Franchisees on the De-flagging Fence: A Gamble Or A Golden Goose? - Former Franchisees Talk Specifics About Channel Loyalty and How They Leverage VIP International Channel Marketing to Succeed as Independents
HVS Guides Boulder Property to Independence, Increases Revenue 40%
Colorado-based HVS Hotel Management provides independent third-party management services to owners of lodging properties, particularly distressed properties in need of a turn around. Daniel King, President of HVS Management, has good business counsel for operators evaluating independence. "There are plenty of good reasons to go independent," King explains. "Brand value is key, but in many markets the top flags are taken. The options for operators in this situation are to sign with a second- or third-tier flag, or go independent. We took the 160-room Boulder Outlook Inn and Suites independent and we have actually increased revenue by 40 percent and raised rates since going on our own. Internet booking volume is key to the success of independent operators. You need to play the game hard against the big flags, manage your rates and Internet exposure, and pick good partners. It takes real work."
King estimates that of about 187 hotel brands only a handful are strong, although fees are roughly the same. He believes the key to running a profitable independent property is knowledge of your market's demand generators and how to sell to them. "A growing number of people are on the Internet buying rooms through Travelocity, Hotels.com, and others, and they are becoming channel-loyal, rather than brand-loyal," HVS Management's Dan King continued. "If a property has a good presence on the right sites they can compete against the flags; but you cannot do it in a casual way. We partner with VIP International, a reservation channel sales company, tomaximize the Boulder Outlook's eChannel bookings and revenue. The bottomline is that it is important to work with a specialist in on-line marketing and sales, regardless of whether you are franchised or independent."
An additional challenge concerning hoteliers evaluating independent operation is their property's loss of brand advertising and priority placement on leading Internet search sites. To reduce the potential loss of position, channel sales partners like VIP International help independent properties compensate for brand neutralization by providing search engine optimization services to give a client hotel's website the most prominent positioning on most Web search engine results. Often this positioning will put a independent property's listing on the first page of search results. This same reservation sales support is valuable in raising property screen ranking when independent properties offer rooms over third party travel sites.
Former Choice Operator Creates Independent Alaska Brand, Pulls 15% Web ReservationsAspen Hotels, based in Anchorage, is a five-property chain created four years ago by Carol Fraser and her partner to fill a need they saw for an Alaska-focused hotel group. Ms. Fraser operated Choice properties and understands the big-chain dynamic and loyalty. "The Alaska market is competitive; there are a lot of franchises, but none of them focus on helping Alaska. This is why we started an independent chain," Fraser said. "Our goal was to create a niche, not a big flag. Our market here does not respond to flag strength the same as in the lower 48." Aspen Hotel's team recognized the importance of the Internet segment so it shopped for a solid GDS representation company to compete against the big flags in the e-booking environment. Their eChannel strategy was successful; in 2003 over 15 percent of Aspen's reservations came from Internet sources. "How a company markets its properties is crucial. Many small operators think they must have a franchise flag to access the GDS channels. We found an aggressive reservation channel sales company that represents our rooms on the GDSes, and Orbitz, Hotwire and other sites. We also have a frequent flier business agreement with Alaska Airlines, a company with excellent brand loyalty, that, in turn, creates loyalty for our properties."
To increase booking efficiency Aspen Hotels is leveraging its channel sales provider's technology to distribute Aspen's availability and rates through a single point of contact with all the third party Internet sites selling its rooms. Carol Fraser explained, "We give our vendor one rate and they sell our brand and rate across the Internet, GDSes, and to TAs. The system works; over half of Aspen's reservations came from the Internet last year." Almost 13 percent of the chain's reservations come through its website, and it is viewed as another key revenue source. Rooms for all five properties are sold from the Aspen site through its channel partner's booking engine, which is invisible to guests. "Revenue management is my specialty, and this is why I like VIP," said Fraser. "They specialize in driving sales for independent operators and make us look like a big franchise to shoppers and travel agents."
Operator Goes Independent with Health & Fitness FocusOwners of the Krystal Aire Inn and Suites in Springfield, Missouri wanted to have a health and fitness-focused property, but none of the chains they evaluated were ready for the concept - so they took their hotel independent. The property is the first of a proposed new franchise idea managed by Missouri-based Rolling Oaks Hospitality. Rolling Oaks President Lonnie Funk, a former Executive Vice President of Operations for John Q. Hammons, described the reasons behind their decision. "There were simply no flags available in our market that gave us what we wanted in value proposition or price for our residential motif property, so we founded our own. To market our concept on-line and generate reservations fast we knew we needed representation on the GDSes and Internet booking sites, so we partnered with a top reservation sales provider that could represent our property on the most productive electronic channels. We began receiving reservations based on our health and fitness niche the first day we 'turned on' our relationship with a strong channel marketer."
Kelly Blake, President of VIP International, the second largest channel reservation sales and marketing provider, explained that it is imperative hoteliers understand the myriad of marketing options available to them and how to optimize each alternative. Blake said, "The key question franchises are asking themselves is, 'What does a brand offer me that I cannot get elsewhere for a lower price and often with better quality.' The marketplace sees brands as vanilla offerings with little differentiation. This is one reason why Expedia and other 'on-line brands' are successfully making the game all about rate." To optimize revenue, hotel operators must understand how to play the revenue management game on the top e-Channels. Being profitable is a matter of finding the proper sales channel mix that maximizes revenue and profitability. "The move to be independent has never looked so good," concluded Blake.
For More Information Contact:
HVS Hotel Management
Dan King, President
777 29th Street, Suite 100, Boulder, CO 80303
Carol Fraser, Vice President
108 E. 8th Avenue, Anchorage, AK 99510
Rolling Oaks Hospitality
Lonnie Funk, President
1045 South Farm Road 193, Springfield, MO 65809
About VIP - VIP International (www.vipintcorp.com) is a channel marketing organization that drives revenue for hoteliers, car rental owners and regional airlines through a multi-channel reservation sales center, the adoption of leading-edge technology, and partnerships with clients to provide ongoing education. Founded in 1979, the privately held Calgary, Alberta-based firm pursues a mission of being "The number one producer of bookings per client." This is accomplished through mastering the electronic channel marketing environment, developing and implementing strategies for each client's unique position, and educating customers about how to optimize participation in the changing electronic marketplace. VIP International, the industry's second largest provider of reservation sales services to hotels, car rental companies and airlines, serves more than 5,000 clients worldwide. A sister subsidiary of VIP International acquired Lexington Services in November of 2003. The combined companies are a central distribution point to every viable Internet web site, and to all of the major global distribution systems including Sabre, Galileo, Pegasus, WorldRes, Amadeus, and Worldspan. VIP International is headquartered in Calgary, Canada with a USA headquarters in Dallas, Texas and significant development office presence in Denver, Colorado, London, United Kingdom, Hong Kong and other cities located around the world.
Senior Vice President Sales And Marketing
Phone: (719) 487-0789