New hospitality management research suggests that rebranding and moves in market scale result in positive financial effects after two years or more.
A hotel revenue management study of 95 properties, "Rebranding and Rescaling: Effects on Hotel Performance," by Bjorn Hanson, Anna Mattila, John O´Neill, and Yong Hee Kim, is the featured article in the August 2009 edition of the Cornell Hospitality Quarterly.
Sixty-four of the 95 hotels in the hotel management study moved downward in their market scale, and more than half of those downwardly mobile hotels switched from midscale to economy properties.
Ten hotels changed brands but not market scale. The hospitality management research analysis found that the hotels´ financial performance generally improved in the second year after they rescaled. During the first year after the changeover, net operating income diminished, probably due to temporary occupancy declines and the expenses of making alterations.
The Hanson group found that hotels which moved upward in scale saw higher ADRs, while those that moved downscale generally saw no change in ADR, meaning that they were able to hold their rates even as they moved downmarket. The study found no significant change in financial ratios for the few hotels that rebranded without rescaling.