By Fred Bean, CEO and founder of HotelPORT
The desire to consolidate within the hospitality sector is showing no signs of slowing down. In fact, quite the opposite, with a flurry of new consolidations announced this year and big brands such as Choice Hotels, Benchmark and many more all keen to sign on the dotted line and seal the deal.
In hospitality, brand acquisition and partnerships are driven by factors such as the hotels’ desire for rapid and significant growth or the capital markets’ rewards for delivering at scale. Compared to other sectors, however, the industry is still highly fragmented, without a single brand having significant global market share. In fact, analysts estimate that the top hotel chains only account for approximately 33 per cent of traditional hotel rooms on a global basis and it’s this fragmentation that will drive continued merger activity in the hotel sector for the foreseeable future.
So how will these continued mergers affect the hospitality landscape and the industry as a whole and, more importantly, should we be concerned?
As with any service industry, the bigger you get, the harder it is to provide the same level of intimacy and customer service, and the hospitality industry has its foundations firmly rooted in just that. Consolidation of management companies brings with it the clear advantages of critical mass as well as recruitment, training and retention, but the concern is that hotels lose the level of contact and engagement with the people running the business. Where you once had access to the CEO, for example, with more properties to manage, they have a lot more people working for them and are far less accessible.
As a buyer, hotel programs will need to rely heavily on the business’ ability to demonstrate its own command of buying-power numbers and market share and its ability to shift business. Those who can demonstrate the ability to move share and articulate spend numbers will be the ones having meaningful negotiations with consolidated hotel groups. Others may simply be relegated to dynamic pricing, so we can expect higher pricing dynamics after the rounds of consolidation, similar to what happened with airlines and travel-management companies.
That said, the advantages of mergers and acquisitions for hotel brands are all too clear — wider global reach and the benefits of integration and combining platforms and technology to provide new purchasing programs. Let’s not forget that partnerships also bring with them the benefits of new portfolio opportunities such as all-inclusive or luxury, which may not have been a part of your pre-merger product range.
Avoiding the merger missteps
Many hoteliers allow newly-acquired brands to continue to operate as they’ve always done, with no change in their approach to revenue management. They don’t integrate their systems with other brands; it’s just business as usual. This prevents hotel chains from achieving efficiencies of scale, with a host of disparate revenue-management technologies and strategies under one roof.
For an economy hotel, pricing is critical in the short booking window and inventory controls may not even be necessary. But the same is not true for the luxury hotel, which needs to maintain premium rates for upscale accommodations and offer customized bundling/merchandising to drive revenue opportunities while increasing guest satisfaction. Then there’s the new updated content to consider.
Merging hoteliers should be creating content with their audience in mind. Content includes descriptions about the property, its amenities, services, calendar of events, destination, local activities and attractions that are being delivered to targeted audiences through various channels.
The channels — OTAs and agents — spread the word about the hotel and reach markets with its value proposition as travellers enter the browsing phase, (images, amenities and so on) before locking down their must haves — spa treatments, entertainment, sports.
Just like any other business, hotels rely on a correct and accurate description of the product, whether that’s content describing the facilities, the rooms, amenities, ancillaries et cetera. The problem for hotels, however, is that information changes after a merger. New services are added, new images, changes to facilities and much more.
Hotels with websites that have outdated or duplicate content will fall behind those that have deep, original content. Google is indexing and showing pages that have original information, which means that duplicate content will inhibit the user experience. In hospitality, a typical example of duplicate content would be providing descriptive content to OTAs or third-party channels that is identical to the hotel’s own website. When Google discovers this same content on two sites, which one does it go with? It’ll be the OTA, which has the higher authority, larger audience et cetera, so the hotel’s website gets ignored.
Merging hotel brands must avoid duplicate content offered to any third party, such as an OTA, or their rankings could be affected. What’s needed is a kind of merger prenup.
So, take a good look at the site after the deal is done. Check your content and avoid the easy copy-and-paste option or your market will go elsewhere and, after the honeymoon period, your newly-formed partnership will hit the rocks before the ink had dried.