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Branding, brand equity, and brand extensions
Woody G. Kim

Handbook of Hospitality Marketing Management

Introduction
Brand management is a topic of considerable interest for both academia and industry. Building and managing strong brands is considered to be one of the crucial tasks of brand managers for the success of any hospitality and tourism organization. Strong brands provide a series of benefits to service firms, such as greater customer loyalty and higher resiliency to endure crisis situations, higher profit margins, higher market value (O’Neil and Xiao, 2006), more favorable customer response to price change, and licensing and brand extension opportunities (Keller, 2001). Ries and Ries (1998, p. 2) argue that branding has possibly been one of the most critical marketing strategies that serve as ‘the glue that embraces the wide range of marketing functions collectively.’ In the past 20 years, the hotel industry has observed the proliferation of new brands. The rapid growth in hotel branding, totaling approximately 285 brands around the world in 2006, poses some problems to customers. Many hotel guests are confused with an explosion in the number of brands, and they may not be able to distinguish many similar brands offered by different hotel companies, in the same price range. According to Hotel & Motel Management magazine (2004), the total number of lodging brands in the extended-stay segment alone was over 25. For example, Residence Inn by Marriott was the front-runner in this segment, closely followed by Homewood Suites by Hilton, Extended StayAmerica, and Candlewood Suites by InterContinental. There are plenty of newly launched hotel brands such as Starwood’s ‘XYZ’, Choice Hotel’s chicCabmira Suites and InterContinetal’s Indigo (Weinstein, 2005). Starwood typically focuses on operating luxury brands, namely, St. Regis, the Luxury Collection, ‘W’ and upper upscale segments such as Sheraton and Westin. It developed Four-Point brand categorized as a midscale hotel with food and beverage (F&B) in 1995, and the brand was successful with a rapid expansion in positioning in the mid-priced market. Starwood recently introduced a new brand, Aloft, in a select-service hotel segment developed by W Hotel’s development team. Shortly after launching ‘Aloft,’ Starwood introduced another upscale extended-stay brand, Element. It intends to be positioned closely to an upper upscale brand, Westin. Nylo is another newly launched hotel brand in a boutique hotel concept. Nylo hotels’ primary market segments are business travelers and weekend leisure guests in their early 20s to mid 50s (Nylohotels, 2007). Nylo hotels feature 24-hour restaurants, bars, libraries, business centers, and game rooms. Evidence suggests that independent hotels have lost ground in market share to branded hotels. A study by Forgacs (2003) showed that branded hotels in the United States accounted for more than 70% of the total room supply in 2000, as compared to approximately 61% in 1990. Forgacs (2003) also revealed that branded hotels in the United States led by American hotel chains has spread to all over the world and dominate the total room supply; more than 70% of the hotels in • • •

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Branding, brand equity, and brand extensions

the United States have a brand name relative to 40% in Canada, 25% in Europe, and approximately 10% in the rest of the world. The significant increase is attributed to the benefits associated with branding. Previous research disclosed that a majority of business and leisure travelers preferred to stay at branded hotels rather than at ‘unflagged’ operations (Yesawich, 1996). Hotel guests perceive relatively lower risk when they choose an internationally well-recognized brand than when choosing an independent hotel. Compared to independent operations, branded hotels have competitive advantages in trusted brand names, sophisticated revenue management system, and frequent guest programs. In...
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