Offering a clearly defined brand promise and delivering a great guest experience drives customer loyalty and value for owners. But, says Heather Balsley, SVP, Americas Brands & Marketing InterContinental Hotels Group (IHG), it’s also important when building scale. “Having a network of hotels with a consistent level of service leads to more growth,” she says. “On the strength of this scale, branded hotels can also offer guests added benefits. Harnessing the power of channels and a vast distribution network, coupled with a successful revenue-delivery enterprise and a portfolio of preferred brands is part of building [a] winning strategy for long-term growth.”
According to Robert Pratt, president of Vancouver-based ONE Lodging, brands have had to step up their efforts to encourage consumers to book directly with brand channels in order to combat aggressive marketing efforts by the OTAs (online travel agencies). “Be it fancy new ad campaigns, robust loyalty programs or targeted digital marketing, brands have had to fight back to regain consumer preference of their brand versus that of the OTAs.” He says strong growth and large-scale mergers within the hotel-branding world in recent years have resulted in large brand families with much higher leverage and buying power. “This new and critical mass has given large brands the ability to eliminate last-room availability and price-parity terms with OTAs, which now allow yielding of these channels. This means franchisees are not required to accept as many OTA reservations during periods of higher demand, which lowers their cost of reservations. In addition, more scale has given brands the ability to negotiate lower commissions with OTAs which further helps franchisees to rein in costs.” Brands are now able to offer lower pricing to loyalty program members on brand.com, he adds.
In 2016, IHG launched Your Rate by IHG Rewards Club, a program offering its loyalty members access to exclusive, preferential rates when they book via IHG’s direct channels. The result has been growth in member enrolment and direct bookings. “OTAs are an important sales channel for hotels, which are always looking for ways to encourage incremental business from their OTA partners,” says Balsley. “At the same time, hotels are looking at ways to drive a greater proportion of bookings through direct channels, whether through web, mobile or voice/phone channels. This usually goes hand in hand with a hotel brand’s loyalty program, to drive loyalty and the best rate available by booking direct.” As an independently owned brand, Trina Notman, VP Sales & Marketing at Accent Inns & Hotel Zed, says it becomes even more important to build a brand the customer wants to be a part of in order to hold your own against the OTAs. “We need to keep delivering on our brand promises and make the entire experience something a little bit different so people want to come to us directly,” she says.
AVOIDING BRAND FATIGUE
Canada’s hotel industry is booming. According to recent numbers from CBRE Hotels, continued supply growth is expected, with a projected increase from half of a per cent in 2017 to one per cent in 2018. But with so many hotels to choose from, how do operators avoid brand fatigue and remain relevant? Balsley says it’s about staying focused on innovation, remaining true to your customer and knowing how to flex and adapt to guest demand and needs. “Sometimes that means evolving current brands and launching new ones,” she says.
For example, IHG’s heritage brand, Holiday Inn, which is more than 60 years old, launched new H4 room design, which takes an updated, modern approach to the guestroom while adding features such as a “Welcome Nook” — a place for guests to hang their coat, drop their keys and shoes — and added USB ports to plug in their devices.
It’s also important to look at opportunities in the market, she says. “Extensive research and consumer insights led us to develop a new brand, Avid Hotels, in September 2017, to fill a gap in the mid-scale travel market.” In December, IHG announced that this brand was franchise-ready for Canada and recently broke ground on its first property in the U.S., which is expected to open in third quarter of 2018.
In its business of operating select-service hotels, the brands ONE Lodging works with have stayed relevant and have avoided brand fatigue by staying true to their brand promise, says Pratt. “By doing so, guests know what to expect each and every time they visit one of our hotels. We’ve seen over the past year, all the major hotel brands evolving and continually looking for new ways to connect with existing and potential guests; however, much of that attention has been focused on the digital space, with outmaneuvering the OTAs, and what can often be lost is the human interaction being delivered at the hotel.” Notman and her team avoid brand fatigue by constantly adding to the brand’s story. “We did an amazing rebrand about five years ago where we infused a lot of playful humour at customer touchpoints at our properties and online,” she says. “For example, we just transformed all of our drab, boring elevators into hot-air-balloon rides over the destination you’re in, with 360-degree deco-wraps so you feel like you’re stepping into the basket of a hot-air balloon and going over Vancouver, Kamloops or Kanora.” Accent also added hopscotch games to the breezeways at all of their motel properties. “You can’t just pat yourselves on the back and take a seat because you’re never done,” warns Notman.
BUYING THE BRAND
In an era of asset-light hotel companies, Balsley says the value is heavily focused on brands and the strength of those brands when it comes to mergers and acquisitions. “For IHG, we have a compelling, well-established and long-term winning strategy for high-quality growth. Our strategy is predicated on building a portfolio of preferred brands, growing and leveraging scale, investing in technology and delivering a world-class loyalty program. We are always looking at opportunities, but they must fit clearly with our asset-light, brand-heavy strategy.”
Ian McAuley, president of American Hotel Income Properties, which acquires/owns the hotels that ONE Lodging subsequently manages, says his company’s top acquisition criteria for evaluating new portfolios or hotel properties is the assets must carry a premium brand. “Consistent with our investment strategy, we’d be very unlikely to look at non-branded portfolios, even if all other metrics were the same.”
