360 Cornell Hospitality Quarterly AUGUST 2009 Hotel Rebranding and Rescaling Effects on Financial Performance by BJORN HANSON, ANNA S. MATTILA, JOHN W. O’NEILL, and YONGHEE KIM 2009 CORNELL UNIVERSITY DOI: 10.1177/1938965509332762 Volume 50, Issue 3 360-370 An exploratory study of ninety-five hotels that rebranded or rescaled their operations revealed the possibility of long-term financial benefit after the change. In many cases the hotels saw an initial decline in financial results, but that was followed by a gradual recovery. Hotels that moved upscale generally saw increases in average daily rates. Hotels that merely changed brands without also changing their scale reported no significant change in financial results. Keywords: hotel rebranding; hotel financial perfor- mance; hotel obsolescence A n appropriate brand and correct positioning are key drivers of success in the hotel indus- try (Jiang, Dev, and Rao 2002; Ambler et al. 2002; Brady, Bourdeau, and Heskel 2005; Leone et al. 2006; Kayaman and Arasli 2007). Consequently, hotel owners sometimes find it necessary to rebrand their property (changing from one chain name and system to another) or rescale the hotel (changing from a brand in one market segment to a different one). Making such a change is especially important when a hospitality property has lost effectiveness in serving its market, whether due to obsolescence or to market changes (Frigo 2002; Wänke, Herrmann, and Schaffner 2007; Kwortnik 2006; Lei et al. 2004). A common reason that a hotel may need to change its brand affiliation or its market scale (most commonly, moving down market to a different brand) is when there are changes in market demand (Lomanno 2006). Each year between 2002 and 2006, for example, an average of approximately fifteen thousand hotel rooms were converted to luxury and upper upscale hotel chains, eleven thousand to upscale flags, thirty thousand to midscale brands with food and beverage, twenty thousand to midscale chains without food and beverage, and thirty-five thousand to economy flags at CORNELL UNIVERSITY on July 29, 2009 http://cqx.sagepub.com Downloaded from