With the economy still limping along and credit tight for new projects, hotel franchisees are ditching current brands in favor of ones they think may perform better.
Last week, Thayer Lodging, a franchisee that is buying the Hotel Palomar in Midtown, announced it is converting or "reflagging" the property, a Kimpton Hotels boutique, for Marriott Renaissance. Sol Melia, a Spanish hotelier, opened its first U.S. accommodations late last year by taking over a franchisee-owned Renaissance that had been downtown.
If Hilton leaders have their way, their luxury Waldorf Astoria brand will replace Dallas-based Rosewood at the Mansion on Peachtree in Buckhead. Hilton leaders said that last summer they submitted a plan for a Waldorf to the new owners of the Mansion, a 42-story hotel and condominium project. They have not heard anything more about plans for the building.
"It's just kind of up in the air," said Bill Fortier, Hilton Worldwide senior vice president for development for the Americas. "We have done all the due diligence that we can."
In general, such renamings are popular with hotel brands and franchisees because they cost less than new construction and can get a brand into a prime location. They become even more important in a troubled economy because they offer an alternative for brands to continue to grow and gain market when capital is tight.
Jim Abrahamson, president of the Americas for England-based InterContinental Hotels Group, said reflagged properties made up about half of the company's new properties in 2010. Typically conversions are 10 percent to 15 percent of new hotels for the company, whose brands including Holiday Inn, Staybridge Suites, Crowne Plaza and Hotel Indigo.
Fortier said Hilton also saw a spike in the number of hotel conversions in 2010, up to 35 percent of new inventory. The company's most converted brand is DoubleTree, he said.
Paul Breslin, managing partner of Panther Hospitality, said buildings' owners drive the strategy. Because most hotels are franchised, building owners want to maximize their profits. Many want brands with strong customer loyalty programs that guarantee booking strength.
Included in the conversion numbers, he said, are independent hotels that keep their individual names, but are acquired behind-the-scenes by large brands. For instance, The Glenn, a downtown boutique, is now part of Marriott's Autograph collection.
Atlanta is no stranger to conversions. The Four Seasons was originally the Occidental Grand; the Hotel Nikko become the Grand Hyatt and Swissotel Atlanta switched to Westin Buckhead.
The Comfort Suites Downtown Convention Center at 54 Peachtree Street was originally a Howard Johnson Plaza Hotel and Suites. It later became an Atlanta Underground Suites Hotel and then University Place at Underground Atlanta, a dorm catering to students from surrounding universities. Comfort Suites took over in December.
There is a cost to all this reflagging, Breslin said. The Sheraton Atlanta underwent $35 million in renovations after it switched from the Radisson brand in the late 1990s. Breslin, who became general manager of the property after the conversion, said everything from paint to the thread count in sheets to the speed of wi-fi can change in a reflagging. Even brands of toilet paper are switched.
"Everything that a customer touches is considered," he said. "It can be very expensive."
Sometimes, however, hoteliers look for properties that are move-in ready, Hilton's Fortier said.
"Conversions depend on the condition of the hotel at purchase," he said. "A Hampton Inn conversion, for instance, is extensive because the prototype is specific. In contrast, (The Rosewood) was built as a five-star hotel and is brand new, so it meets the standards of a (Waldorf Astoria) and wouldn't need to do too much to convert it."
There are downsides. The reaction in the blogosphere to the news of the Palomar's reflagging -- including the closing of the building's restaurant Pacci and its patio bar AltoRex -- was mostly negative.
"Boutique and chic gets replaced by the mundane and mainstream….if you were wondering what was going to replace Pacci, my bet is Applebees," wrote Urbanist on the WhatNow? Atlanta blog.
