Clearly Defined Niche Brands Prevent Confusion

Hotel & Motel Management:

The hotel industry has been a leader in niche franchising. The concept and technique of a hotel franchisor subbranding its hotel franchise to readily identify a particular customer base has proven to be very successful. As the hotel industry matures, various issues have developed in the process.

Overniching. One of the great challenges in the hotel industry is not to go overboard in identifying a niche and subbranding. Clearly there is value and benefit in identifying separate brand names distinguishing economy, midscale and upscale hotels so that hotel guests can readily identify from the subbrand the type of hotel experiences they can select and expect. The challenge becomes more complex as we move into extended-stay brands that can cover the spectrum on the quality of the guest hotel experience from budget to upscale. The challenge becomes further intriguing when subbranding for specialty experiences, such as hotels focusing on children, women, European flavor etc.

Hotel chains need to exercise caution not to overly subbrand, and thereby confuse their hotel guests. An additional challenge in subbranding is ensuring that there are sufficient distinctions between the mother hotel brand and the subbrand so that the hotel guests are incentivized to purchase rooms in hotels that particularly suit their needs. The hotel franchisor also needs to adequately evaluate that there is a sufficient customer base to justify a separate niche.

I have heard hotel guests be critical of hotel chains that overly subbrand and do not adequately distinguish their subbrands from one another. Poor product quality also adds to the challenge of the hotel franchisor to successfully pursue a niche franchising program. Poor product quality with different subbrands can confuse the hotel guest on the special kind of experience and distinction the hotel franchisor is attempting to provide within its franchise system by niche franchising/subbranding.

Impact issues. Niche franchising has added to the challenges of impact issues between franchisors and franchisees. Franchisors often will take the position that they do not need to consider impact issues when they are adding a different subbrand product near an existing hotel product of their hotel chain in the same market, such as a budget hotel near/next to a midscale hotel. The franchisor asserts that since it is addressing a different niche customer base of the market, impact is not an issue. Different hotel chains may take different approaches in handling these issues. In this writer’s opinion, a real-world assessment needs to be made to determine whether impact issues are actually present by the franchisor and franchisee.