Are brands becoming relevant again?
— 11 experts shared their view
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Traditionally hotel brands largest added value has been distribution. A hotel got branded and was quite rapidly connected to a massive flow of reservations, on all the channels that existed. It helped guests search, travel agents book and hotels get filled. But that distribution function has largely been replaced by OTAs. So much so that, a few years ago the CEO of a large European Owning company publicly questioned why he should keep his hotels branded instead of going independent.
Today with brands adding new sub-brands every year it becomes unclear what a brand really is. But at the same time, the market is growing and they are making more revenue so it seems like the market accepts the new brands. Google has added a brand search functionality into their metasearch product and the conversation has shifted away from "are brands still needed". The millennial generation is supposedly not loyal to brands. Loyalty programs are getting revamped but costs are increasing. So have brands become relevant again? Are we entering a new golden age for the hotel brands?
I think what we've seen is a period of acknowledgement from the larger hotel brands needing to diversify their brand options in order to stay relevant and protect market share. We've also enjoyed very strong hospitality market growth, up until this year. You're always going to see a greater number of mergers and acquisitions of brands during market peaks. The acquisition of the soft-brand Worldhotels by Best Western and of course the large Marriott acquisition of Starwood in recent years are both moves by large chain companies to diversify their brand portfolios towards boutique and lifestyle branded hotels.
It's no coincidence that brands are adding sub-brands in the boutique and lifestyle sections of the market. That is a section of the market that I feel is best equipped to compete against Airbnb and target the experiential traveler market. Its fascinating to me that Airbnb is predominantly debated as a distribution channel when it has had a far wider impact on travel trends. I think that's where many hoteliers miss the point about the rise of the experiential traveler and their desire to feel connected to a city's vibe, to its culture, its food and its people. To me, that's the threat that Airbnb poses to traditional hotels and to brands in particular because it's so hard to create if you are a cookie-cutter branded hotel.
In the last couple of years, we've seen some of the largest book direct campaigns ever produced. Hilton launched 'stop clicking around' and Marriott launched 'it pays to book direct'. Both were loyalty drives aimed at improving that distribution challenge that you mentioned in the original question. According to Phocuswright data released in February 2019, direct bookings accounted for 49% versus 51% OTA and is trending in favor of direct bookings again so it looks like that's a battle that's starting to be won by branded hotels.
I agree that loyalty schemes are losing popularity, a recent study showed that 39% of millennials believe that it is not worth it to join a loyalty program and that's a real challenge from a brand engagement perspective for the large hotel chains and their many brands. Most loyalty schemes were devised pre-internet and pre-OTAs and have had little change other than a new name and a website re-launch. Mainly it is the same tired programs that amount to little more than spam emails about credit card offers for points that no one wants to redeem anyway. I think the exception is Marriott's Bonvoy, simply due to the scale of choice of brands and because they have started incorporating experiences as part of their loyalty schemes. I believe that's directly targeted at the experiential traveler type of guest e.g. a cooking class with a Michelin starred chef or a tour by a local guide who can provide a unique local experience. They are an example of a loyalty scheme that's genuinely innovative and trying to do something different.