The Brands, They Keep A-Comin’
Today’s travelers face a bewildering choice of hotel brands. Back in the day, people knew what Holiday Inn, Hilton, Hyatt or Marriott could offer, and that familiarity bred comfort.
This is changing. Today, who knows the difference between a Hyatt Regency, Park Hyatt, Grand Hyatt, Hyatt House, Hyatt Place and Hyatt Centric?
Cheap financing, strong demand and eager developers have prompted hotel companies to dilute brands to ensure their flag flies on new properties. What do you do when you want to sell a franchise for a new hotel but non-compete agreements with current owners preclude you from building more Marriotts in the city? Create a new brand!
Hotel companies have little to lose, because they own less real estate and operate fewer hotels than ever in their history.
In 1992, Marriott Corporation owned 136 hotels, managed 415 and franchised 195 hotels. As of March 2013, Marriott International owned six hotels, leased 38 hotels, managed 1,021 hotels and franchised 2,571 hotels. Most other major hotel brand companies have since followed suit.
Modern hotel companies are not in the hotel operation business – they are in the technology, branding, sales and marketing business. In this business, more brands is a sound strategy.
Guests can’t keep track of the subtle differences. Brand differentiations are mostly meaningless … hot cookies at check-in, cinnamon buns at breakfast, free coffee and tea in the lobby, small rooms/big rooms, desks/no desks and so on. Ask a business traveler to name Marriott’s 30 brands and define their key points of difference. It likely can’t be done.
Then, there is the mushrooming of lifestyle and soft brands in the last 10 years. Soft brands are the collection of ‘independent hotels’ that maintain their unique names but participate in brand booking engines and loyalty programs.
Lifestyle brands are chain owned properties marketed as boutique hotels. They are distinguishable from their legacy parents, but they are almost identical to one another. Their core ingredients are the same, including a design that reflects the unique community and culture of the area, a high-tech approach, high-energy social environment, and a health-focused, authentic experience.
There are currently more than 100 lifestyle brands operating in the US.
As a result of brand proliferation, travelers are becoming increasingly indifferent to hotel brand selection.
The proliferation of brands is leading to a lack of brand affinity among hotel travelers. Consumers enroll in a multitude of brand loyalty programs, driving undesirable brand-switching behavior.
Hotel brands have commoditized rewards by focusing on repeat purchases instead of building enduring emotional connections and positive customer experience associations.
As a result, hotel loyalty members show a remarkably low affinity for their preferred brand. Only one out of four hotel travelers allocate more than 75 percent of their wallet share to their preferred hotel brand.
Bigger and Better Airbnb
In 2017, The New York Times released documents proving how much the American hotel industry regards Airbnb as a threat, and the resources and efforts they are willing to dedicate to thwarting this disruption.
The American Hotel and Lodging Association (supported by major hotel brands) launched a major lobbying and public relations initiative forming unlikely alliances with politicians, affordable housing groups, neighborhood associations and hotel labor unions.
They had some small wins, initiating a few regulatory roadblocks. Three U.S. senators asked for a Federal Trade Commission investigation into rising housing costs caused by Airbnb, and some Airbnb hosts in New York were fined.
In response, Airbnb is making concessions, strengthening efforts to work with landlords and regulators to collect local hotel taxes, limiting the number of properties hosts can rent through Airbnb, and informing landlords about their renters who are hosting on Airbnb.
Overall, the initiative seems to have made only a small dent in Airbnb’s armor.
- Google search traffic for Airbnb hit an all-time high in April of 2017.
- Their customers are happy, with 90% of users rating the Airbnb experience as good or very good.
- Airbnb is valued at $31 billion. (The only hotel company that exceeds this is Marriott at $39 billion.)
Airbnb has new initiatives and big plans. The company recently purchased a vacation management company called Luxury Retreats for $300 million, thus adding 4,000 properties to its database.
It launched a travel app and a program called Airbnb Trips, enabling users to recommend and book local experiences, and access recommended itineraries and restaurants.
The Airbnb website says, “We want every trip you take to feel magical. So you no longer have to follow the maps, wait in the lines, and take photos of all the same sights. Now, you can access unique experiences, incredible homes, and local favorites — all from one app.”
Now, for $120, visitors to Miami can spend four hours learning about leatherworking. Airbnb takes a 20 percent commission from experience providers. Forty thousand experience providers have applied to join the platform.
The company also launched a program to attract more business travelers called ‘Business Travel Ready,’ which includes a search tool that shows only properties suited for business travelers. To qualify, listings must have features like self-check-in, fast Wi-Fi and comfortable workspaces.
In July, Airbnb listings started appearing on Concur (the largest business travel portal in the U.S.). Companies like Autodesk, Box and Salesforce are now offering their employees Airbnb rentals via Concur.
Airbnb also joined forces with WeWork, the largest provider of shared workspaces in the world, valued at around $20 billion. This collaboration means that two of the world’s most valuable technology startups are teaming up, with the hope of luring young business travelers away from hotels. Now, Airbnb’s corporate customers will be able to save a spot at a WeWork office nearest to where they’re staying.
