U.S. hotels eye new brands as supply growth slows

Top U.S. hotel companies are scouting out new brands to expand their reach abroad and keep their best customers from defecting to rivals as new rooms growth slow down.

In recent months, Choice Hotels International Inc (CHH.N), Hyatt Hotels Corp (H.N) and Wyndham Worldwide Corp (WYN.N) have all expressed interest in acquiring a brand.

Buying a brand allows a company to offer more hotels at different prices and give frequent guests more options, keeping them away from competitors.

It also helps a hotel company diversify into new market segments and regions without the cost of developing a chain from scratch.

“You’re trying to be everything to everyone,” said Stifel Nicolaus analyst Rod Petrik.

Loyalty program members book a large number of rooms, according to companies that operate and manage hotels.

For example, roughly half of Marriott International Inc’s (MAR.N) room nights are purchased by loyalty program members. And about 25 percent of the domestic gross room revenue of Choice Hotels comes from frequent guests.

“When so much of your business is driven by loyalty programs, you want to have all those offerings available to your customers,” Petrik said.

Acquiring a brand might be a good way for hotels to seize market share as new room construction slows down, analysts said.

Data firm Smith Travel Research projects supply will grow 1.8 percent this year and 1 percent in 2011. Last year, the number of new rooms grew 3.2 percent.

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Source – Reuters