Do Brands Still Matter in 2017?

5 min read

Are Millennials Blind to Hotel Brands?

Do brand preferences still matter in the Millennial generation? This question comes up because Millennials have shown an emerging taste for untraditional, decentralized, and independent local providers of goods and services in what is commonly referred to as the “sharing economy”. The sharing economy has undoubtedly made an impact across multiple industries.  Sharing economy leaders like Uber and Airbnb are estimated to grow to $335 billion by 2025. This significant growth leaves many hoteliers and investors alike wondering how the hotel industry will continue to change moving forward. Many are also asking if hotel brands matter at all? After all, Millennials seem to be happy with online travel agents (OTA’s) where brand loyalty doesn’t matter, or online platforms like Airbnb which reveal a preference for more communal, local, and location-authentic lodging experiences.

Despite higher preferences than their older counterparts, Millennials still show strong preferences for branded hotels.

The travel and hospitality marketing firm MMGY Global launched a study hoping to answer questions about these changing hospitality preferences among American travelers. (You can check out the full article here.) Peter Yesawich from MMGY Global has some great insights worth checking out, and below is a snippet of that report:

Source: MMGY Global

Highlights from the Study

Our team at EquityRoots also wanted to take a look at the study results to find a conclusive answer on whether or not hotel brands will still matter into the future.

In short, yes – brands still matter, and investing in the right hotels can still lead to a fruitful real estate investment.  It’s true that Millennials still show more interest in a shared economy, especially compared to other age demographics. Knowing this, are hotels still solid real estate investments? Yes, of course they are. Millennials’ preferences are still similar to their older counterparts, including high preferences for full-service flags like Hilton, Marriott, and IHG (77%) as well as all-suites properties (70%). Looking at cumulative interest across all age groups, we see that big brand hotels are still preferred by a vast majority.

The rise of the sharing economy doesn’t take away from brand loyalty. Let’s take a look at our Millennial Airbnb travelers as a case-in-point. Bed and breakfast operations have existed way long before Airbnb (and even before the rise of hotel room standardization in products like Hilton and Holiday Inn). However, brands like Airbnb and HomeAway are streamlining alternative lodging, gaining strong loyal users. Even though Airbnb users are staying in different hosts’ accommodations from trip to trip, many Airbnb users continue to use only the Airbnb platform to find those rooms. In other words, they are familiar with the brand Airbnb and choose to book through there the same way that many travelers today maintain degrees of loyalty among the Hilton or IHG or Marriott. Despite the huge variance that might exist on Airbnb’s platform, users have come to Airbnb repeatedly with some sense of standardization and expectations.

EquityRoots - Hotel Real Estate Investments Platform

Hotel Brands Continue to Evolve

The question now becomes “how do current hotel brands adjust to capture the sharing economy audience?” It’s a question that hotels are already taking steps to answer including by:  

– Developing new hotel products like Marriott’s Moxy, Hilton’s Tru, and IHG’s Avid that target the emerging Millennial preferences

– Partnering with Airbnb to provide food and beverage solutions

– Offering “local experiences” and trips that are commonly utilized by the sharing economy.

The hotel investor can rest at ease. Hotel products from strong, established hotel brands aren’t going away anytime soon. Corporate travelers and companies still prefer lodging with hotels, considering hotel brand benefits such as loyalty points and more established quality standards across a wealth of hotel franchise locations. If anything, the hotel industry is thriving, continuing a trend of growth since 2010 as hotel demand increases faster than hotel supply. On top of this increasing demand, hotel companies continue to innovate and appeal to travelers, whether it be through adopting new food and beverage options, creating more communal living arrangements or utilizing the latest technology to provide travelers with instant check-in and other amenities. As the hotel industry continues to evolve, hotel investors will need to keep a fresh eye open for both strong performers in the present day, as well as potential performers in the future.

Sources

“2017 Set to Bring Modest Growth for U.S. Hotel Industry.” Zacks Equity Research. Jul 17, 2017. NASDAQ. 

“Global Portrait of American Travelers.” MMGY Global.

Moyer, Liz. “Hotels, Feeling the Pinch of Airbnb, Promote Local Experiences.” May 29, 2017. The New York Times. 

Simon, Elaine. “Food-and-beverage an opportunity for hotels, Airbnb to partner.” Sep 22, 2017. Hotel Management. 

Yaraghi, Niam and Ravi, Shamika. “The Current and Future State of the Sharing Economy.” Brookings India. 

