Brand overdoseThere is a tectonic uplift occurring within the industry, where a deluge of brands competing with each other, is leaving customers dazed. Are we seeing too many hotel brands and sub-brands? The hotel industry has some explaining to do.
A little less than a hundred years ago, some of today's biggest hotel brands started off as family-run businesses with a single property. Conrad Hilton purchased his first hotel in Cisco, Texas, during the 1919 oil boom, upon learning that room occupancy turned over three times a day. Thirty years later his acquisition of the famed Waldorf Astoria hotel in New York City made national headlines. When Hilton Hotels Corporation acquired control of Statler Hotels in 1954, the real estate transaction was the largest the world had known to date. The Marriot which began later in 1957, with the Twin Bridges Marriott Motor Hotel located in Arlington, Virginia, purchased the Ritz-Carlton Hotel Company LLC by in 1995. More recently, it acquired Starwood Hotels and Resorts Worldwide. Purchasing Starwood meant that Marriott International's portfolio alone now contains over 30 brands.
Clearly, if one had enough cash, the new and clever way towards instant growth is to buy over established hotel brands. This allows companies to instantaneously widen their portfolio without having to embark on new construction or the creation of a new brand. When one adds the near 300 other hotel brands that have cast a wide global net in the hospitality industry and the omnipresent likelihood of more brands flooding the market, several questions immediately come to mind. Is the market oversaturated with brands? How does one differentiate one from another? Does having so many brands in the marketplace benefit the customer or the hotel operator or both?
Over the years, hotel brands have started to own less real estate and operate fewer hotels. This did not mean that they ceased expanding their presence. Instead, they adopted a fee levying licensing relationship, namely ‘franchising’- a business model that enables a hotel owner the right to use the brand of a specific parent company for a prescribed period of time. Influential, emerging and growing markets will attract international hotel brands and competition is bound to get intense particularly in smaller cities. Colombo for example can hypothetically support one Holiday Inn. In this scenario, adding another Holiday Inn into the already franchised territory is likely to violate the rights of the existing franchisee. So how does one avoid legal issues and yet add more properties in a small city?
You create a new brand, say Holiday Inn Express or Hotel Indigo and enter the marketplace. Having more brands enables big hotel chains to place more hotels in the same location or market. Why settle for 10% of the total market share with only one brand when you can capture 20% or more of market share by positioning several of the company’s different brands - each one aimed at capturing a different segment in the market. Having more brands enables the company to generate more revenues. Stands to reason why many big hotel chains only look at the supply side of the equation. However, one of the dangers of this approach is that there can be brand confusion, with consumers expecting the same kind of offering across all sub-brands.
The lodging industry needs to, at least for now, cease the introduction of confounding new hotel brands and instead focus on bolstering and reinforcing existing brands by making clear to customers what to expect when they stay at one versus another. This expansion has also affected the top of mind awareness (TOMA) phenomenon. TOMA refers to the brand or specific product which comes up first in customers' minds when thinking of a particular industry or category. With the availability of over 300 brands out, travelers have either lost a sense of what brands are really for them or are just no longer interested.
Hotels are all about hospitality which is what is anticipated during a stay. Guests expect to book their room without any hassle, a fast check-in, getting a room that is similar or better than what they saw on the hotel’s website, clean, new/fresh linens, comfy bed/s, a TV with plenty of channels, clean bathroom with hot/cold water, amenities, a healthy breakfast, a decent restaurant, free Wi-Fi, a sense of security and attentive service with a ‘can do’ attitude and a genuine concern for guests well being.
Most of the dizzying arrays of brands offer the basic needs: Shelter, food, electricity, hot water, Wi-Fi – all bundled in the guise of hospitality at a premium price. So, how does one differentiate one from the other? What is the difference between a Marriot hotel and a Hilton hotel? Has the hotel industry gone mad by over-saturating the market with brands that are not all that different from each other? I hope not.
Ilzaf Keefahs
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