While most tourism operators are preparing for another two years of turbulence until travel sentiment returns to pre-Covid levels, some hoteliers are joining large chains to survive.
The "C9 Hotelworks Soft Brand Hotels Review" found movement by global and regional chains, as they both offer soft brands as an option for independent owners who want shelter from the pandemic storm, rather than staying on their own.
DISRUPTIVE CYCLE
A soft brand is usually known as an option for independent hotels that want to operate as part of a global hotel chain, spreading networks and enrolling in loyalty programmes, but with a lighter commitment.
Bill Barnett, managing director of C9 Hotelworks, said challenges in the post-Covid world have made more independent owners want to join with reliable brands, while global chains see growing conversion opportunities by introducing a "management-light" approach.
According to STR, a hospitality market analyst, 81% of 8,757 international-standard hotels in Southeast Asia are classified as independent hotels, with 19% affiliated with branded hotels.
Thailand is a key regional market, with independently owned hotels making up 77% of the total nationwide. Other countries with high levels of independent hotel ownership include Vietnam, Indonesia, the Philippines and Malaysia.
"The hotel industry is being driven into a new cycle out of necessity because of the pandemic. Common practices in North America and Europe are now accelerating in this region," Mr Barnett said.
"Given the significant number of independent hotels in the region, it is a logical step to fish where the fish are."
In terms of operating international-standard hotel conversions by tiers, 31% of hotels are in the upscale class, followed by hotels classified as upper midscale (22%), he said.
Some 73% of the conversion was rebranding from independent hotels across the region, of which 39% are in Thailand. The country already has 31 soft brand hotels with 4,440 rooms, while another 13 soft brands are in the pipeline with 1,591 rooms.
Soft brand hotels in the regional pipeline mainly dwell in the upper upscale and upscale, which account for 54% and 24%, respectively, said Mr Barnett.
Accor, Onyx and Marriott are the top three most used hotel chains in Southeast Asia, both in terms operating hotels and those in the pipeline.
Even though the number of converted hotels will increase because of the pandemic, he said there is always a place for independent hotels, which remain plentiful in Thailand.
"Soft brand conversion is a positive trend, as these properties tend to be smaller and more focused, so they will not rely on a mass tourism model," Mr Barnett said. "Less is more in this case."
SAFEGUARD THE FUTURE
The year 2021 is considered one of survival in Thailand, as hoteliers need to focus on the domestic market. Mass tourism is projected to return in 2022 with significant pent-up demand after a nearly two-year break, he said.
In the midst of the pandemic, conversions to branded hotels are accelerating to help owners enhance their competitiveness. Hoteliers are carefully weighing the costs and benefits of joining a global chain's umbrella, said Charintip Tiyaphorn, financial controller at Pimalai Resort and Spa, an independent hotelier in Koh Lanta.
The development of vaccines is essential to restore tourism confidence and ease public safety as well as border measures.
But international arrivals are unlikely to flood back during the first stage of reopening in Thailand, said Ms Charintip.
Hoteliers need to prepare for fierce competition when the country is ready to welcome a new flow of foreign tourists, she said.
Nantanittaya Sesaweech, assistant managing director at Horizon Village and Resort in Chiang Mai, said a lot of hoteliers suffered from the heavy slump in tourism demand, especially hotels in the southern part of the country. Many of them converted to soft brands to stay afloat and protect employee jobs.
She said being part of a hotel chain helps owners preserve their properties and increases brand awareness to a wider group of guests, thanks to strong customer databases from loyalty programmes.
However, the shift to soft brands can be negative for the industry if most conversion activity is done by local billionaires or foreign businessmen who buy up several hotels in the country, said Ms Nantanittaya.
She said such a move could lead to monopolies taking control of the market in the long run.
LOSING YOUR IDENTITY
Ms Nantanittaya said another downside of converting to a soft brand is independent hotels lose some of their unique selling points because owners have to comply with brand standards.
"Branded hotel standards provide less flexibility for management, as brands want to make every property offer a similar experience," she said.
Horizon Village and Resort has been approached by hotel chains, but being an independent hotel operator allows more agile operating principles to cope with unprecedented crises such as the pandemic.
It also allows a hotel to retain its "Thainess", said Ms Nantanittaya.
Ms Charintip said becoming a branded hotel is not a guarantee owners will earn a profit, as such outcome depends on many factors including the type of operations.
If hotels choose to operate under a management agreement, owners are responsible for a high management fee, which could hamper their business during tough times, she said.
Franchising, which offers lower costs of operation, could be more beneficial in the current environment, said Ms Charintip. Owners are allowed access to global brands' marketing strategies, which is the most critical challenge for independent hotels, she said.
However, if there are many hotels under the same brands, it is quite difficult for hoteliers to make their properties stand out, said Ms Charintip.