And there’s more in the works. Airbnb’s CEO is speaking publicly about plans to purchase or build its own Online Travel agency, even getting into flight reservations.
Other Players Jumping on the Home Rental Bandwagon
Big online travel agencies (OTAs) are moving in on Airbnb’s turf. In 2017, Priceline’s Booking.com offered around 650,000 alternative lodging properties, an increase of more than 50 percent from 2016. Priceline’s valuation of $89 billion is bigger than both Marriott and Airbnb combined.
Expedia said its alternative lodging subsidiary, HomeAway, experienced 30 percent growth in the most recent quarter and now has 1.4 million listings.
Co-Living: The Next Big Disruptor?
Co-living spaces are now popping up in big cities. What is co-living, you ask? People describe it in many different ways, from “dorms for adults” and “the modern commune” to “a solution for the urban housing crisis” or “a new live/work alternative for remote workers and global nomads.”
Co-living spaces range in style and price from ultra-luxury to hostel-style, blurring the lines between residence, hotel and home-share. WeWork recently launched WeLive as ‘a new way of living built upon community, flexibility and a fundamental belief that we are only as good as the people we surround ourselves with.’
“From mailrooms and laundry rooms that double as bars and event spaces to communal kitchens, roof decks and hot tubs, WeLive challenges traditional apartment living through physical spaces that foster meaningful relationships. Life is better when we are part of something greater than ourselves. Whether for a day, a week, a month, or a year, by joining WeLive – you’ll be psyched to be alive.”
At WeLive, you can move in for months or stay one night and enjoy yoga studios and community concierges, with online access to a global community of 100,000 members. A private studio in New York goes for $3,500 a month, or $230 per night.
How to Compete
The hotel industry needs to realize we are not going to win the battle against homestays through legislation. Instead of trying to slow them down, we need fight a great idea with a better idea.
Homestays feel local, but are also isolating. There’s no central hotel lobby where you can gather with other travelers or locals. Hotels need to double down on this distinct advantage and build on guest desires to get out of their rooms and socialize.
We must invest in communal spaces and integrate restaurants into our lobbies, with the bar front and center. Hosting community building experiences will bring people together.
We can also shift our focus to pampering, especially in the way of great beds and bathrooms. Think about the amenities guests have at home and make sure they are in our hotels … only more fabulous.
We have an opportunity to make people feel like they’ve been somewhere special and learned something new. This is why it’s more important than ever to offer local, ‘in the know’ information to our guests, with an insider perspective on how to experience our destinations. Let’s expand the traditional concierge and facilitate connections with local influencers to enhance our guest experience.
Mobile, Mobile and More Mobile
Mobile has overtaken desktop as the traveler’s search and booking device of choice. In 2017, there were more than 128 million Google search results for hotel bookings on mobile devices. Travelers also want immediate, real-time customer service on their smartphones.
That’s why Starwood Hotels launched “Let’s Chat,” allowing guests to communicate with guest service teams via WhatsApp or iMessage, and Hyatt Hotels provides customer service through the Facebook Messenger platform.
Mobile payments are on track to overtake credit card payments in the near future, using platforms like Apple Pay.
Hotel guests appreciate a more personalized touch to their booking experience. They want you to get to know them before they arrive. Some marketers are creating qualifying fields in their booking engines, asking about the ‘purpose of travel’ or celebrations like honeymoons and birthdays. Return visitors like to be welcomed back in a special way.
So hotels are increasingly adopting software that enables them to recognize these guests and give them the personalized attention they crave.
Good Design Goes Mainstream
Whether your hotel is ultra-luxury or ‘bare bones’ budget, guests are more focused on design. They want hotels that look and feel good, with a fashionable design that encourages a sense of community. (And photographs well for Instagram.)
This sort of design creates communal spaces that make solo travelers feel more comfortable and facilitate being alone together. It will attract locals to your lobbies, restaurants and bars, encouraging a higher spend on food and beverage.
Architectural trends include more natural light, open spaces and expansive sightlines. Guests want to hang out in the lobby (and we should want them to spend time there, too) so we need to add more hang out spaces in our hotels – as many different social spaces in the same area as possible. There should be a greater sense of theater, a “bigger reveal,” with more art and animation.
It is highly likely that the Internet of Things (IoT) will be coming to a hotel room near you.
Here are some ‘Brave New World’ things to expect …
- Smart, hyper-personalized rooms with smart mirrors (that display your morning yoga routine) and faucets (that auto adjust to your preferred water temperature).
- Ability to use your phone to check in and unlock your room.
- When you enter, your personalized preferences are already in place (art, temperature and amenities) and there’s a personalized welcome message on the TV.
- Ability to cast content from thousands of different apps without having to enter your personal credentials, automatically disconnected when you leave.
- Rooms fully customizable via your phone (lighting, temperature, television, curtains, etc.)
- Fingerprint technology replacing keys and payment systems.
- Robots delivering towels.
- RFID stickers on the carpet that turn on lights when you step on them.
- Room service from voice-activated devices.
- Real-time voice-activated and text communications with hotel staff to order room service or request towels or get restaurant recommendations.
We need to build the strong infrastructure necessary to deliver these services, so hotel brands and individual properties are making major investments in technology.