 

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How Expedia and Priceline Impact Hotel Owners and Hotel Investors

9 min read

Special thanks to Christina Velasquez for contributions to this article.

When was the last time you used Expedia to book flights or a hotel room? Travelers often turn to Online Travel Agencies (OTAs) like Expedia to quickly find available accommodations, but that doesn’t mean that everyone is benefiting. Nowhere is this truer than in the hospitality industry.

This year alone, we’ve seen both AccorHotels (products include Ibis, Novotel, and Pullman) and Hyatt go head to head with Expedia.1 Hyatt, in particular, made headlines when it threatened to stop working with Expedia altogether, although just last month Hyatt admitted it would continue to work with the OTA for the foreseeable future.2 This isn’t anything new. In 2004, IHG actually left Expedia and did not have any listings on Expedia sites until it re-entered its partnership with Expedia 3 years later. Choice hotels in 2008-2009 had a dispute with Expedia as well, and shortly after the dispute, the hotel brand told all its franchisees that all Choice products would not be on Expedia.3 Despite hotel brands and hoteliers relying on OTAs for a large part of their annual room bookings, these disputes reflect a discontent among hotel owners that is neither new nor insignificant. So…what’s the big fuss about?

It’s a tricky game. In order to understand the Hotel-OTA conflict and analyze potential solutions, let’s first take a look at how OTAs work and they impact hotel owners.

Giants of the Industry

Every industry has its giants. The NBA has the Warriors and the Cavs. The tech world has Google and Facebook. In the hotel industry, we have the big three – Hilton, Marriott, and IHG – all established hotel brands that EquityRoots strives to work with in our own projects.  

But who owns the OTA world? There are two companies you’ve undoubtedly heard of:

  1. Expedia, Inc. has quite the roster, with an army of websites including Expedia.com, Hotels.com, Hotwire.com, Travelocity, HomeAway and Trivago.4 In 2015, Expedia acquired Orbitz Worldwide, which also includes Orbitz, CheapTickets, and Ebookers, among several other brands. Add to that thousands of other affiliate sites, and you’ve got one major player controlling much of how OTA’s operate.
  2. The Priceline Group is the other worldwide giant with a hefty lineup of its own, including Priceline.com, Booking.com, Agoda.com, Kayak.com, OpenTable, and Rentalcars.com.

These powerhouses alone hold incredible influence in the hospitality industry in no small part due to their all-inclusive appeal to travelers. Travelers using Priceline or Expedia can book not only hotels, but also auto rentals and flights. Planning a vacation to Los Angeles? It’s pretty easy to log onto Expedia.com, and search for a flight and hotel for your trip. Online filters generally allow you to specify dates, times, and travel budgets to best fit your needs. Hotel owners can actually utilize this powerful tool in a way that benefits them more appropriately – but more on that later.

If travelers search for hotel bookings in L.A. right now, they can compare pricing and offerings from the Hilton Pasadena, the Best Western Plus Garden Inn and Suites, and La Quinta. Once a traveler has made their hotel selection, an OTA actually handles the payment of the hotel for you. From the traveler’s perspective, it’s not difficult to appreciate the convenience.  Especially for travelers not loyal to specific hotel brands, they can use OTA’s to pick the right lodging for their needs efficiently.

How does this hurt hotel owners?

Hotel owners pay hefty commissions when working with OTAs, and increasing dependency on Expedia and Priceline can compromise sustainability in hotel operations. For example – let’s say you own a hotel in L.A. For simplicity, your rooms are priced at $100 per night. Chuck from Chicago decides to fly into L.A. for a trip. Chuck walks into your hotel, and requests a room, paying that $100 rate. Chuck gets to stay at your hotel, and you get to keep $100 in revenue. Straightforward.

Let’s compare Chuck to another guest at your Hotel, Erica. Erica decides to book her hotel through Expedia. She books the hotel online with the same listed room price of $100. Expedia handles the payment and gets that $100. Then, Expedia takes a commission and only pays you $75 as the hotel owner.

Whoa. What happened? Since Expedia helped you, (the hotel owner) gain a customer, the OTA charges you a commission. After all, without Expedia, Erica may never have booked at your property. The hotel owner has to pay a fee of 25% of the room rate – $25. This rate is pretty typical of many OTAs.

A distinction worth highlighting is the fact that Erica does not pay that commission fee. You do as the hotel owner. That’s primarily how OTA’s make their revenue – by charging a fee for hotel rooms booked online. Among all its services offered, Expedia makes 70% of its revenue through hotel bookings.5 That’s not to say that OTA services are not valued. Oftentimes, getting customers through OTAs is a great tool for a hotel owner to have. The issue is that the commission for these bookings are high enough to make it difficult for hotel owners to continue operating.

