they say that for two reasons. One, because it’s really hard to shut down a brand, and two, to eliminate one would mean that they’d have to go to the franchisees of that brand and, especially in this environment, provide financing for them to convert. Shutting down is an admission of defeat.”
While Hanson predicts that very few brands may ultimately end up on the chopping block, he does view the current downturn as a potential opportunity for companies looking to do some light pruning.
“Some people are saying that during this pandemic, these companies may actually have a window to terminate a brand, without having to admit it was unsuccessful,” added Hanson. “They can put the blame instead on the current environment.”
Of course, some brand segments may be better positioned to survive than others in the immediate aftermath of the crisis. According to Makarand Mody, assistant professor of hospitality marketing at the Boston University School of Hospitality Administration, the economy and midscale sectors will likely “come out of the pandemic a little bit stronger” than other chain scales.
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