My question doesn't involve names that stem from mergers and acquisitions. Keeping these names is less costly than replacing them, like replacing Ritz-Carlton, Sheraton, Delta, Westin with Marriott.
closed as too broad by Michael Hampton, Giorgio, gmauch, David Richerby, Ali Awan Nov 6 '18 at 9:19
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The hotel brands have differences in amenities within the class. To use your Hilton example, from lower to higher service, it goes Tru (smaller, more basic rooms), Hampton Inn (middle of the range, no food operation allowed outside free breakfast), then Hilton Garden Inn (requires full-service restaurant, no free breakfast). There's also some minor requirements about things like plastic cups, fridges, and microwaves.
To the owner, requirements like a restaurant and room sizes can have a significant impact on profitability, given the location. Mass-market hotels are built on the principle of predictability, and it's critical to convey the level of service up front.
Second, the majority of hotels are franchises, so to the franchisee, their hotel does compete against a hotel from the same brand. As in all franchises, a hotel is granted exclusivity over their brand for a certain area. By making different brands with different amenities, the chain can offer more hotels, and rooms, in the same market, while limiting to a certain extent the competition between franchisees.
The Hotel market is, like many other markets, splintered into many different brand names, and consumer don't follow consolidations well.
In other words, a single brand name is not able to capture more than 3 or 5% of the market, no matter how great they are.
Therefore, offering multiple brand names allows the chain behind it to grasp a larger share of the overall market. Consolidating all Hilton brands in for example two brands would reduce their market share over the next years significantly; obviously not something Hilton is interested in.
Other well-known examples are detergents (basically the complete detergent market consist of two companies, but they need to offer several dozens of 'brands' to defend their market share); sweets; and so on.
In addition, each brand tries to cater to a slightly different market segment, as customers have different priorities.