[Excerpt] Building and successfully managing strong brands is considered to be one of the key drivers of success in the hotel industry. CEOs of hotel companies that own brands recognize that brand equity drives stock price and shareholder value. This sentiment is echoed on Wall Street, as the following comment indicates:
"Lodging is a brand-equity business—(that) is the backbone of expansion. By building equity in its brand, a lodging company is able to “sell” its name to hotel owners and franchisors, and also able to reach consumers, thereby generating the demand to support expansion."
Consumers often base their hotel-stay decisions on their perception of a specific hotel’s brand name. The United States now has over 200 hotel brands competing for business, more than in any other product category. Many of these brands are extensions of existing brand names. Brand extension is the practice of introducing a new brand (differentiated by market segment) using a well-established brand name as leverage.
Jiang, W., Dev, C. S., & Rao, V. R. (2002). Brand extension and customer loyalty: Evidence from the lodging industry. Cornell Hotel and Restaurant Administration Quarterly, 43(4), 5-16. doi:10.1016/S0010-8804(02)80037-4