By Chekitan S. Dev and Eva Steiner
Dual branding of hotels has become a growing industry practice. Beyond the potential marketing benefits of the dual-branding strategy, this paper tests whether dual-branded hotels operate more efficiently than comparable single-branded hotels (and therefore deliver better bottomline results). Comparing a proprietary longitudinal data set on the operating performance generated by dual-branded hotels in the U.S. against a set of comparable single-branded hotels, we document mixed results. While dual- and single-branded hotels achieve similar occupancy percentages, dual-branded hotels generate higher average daily rate and revenue per available room. That said, dual-branded hotels have similar departmental expenses to those with a single brand. Although dual-brand hotels achieve some savings in undistributed expenses, for example, administrative and general (A&G) and maintenance, they incur higher IT and marketing expenses. As a result, gross operating profit margins are slightly lower in dual-branded hotels than in single-branded hotels. In sum, we document limited operating efficiency gains in dual-branded hotels compared to single-branded hotels. However, we recognize that the novelty of dual branding may mean that we need to allow more time to allow these hotels to achieve stabilized operation.
The authors are grateful to John Corgel, Robert Mandelbaum, Mark Woodworth, the CHR editor, and an anonymous referee for constructive feedback on earlier versions of this report. We thank CBRE Hotels for providing the data on U.S. hotel operating performance.