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Hotels Look To The Power Of Brands To Drive Values

LONDON-The value of your hotel depends on its brand strength. That's the conclusion of new research by Jones Lang LaSalle's international hotels division into the past year's spate of portfolio sales.

By Charlie Jacoby | Updated on October 31, 2001

LONDON-What to pay for a hotel name is one of the most difficult decisions facing would-be buyers in the global acquisition game. Research by Jones Lang LaSalle shows that brand is the key to value. It points to the recent acquisitions of Krasnapolsky, Posthouse, Le Meridien, Swissôtel and Scandic. ‘The bidders paid for not only the asset base of each company, but also the brand value fostered and grown by management over time,’ said Mark Wynne-Smith, Executive Vice President of Jones Lang LaSalle Hotels. ‘It is often the latter value which is more difficult to determine.’

According to Jones Lang LaSalle Hotels, the key components of brand value are the brand name, re-branding enhancement, sales and marketing infrastructure, including marketing agreements, IT systems and customer databanks, strategic alliances and loyalty programmes, which involve both tangible and intangible components. JLL says that investors must assign a value to the current and potential future benefits of each component as well as their sustainability after the purchase. These benefits can be expressed via revenue enhancement, cost savings, opportunity costs or other methods.

Wynne-Smith said: ‘The brand name may provide potential investors with additional up-side, particularly if they do not operate their own brand. A second potential benefit of the brand name is the enhancement of the investor’s value of pipeline developments as well as assisting in securing future developments by way of lease or management contract.

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