He says branding has become more and more important as competition and supply has increased. “Ten to 20 years ago, a hotel’s most important marketing tool was its 1-800 number; now every independent and branded property is available through multiple channels online. Layer on OTAs, disruptors such as Airbnb and alternative-accommodation providers and imitators and consumers now have more flexibility in their purchasing options.” So why do consumers buy brands? “Because of the equity and confidence brands have developed to capture consumer confidence,” says Pratt. “It’s a brand’s distribution and loyalty programs that give owners and operators a distinct competitive advantage. Notman says branding is more important than ever. “There are so many brands out there and so many options for guests — especially with OTAs — to find your competitors. You have to give them a reason to stay with you and give them a brand experience that makes them want to come back because you can easily lose them to the next listing on Expedia.ca.” But buying a brand isn’t enough. Establishing and maintaining brand standards is also critical to success. “Brands make big investments in marketing to help guests understand what they can expect when they arrive at a particularly branded hotel,” says Pratt. “Guests expect every hotel to fulfill the brand promise and meet or exceed their expectations each and every time. Strong and clear brand standards help operators to deliver a consistent brand promise for every guest.”
Balsley also emphasis the importance of monitoring feedback when it comes to brand standards. “We work in lockstep with our owners through the IHG Owners’ Association in developing and implementing brand standards. We’re very transparent about the brand guidelines from the beginning and what it takes to stay compliant throughout the PIP (property-improvement plan) process. We also monitor owner feedback through owner-satisfaction surveys and use it to refine our measures, so we are constantly fine-tuning and evolving our standards to ensure we are delivering the best value to our guests and our owners.”
NEW KID ON THE BLOCK
Canada has unique challenges and opportunities when it comes to introducing new hotel brands. “Compared to the U.S., Canada has a smaller population spread across a large area and there can be language barriers with the need to communicate messages in both French and English,” says Balsey. “That said, there are several opportunities. Canada remains a top destination for travellers from the U.S. and abroad and has seen steady growth in occupancy and RevPAR. It’s a top-10 market for IHG and has experienced high growth recently. IHG’s presence in Canada has been growing two times faster than the industry average in the region with 12 new Canadian properties opening in 2018 and 31 additional hotels in the pipeline.”
“With the proliferation of numerous brands, sub-brands and soft brands consumers can have difficulty distinguishing brands and understanding the finer differences between them,” adds Pratt. “New brands can be challenged to establish clear and unique positioning in Canada as a new market particularly if there is a low level of awareness within this market. Without distinct points of difference, they are just another brand in a sea of many brands.”
Getting baseline awareness for a new brand is a challenge, says Notman, especially on smaller budgets. “When you look at the purchase funnel, awareness is at the top and then it comes down to consideration and then purchase. If you don’t have awareness, you can’t just skip to step two or three — you need to fill that funnel and get that baseline awareness and it’s difficult if you’re on a smaller budget. Is there room for more brands: I’d love to say no, but yes. There’s tons of interest in Canada as a travel destination and more people are coming here than ever before, but I don’t know that we have the infrastructure to support it.”
Marketing departments play a crucial role in the branding process and are key to building that awareness. “Marketing departments have to be nimble and innovative; even deep-rooted brands have to be willing to be adaptive the changing needs and desires of consumers,” says Balsley. “To remain competitive, we know we have to stay committed to our brand proposition and offer a differentiating value for our owners and our guests, so marketing is a huge focus for IHG. We are always exploring new and targeted ways to reach consumers that is very focused on ROI.”
“There is more onus on the brands to create key initiatives franchisees can take advantage of because most operators are running fewer and fewer campaigns on their own,” says Pratt. “Most brands give franchisees plenty of flexibility for participation to encourage operators to work with the brands rather than creating individualized programs on their own. Brands are making it far easier for franchisees to participate in [marketing] campaigns by offering different levels of buy-in that suit every operator.”
TECH IS TOPS
Technology has become a fundamental part of the branding process and impacts every aspect of the guest experience. From mobile apps to reservation systems to guest Internet, hotel companies are constantly having to keep abreast of changes in technology and upgrade systems to stay current and continue to offer a high level of service. “At IHG, we’ve placed a major emphasis on technology and investing in key areas that will drive our business. Two major initiatives are IHG Connect, our state-of-the-art guest Internet and Wi-Fi platform, and our new cloud-based guest-reservation system (GRS), which we started rolling out at the end of 2017 across our estate and expect to fully deploy by early 2019.”
But, says Pratt, sometimes it’s difficult to determine the difference between technology that adds real value for guests or is just cool. “Nonetheless, brands are working hard to create points of difference through technology while keeping up with competing brand technologies. Hilton, for instance, has already implemented keyless mobile check-in and recently announced the beta launch of its “Connected Room’, a high-tech guestroom that enables guests to personalize and control every aspect of their stay from their mobile device. While appealing to the business traveller, what remains to be seen will be whether greater integration of technology will loosen the connectively between guests and hotels’ hospitality teams or strengthen it.”
Notman says new technology brings new opportunities. “You can now be represented across platforms that didn’t exist 12 years ago,” she says. “But not only are you representing yourself, you’re participating and interacting with your customers in real time. Then there’s opportunities at the operational level — apps that get you engaged with your brand.”
The downside, she says, is keeping up with the lightning-fast rate of change in the technology world. “If you really want to be engaging with your customers to the maximum, it’s a lot to keep up with.”