This booking fee isn’t a one-sized-fits-all setting. Hotel brands like Marriott and Hilton independently negotiate their own commission rates with OTA’s, and those commissions can vary depending on whether or not the booking date is a weekday or a weekend. Typically these rates range from 15-28%, depending on the brand. Independent hotel owners unaffiliated with a brand can face commission rates as high as 30% of the room rate. If your rate is $100 a night, you only earn $70 if your customer decides to book through Expedia.

Hotel Owners Suffer from OTA Dependency

Back to the example with you being the hotel owner. Although it’s true that you still get to keep the larger part of this revenue from Erica’s booking, you’ve been facing increasing costs in the past few years. Labor costs are on the rise.6 You’ve got to pay utility bills, mortgage, internet systems and other new tech costs to keep up with competition in the industry. With Priceline and Expedia charging the high rates in commission, hotel owners have a decreasing budget to cover more front end costs. In contrast, OTAs don’t have to pay the same overhead, brick-and-mortar, and maintenance costs that hotel owners have.

Additionally, a growing concern is that OTAs are becoming the norm rather than an alternative for hotel bookings. Younger travelers especially are conducting many of their travel bookings through online platforms like Kayak and Expedia. In the past, hotel owners were looking at a smaller percentage of their rooms to be booked by OTAs. As OTAs have grown, many hotel owners are now seeing the vast majority of their rooms being booked through OTA’s – this makes it difficult for hotel owners to sustain their operations without raising the prices of their rooms.

It’s important to emphasize that most of the damage is felt by hotel owners, not hotel companies. With or without OTAs, hotel companies still retain much of their revenue through royalty fees (also paid by hotel owners) and are more insulated from the effects of online middlemen.

That doesn’t mean that these hotel companies are completely safe from the effects of OTAs. When OTAs create a large impact on thousands of individual franchise owners, increased discontent among those owners push waves of communication to hotel brands with a clear message: something has to change. That’s what we are seeing now with several hotel brands now questioning their current working relationship with OTAs.

 

EquityRoots - Hotel Real Estate Investments Platform

Flights, too?

For better or for worse, OTAs are not going to go away in the future. If anything, they will continue to grow. Yet, hotels aren’t the only ones who have scuffled with OTAs. Airline companies such as Delta, American and US Airways have all at one point removed their flights from Expedia to protest high fees. To this day, Southwest Airlines still keeps listings off of OTAs because of those fees.7 Other airlines charge a fee if travelers book through OTAs: most recently, British Airways announced it would start charging a fee for many third party bookings on OTAs.8

Airline brands have even rallied together to leverage their fight against OTAs. Around 2006-2007, major OTAs got sued by several airlines for charging booking fees. The result fell more in favor of airlines. When travelers book airlines through one of the OTA websites, the airline still gets charged with some margin, but there are no longer any booking fees. Similarly, an Illinois Court gave American Airlines a win in their battle against OTA Orbitz (again, now owned by Expedia).9

Hotel brands could attempt to utilize some of the strategies utilized by the airline companies. Hotel owners can upcharge fees if guests book through Expedia or Priceline. Hotel owners can push for hotel companies to band together in a similar fashion as major airlines. It’ll take a high degree of coordination among hotel companies and hotel owners alike, but a concerted effort across the hotel industry could really benefit hotel companies and hotel owners in the long run.

Of course, it won’t be easy. Airlines are in a better position to challenge OTAs – because airlines own all the actual aircraft that travelers fly on; they have a unique position in that airlines own all of their assets. In contrast, the hotel companies do not own the hotels themselves – individual hotel owners do. The hotel brands give owners brand support in return for royalty fees, but they do not own the brick and mortar outright. This key difference gives airlines a greater reason to push back against OTAs, whereas hotel owners must coordinate with hotel companies on a large scale.

Hotel Owners can Utilize OTAs as an Asset

There’s an absolute need for hotel owners to put pressure on hotel brands, and hotel brands uniting against high commission OTA fees is incredibly important for sustainability. In the meantime, how do hotel owners utilize OTAs as more of an asset? There’s a definite stigma among hotel owners against OTAs, but there are ways to look at Expedia and Priceline as potential tools in the hospitality business. Hotel owners do have an opportunity to utilize OTAs like Expedia more appropriately in their favor. 

  • