Seeking differentiation amidst brand proliferation
The number of hotel brands in operation is growing, and so is the concern that travelers simply cannot tell them apart. Many leading hotels continue to introduce new brands, particularly boutique-style locations, such as Best Western’s Glo and Sheraton’s Grand tier. As hotels leverage differentiated brands to appeal to a full array of guest segments, they are also challenged to maintain a degree of consistency. Maintaining this balance is especially top of mind for companies like Marriott or Shanghai Jin Jiang that are currently in the midst of integration after recent acquisitions of Starwood and Louvre, respectively.
In an industry of brand proliferation and consolidation, marketing and real estate strategies are critical. Hoteliers should craft marketing messaging that will retain engagement among loyal guests and facilitate brand cross-promotion, while finding opportunities to rationalize marketing spend across brands. Perhaps even more importantly, hoteliers need a rigorous analytic process in place to identify the best new site locations, taking into account potential cannibalization effects on the existing network, integrating information regarding the consumer spending at around a potential new location. By leveraging local consumer spending insights, hoteliers can also identify which of their brands will perform best in a potential new site.
Competing in the sharing economy
While many hotel executives do not recognize Airbnb and similar rental offerings as an imminent threat to their business, the rise of the sharing economy is undoubtedly shaping the hospitality industry. Although such players still have a small share of the lodging market, their success reflects shifting traveler preference that hotels will need to keep pace with to continue to best serve guests. In particular, consumers are increasingly seeking both an authentic and hassle-free experience when traveling, via unique accommodations and a sleek, effortless booking process. In light of this trend, digital initiatives and revamping room layouts have been strategic focal points for many hotels: Accor recently made heavy investments in digital capabilities, while Starwood has introduced a “blended space” concept in some of its hotel rooms.
As hotels continue to innovate, they should be careful to consider both the direct (capital and implementation expenditures) and indirect costs of these new initiatives. For instance, while mobile check-in or redesigned room may resonate with certain types of guests (e.g., millennials), others may prefer the personal interaction of standard check-in or a traditional room setup. In some cases, new initiatives may deter bookings from previously loyal guests, but this effect is nearly impossible to measure without trying programs in-market with a small group. By first understanding which locations or guest segments react positively to these changes, hoteliers can ensure that these programs are only implemented for the customers or locations where they will be profitable.
Revamping Revenue Management
Dynamically identifying optimal room rates is increasingly critical as players like Airbnb and TripAdvisor grow their share and sophistication and OTAs expand, leading to heightened price transparency. In fact, Airbnb recently implemented a ‘Smart Pricing’ revenue management system to enable their hosts to price listings to best reflect market demand. Amid these factors, hotels have a heightened focus on improving their dynamic pricing strategies to ensure that their listings are competitive. In addition, a growing number of hotel companies are offering revenue management services to their franchisees or members on a fee-for-service basis. For example, Best Western just introduced enhanced pricing resources for its members, including a phone consultation team and training program, while Wyndham recently rolled out a new automated revenue management tool.
There is great opportunity to fine-tune such programs to ensure they are generating as much value as possible. For multi-faceted initiatives like Best Western’s, small-scale tests can inform which versions or formats of the program work best. For example, one training program may be effective at some locations, while some properties may require more frequent training. Such experiments also serve to quantify the incremental RevPAR impact of revenue management improvements, information that hoteliers can leverage to generate franchisee buy-in.
2016 will be all about the guest, as hotels focus on driving loyalty through personalization and compelling rewards, hotel and room layouts that reflect guest lifestyle, and rigorous systems to maintain competitive pricing. Executives who are able to capitalize on these trends will hold a distinct competitive advantage in the coming year. By testing each new initiative, leaders can accurately predict which programs will work, where they will work best, and how they can be tailored for maximum impact, all with minimum risk.
About the Author
Maryam Wehe is senior vice president of Applied Predictive Technologies.