Challenges and Opportunities with Hotel Brands Today

👋 First time reading? Subscribe here

I think everyone is challenged with [brand building] because there's so much commoditization in the hotel space. I don't know that anyone truly has the answers to that, particularly when you look at conversion product being at this time how most brands are growing.

When I joined Best Western in 2004, it was a singular brand and it was quite a challenge for us because we started down a path to create some distinction within the Best Western family. But there's a lot of risk associated with that and the hoteliers in Best Western get to vote on every decision because it is a membership-based business. For us, it was really about bringing that business case forward in terms of the customer point of view.

When I did a B2B customer focus group, someone shared the Forrest Gump analogy that Best Western was like a box of chocolates: You just never knew what kind of chocolate you were going to get. I think that is true of most of the brands in hospitality today.

Part of it is going back and thinking quantitatively about the business because the average customer stays at a hotel twice a year. So when you think about the frequency of their touch with various brands, it is very difficult to build that brand narrative when you think about the frequency.

I spoke with one of the executives at Apple, and he said with Apple Music, the customer is engaging six or seven times a day. The lack of frequency of engagement in the hospitality space means that you're really not top of mind with customers all that often.

So there are a lot of factors that impact branding in the hospitality space that you have to step back and think about your audiences and then really understand what their needs are and then how you propel the business forward.

It's very expensive to build a hotel today. That is the reality. New construction ebbs and flows in the industry based on how difficult it is to underwrite a business and work with lenders.

When you think about why hotel companies have a proliferation [of brands], part of it comes down to their structure. They give areas of protection in terms of geographic ownership of a territory to a particular hotel owner with that brand. To drive their unit growth, they have to add more brands into their portfolio to be able to add more product in the marketplace.

If you think about online travel agencies (OTAs), they are marketplaces because they have a lot of inventory on the shelf. They have a lot of price points on the shelf. They have a lot of different value propositions that they bring to the customer.

Portfolio companies - the top 10, 12 hotel companies in the space - also need to be marketplaces and make sure that they have inventory on the shelf in all the right markets with all the different types of experiences that customers want, because the customer might want an economy stay because they're only going to be in the room for six hours and they're going to be on the road again. Or they may want a luxury experience because it's a very special occasion in their life.

So having those kinds of solutions under a portfolio brand with the loyalty program being the juice that connects the dots so that you can earn at every step of whatever your experience on that particular trip is is really important. And of course, the business traveler powers so much of that because they are the frequent traveler.

I would go down the path of creating more of a network of support for hotels to have independent product solutions with all of the core marketing assets to power their success.

When I look at the customer today, even generationally, there's a lot of differences between the customers, but I do think that experience and unique element is something that many people are seeking whether it's a vacation or a business trip. But they do need all the mechanisms of the loyalty program, the distribution capabilities in terms of being able to be powered and put on many different shelves. They need all of the solutions in terms of how to tell their story locally, and then they need the connection in terms of the sales and the loyalty programs, all the ways that you go to market to really drive some of those customers into the hotel.

This is why a lot of the hotel brands are trying to establish themselves in the soft brand category because they understand that it's not about that cookie cutter building, which of course is how Holiday Inn really cut their teeth in the marketplace, but there has to be some semblance of product quality, customer experience. But the intermediaries have really helped us with their ability to provide ratings and give customers a sense of confidence in terms of the quality of the experience that they're going to get. So I think it's leaning into all of those elements that are shaping and disrupting our business to power the hotel's success because that owner, they still only drive 65 to 67% occupancy.

The holy grail is always about how to really build that performance without compromising, right? It's really making that business successful, giving them the tools, but allowing a lot of those individual hotels to really bring their magic to the equation.

Who do you know that would appreciate this today? Click here to forward this email.