It may be difficult to imagine the benefits of building and operating not just one, but two entirely separate concepts on a single plot of land, but Brian Stanford, senior managing director at CBRE Hotels, says a handful of innovative companies are reaping the benefits of the dual-branded hotel model, which is slowly coming of age in Canada.
“It’s fair to say that three or four years ago, we weren’t having this discussion, but it’s looked at much more frequently in the Canadian hospitality [sector] today,” says Stanford. During the past few years, a handful of companies have broken ground across the country. Vancouver-based SilverBirch Hotels & Resorts introduced the first dual-branded hotel to Atlantic Canada, with the opening of the Homewood Suites by Hilton and Hampton Inn by Hilton Halifax Downtown. It followed with an additional dual-branded Hilton complex in west Edmonton; a three-flag hotel is also in the development stage in Calgary. Superior Lodging Corp. recently put the finishing touches on its first dual-branded model in December and opened the Courtyard by Marriott and Residence Inn in Calgary.
The dual-branded model can attract different clientele and meet the increased demand for extended-stay facilities. “The reality is, a brand does better if it hosts two separate offerings than it would if it embraced any singular concept,” says Stanford. “Within the same company, you can merge operating synergies to share on costs,” he adds. That flexibility can save labour costs through shared spaces such as fitness and recreation facilities, meeting rooms and even the front-desk. While RevPAR stats don’t exist for the small but growing market, Stanford says an extended-stay hotel will run at a higher occupancy and ADR than its select-service counterpart.
Alnoor Gulamani, president of Bayview Hospitality Group in Toronto, was one of the first on the scene in 2010, launching the 254-room Homewood Suites and Hampton Inn Hilton dual-branded project near the Toronto Pearson International Airport.
“There’s a lot of pressure on developers with the increasing cost of land in addition to opening costs,” says Gulamani. “This concept grants hotels a new way to market two separate concepts so they can get a maximum yield from the site.” He estimates the company saved about 15 per cent in construction costs and continues to decrease annual operating fees by 20 per cent by sharing staff and amenities between the facilities.
It hosts separate buildings, lobbies and front desks but shares a number of services, including the pool, meeting rooms and fitness centre in a central building connecting the two towers.
The challenge is coordinating operations between the two properties and training hotel employees on the different brand standards. “It takes some degree of discipline to make sure each hotel is swimming in its own lane,” he says. “You really have to make sure that you are maintaining the integrity and expectations of each hotel brand. Food-and-beverage is separate, for example.” The Hampton Inn offers a complimentary breakfast as well as a grab-and-go breakfast bag, whereas the Homewood Suites features a communal dining area for multiple dayparts.
Gulamani also emphasizes the importance of maintaining competitive pricing. “You have to be careful not to offer a discount as a knee-jerk reaction to the market,” he explains. “A Homewood Suite price cannot ever dip below the Hampton Inn price or you lose that price integrity. So that challenge means always pricing with the combo of brands in mind.”
Given the juggling act of balancing each brand, it’s no surprise that some operators are waiting and watching the market’s reaction. Brian Leon, managing director at Choice Hotels Canada in Mississauga, Ont., is keen to capitalize on the opportunity. “While we don’t currently have any dual-branded hotels in Canada, there are a number of recent Sleep Inn/Mainstay Suites open or under development in the U.S. It’s an area of interest to us in Canada, both as a way to broaden guest appeal and to create synergies from a standpoint of construction and operational costs.”
Leon says Choice Hotels is still figuring out which brands will work best together within the Canadian market. “We’ve got a huge range of brands within our system, so from our standpoint, it’s on our radar, but we still need to find the right locations and the right brand combo. It’s hard to pass up the cost benefits, so it’s just a matter of time.”
Then there is hospitality magnate Steve Gupta, owner of Easton’s Group of Hotels and the newly launched Gupta Group. Last January, the company opened a Courtyard by Marriott and TownePlace Suites at a former, underperforming Holiday Inn site. “I noticed a shift in the market where there was a huge demand for extended-stay,” says Gupta. “But that includes extra costs for the developer: the suites are not only bigger, but you have the cost of a fridge running all the time and appliances. It’s almost like running a home in a single room.”
What makes the concept unique is both brands exist within a single vertical tower. Gupta says it took years to convince Marriott to allow it. “This is something that I have been working on for 20 years,” laughs Gupta, who notes Marriott’s concerns focused on the idea of one reception area. The other components of the property, aside from food-and-beverage, are shared, from the pool, fitness centre and lobby. By insisting on one reception desk, Gupta says he saved the hotels hundreds of thousands of dollars in labour.
Other savings are found in shared laundry services, since luxury bedding is provided by both individual brands. But, when it comes to food-and-beverage, Gupta agrees it was wise to keep the brands separate. “Each has its own kitchen and eating area,” explains Gupta. “It’s just much easier for staff. But also, each brand has its own dining plan.” TownePlace Suites also offers kitchens, though he notes “98 per cent of people don’t cook.”
The advantage to the dual-branded model is that the extended-stay component elevates occupancy rates. “A transition bed can vary a lot, with occupancy rates dipping or dropping, especially on Sundays. But when you add an extended-stay brand, your occupancy increases because people are staying over a long stretch of time. This balances out the bigger cost of building a fully equipped suite.”
Written By: Jennifer Febbraro
Volume 48, Number 1