Hotel Brands Under Attack: How to Stay Relevant
By Daniel E. Craig, Founder, Reknown
Lately there's been a lot of talk in the travel industry about hotel brands losing relevancy. If there was any doubt before, Google's latest incursions on the travel sector highlight the increasing difficulties brands have in connecting directly with travelers.
Search hotels in a destination and an imposing Google Hotels box appears directly below paid results. Click through to a hotel and you find a revamped interface strikingly similar to a hotel website. Previously, travelers had to visit the hotel's website to access this information. The critical difference, of course, is that Google's hotel pages happily direct visitors to other hotels and booking sites and only list a direct-booking option if the hotel pays to play.
As for organic results, a recent study from Gartner L2 found that OTAs and metasearch sites occupied an average of seven of the ten results for travel-related, non-brand keyword searches related to luxury hotels.
Whether it's Google, Facebook, OTAs or metasearch, hoteliers have acquired an unhealthy dependence on performance marketing: paying intermediaries to generate clicks and bookings. Not only is performance marketing expensive, it's dangerous because it focuses on short-term results and often comes at the expense of long-term brand marketing: building awareness, distinguishing from competitors, and reducing dependency on intermediaries.
It's telling that in recent years Booking.com, Expedia, Trivago and TripAdvisor have all shifted resources from performance marketing to brand marketing, including sizable investments in TV advertising. Why? To circumvent Google and other intermediaries, generate direct traffic, and build direct relationships with travelers. Hotels would be wise to follow suit. This means shifting more resources into brand marketing activities like content marketing, CRM, social media, offline advertising, PR and events.
As the gatekeepers to online travel become bigger and more powerful, will anyone rein them in? In recent years European governments have investigated Google, Facebook and OTAs for illegal practices and anti-competitive behavior, levied billion-euro fines and implemented privacy regulations. But in the U.S. legislators have shown little appetite for regulation. Why bother when these companies are American, are represented in Washington by powerful lobbying groups, and generate thousands of jobs and billions in revenue? For the time being, hoteliers have little choice but to work with these intermediaries—and find ways around them.
Hotel companies can't blame all their woes on intermediaries. One of the greatest threats to brand relevancy comes from within. It seems like every week a new hotel brand is launched. How can travelers distinguish one brand from another? New brands aren't driven by traveler demand but by the desire of hotel companies to grow and expand. In the process they're diluting brand strength, confusing travelers and cannibalizing their own business. They're also losing sight of the primary reasons travelers choose branded hotels: familiarity, consistency and loyalty programs.
It's not all bad news. By some measures hotel brands may actually be gaining in importance. A recent study from Cornell University, which analyzed 30 million reviews of over 30,000 branded hotels in the US and Canada, found that variances in hotel online reputation were significantly higher across brands and sub brands than across chain scales, or segments. If brand is a more reliable indication of the guest experience, travelers are more likely to select hotels by brand than by segment or star rating.
That's good news for some hotel brands—but not all. The study found that many hotel brands had substantial variations in reputation among properties in their portfolio. The brands that ranked high in online reputation also tended to rank high in consistency. The secret to success, then, is not only to offer a distinct brand identity and guest experience but to consistently deliver on brand promises across the portfolio.
Consistency is also key to countering another burgeoning threat to hotel brands: the encroachment of alternative accommodations. Google, OTAs and metasearch sites have gone all-in on this sector, integrating alternative accommodations in hotel search results and actively trying to convert hotel room shoppers to short-term rentals.
Meanwhile, the biggest purveyor of private rentals, Airbnb, has been on a charm offensive following its acquisition of HotelTonight, trying to convince hotels to come on board as a distribution partner. This despite Airbnb's history of attacking the hotel industry for price-gouging and anti-competitive behavior. Given that Airbnb represents one of the few viable competitors to the Expedia-Booking duopoly, hoteliers need to explore this option but should be careful not to repeat the same mistakes as with OTAs. This means retaining control of brand trademarks, inventory, rates and guest relationships.
The obstacles may seem surmountable while the economy is strong, but in a downturn hotel brands will definitely feel the pinch. In any economy to stay competitive hotel companies should focus less on launching new brands and generating clicks and more on building awareness and trust in existing brands. This includes more emphasis on brand marketing, diversifying marketing and distribution channels, and delivering a distinctive and consistent guest experience.
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