This is part three of a seven-part series on value-add investing based on the strategic plan of A&R Development. 

To many who have experience in real estate, the first two installments may be a bit obvious. Hotel branding, however, is a lesser-known factor that can affect an assets revenue.

In the competitive landscape of the hotel industry, a hotel’s brand holds tremendous significance in shaping its overall value. Seasoned hotel experts understand that a strong brand can have a profound impact on a hotel’s reputation, customer loyalty and market positioning, ultimately driving its value to new heights. By delving into the ways a hotel’s brand can influence its value, industry professionals can uncover opportunities to enhance their hotels’ worth through strategic rebranding initiatives.

In the realm of hotel branding, the power and importance of established brands cannot be overstated. While some individuals opt to venture into independent un-branded hotels, the advantages of aligning with a reputable brand are unmatched. A well-established brand carries inherent recognition, fosters a positive reputation and affords the ability to command higher room rates. Additionally, a loyal customer base, cultivated by a strong brand, provides a solid foundation of dedicated guests, bestowing a significant competitive advantage upon the hotel.

Rebranding offers multiple avenues for increasing a hotel’s value. In certain scenarios, it entails transitioning between two brands of similar caliber, such as converting a Days Inn into a Holiday Inn Express. This strategic shift may be driven by the desire to tap into the larger client base associated with the Holiday Inn (IHG) brand, thus attracting a greater number of loyal visitors to the hotel. Alternatively, rebranding can be motivated by the need to make targeted design choices, such as introducing complimentary breakfast or enhancing amenities, to better align with the preferences and expectations of the hotel’s target market.

To better illustrate the potential value-add of rebranding, let’s consider a hypothetical example. Imagine a hotelier who recently acquired a charming Hampton Inn in Nashville. Equipped with a substantial renovation budget and a keen focus on maximizing the hotel’s value, the hotelier conducts comprehensive market research, yielding an intriguing insight—there is a noticeable dearth of upscale hotels within a 50-mile radius. Recognizing the opportunity at hand, the hotelier embarks on a transformative journey, renovating and rebranding the property as an Embassy Suites hotel. By leveraging the esteemed Hilton family of hotels and positioning the newly rebranded property as the premier upscale destination in the area, the hotelier capitalizes on the demand for an elevated guest experience, leading to increased value and profitability.

In the highly competitive hotel industry, a hotel’s brand plays a pivotal role in shaping its overall value. A strong brand generates recognition, fosters a positive reputation, and allows for higher room rates along with more efficient operations. Furthermore, it cultivates customer loyalty and provides a competitive edge. Rebranding offers various avenues for increasing a hotel’s value, whether through transitioning between brands or making targeted design choices to better align with the preferences of the target market. By embracing effective branding strategies, hoteliers can unlock growth opportunities and position their properties as industry leaders, resulting in lasting success.

The next installment will talk about the construction fundamentals and how important it is to test a building’s foundation. Reading part four of this series could save you hundreds of thousands of dollars in repairs.