Branding the hotel industry: The effect of step-up versus step-down brand extensions

Abstract

The study investigates how customer perceptions of parent brands influence the perceived value of brand extensions in the hotel industry and how these relationships are moderated by the nature of the brand extension in question. Drawing on brand equity logic, the study proposes that perceived positive brand attributes, awareness, attitudes, and loyalty toward the parent brand positively relate to higher perceived value of the brand extension, and that these positive relationships grow stronger in cases of step-down extensions rather than step-up extensions. Survey results from UK hotel customers reveal that only perceived parent brand attributes and attitudes seem to have a positive impact on perceived value of the extension and subsequent (re)visit intentions. The moderation results further reveal that the positive relationships turn stronger in cases of step-down extensions and insignificant during step-up extensions. Managers are therefore cautioned to apply step-up extensions too frivolously, as such extensions seem largely ineffective in generating consumer value and subsequent behavioral intentions, whereas the effectiveness is heightened in cases of step-down extensions.