19-The Brand is Worth More than the Land

The modern hotel industry is really two separate businesses. The first business includes companies that have the hotel brand names. These companies manage and operate hotels. These companies include InterContinental Hotels Group, Starwood, Wyndham and Marriott. The second group are companies that are owners of the hotel properties. Most of these are REITs.

In a deteriorating market, the hotel operators, the first group of companies, perform better than the hotel owners because they have far lower capital employed and higher margins. These operating companies maintain higher operating margins over an extended period of time.

At one time, the operators both owned and operated hotels. Most of them concluded, in the late 80s and early 90s, that they made far more money managing a brand than they did owning the land. They sold off the ownership of the hotels to people who would add a great deal of leverage in order to get an attractive return.

In any normal market, it is better to be the brand owner with the customer than to be the holder of other assets. The company closest to the consumer’s mind usually makes the best return on investment.

Posted 5/8/08


Through several acquisitions at different Price Points and organic growth, Marriott has become the world’s largest hotel company in 2021, with 1.4 million rooms. Other brands familiar to western consumers include Hilton, at number three, IHC at number four and Wyndham at number five. All of these companies now follow the same cost approach of managing a brand while letting other people own most of the assets.  A successful cost management approach in an industry is copied wherever possible by all industry leaders over time. The only really sustainable cost advantage in an industry usually comes from superior Economies of Scale and a locked in relationship with the customer.

We have found that the leaders in many industries fail to create economies of scale. HERE are some thoughts on creation of sustainable economies of scale.

Short audio thoughts:  HERE and HERE




If you face a competitive marketplace, read these blogs. We wrote them to help you make better decisions on segments, products, prices and costs based on the experience of companies in over 85 competitive industries. Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 270 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we updated each of these blogs to describe what later took place. You can use these updated blogs to see how the Strategystreet system works and how it can lead you to better decisions.