Some brand commentary from our private company contacts



Incentive misalignment:

  • Given that most US incentive fees are so “out of the money”, brand management companies seem more interested in growing the top-line where they collect a percentage of revenues instead of focusing on the bottom line
  • Almost all of the programs offered by brands are focused on growing the top line vs. achieving cost savings


  • Still the premier brand company in North America
    • High brand integrity
    • Best reservation system
    • Strongest exposure to corporate travel
    • Marriott hasn’t been that aggressive in raising fees since they have a lot of large franchisees and operators that would give them strong pushback
  • Salesforce One hasn’t been viewed as particularly successful by owners who complain that it’s more expensive than doing the selling of meeting business themselves and that MAR doesn’t necessarily have maximizing their profits as a top priority
    • Program has not been popular with franchisees who have chosen to opt out for the most part as they see little upside in sharing their convention contacts with MAR
    • Property owners where MAR is the operator complain that they have yet to see results from the shared services model but are hopeful that things will improve as group business revs up in the coming years
    • We’ve heard that once MAR hits incentive targets, they shift business to other properties to maximize their fees


  • The best brand portfolio internationally but isn’t the top dog in North America
  • Perception that Aloft and Element are failed brands in North America. While Aloft does reasonably well in urban and high volume corporate travel markets, there are too many Alofts in suburban markets where the product doesn’t do well.
    • Complaints that the materials they use are very cheap and the walls are thin
    • Lenders refusing to lend on new Aloft developments
    • Many of the ADRs in suburban markets are $80 or less
    • HOT may come out with an Aloft refresh to salvage the brand in the next year or so
    • Little interest in Element:  no new openings in 2011, 1 in 2012 and 2 scheduled to open in 2013


  • Really jacked up royalty fees since the Blackstone deal
  • Increased fees from 4% in 2008 to 6% in 2012
  • Lots of onerous kickback deals in their contracts like forcing franchisees and owners to buy internet from them at 3x the price of getting it from a competitive source
  • Able to get away with the fee hikes given the strong performance and locations of their brands, high brand integrity, and a fragmented ownership base
  • Higher leisure exposure though so MAR is still preferred by many owners who believe that it will be a long time before leisure travel returns to 2008 peak levels


  • Brands are on the decline
  • Little brand integrity.  One franchisee referred to IHG as a brand “prostitute” allowing applicants through the door and being indiscriminate about what gets a IHG flag
  • Older product base.  Aside from the Holiday Inn Express brand, they are viewed as having a weak brand portfolio and little group loyalty amongst their customers.


  • Working very hard to compete head to head with HLT and MAR
  • Hyatt has good reputation amongst owners and is often a second or third choice for owners who can’t get a MAR or HLT flag


  • Strategy is to be the conversion brand portfolio of choice
  • When HLT, MAR, HOT kicks hotels out of their portfolio after the initial license term expires or if they fail to meet brand standards, WYN is waiting in the wings to convert those hotels. 
  • There are many that think WYN will grow faster than HLT or MAR over the next few years with limited new construction in NA

Choice Hotels:

  • Quality Inn is their go to conversion brand. The majority of Hampton Inns that lose a flag become Quality Inns and a decent percentage become Best Westerns
  • The standard of renewing a license that expires from its initial term of 20 years is much higher than that of maintaining a flag during the license term.
    • Many owners try to sell their hotels a year or 2 before the license expires
    • A hotel with a good flag will usually sell for almost twice the price per key as an unbranded hotel in a suburban location.
    • It’s not easy to get approved for a high quality flag since there are a lot of conformity hurdles
    • Some investors look to buy the old full service Holiday Inns at $20k/key and turn them into Courtyards which sell close to $100k/key

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more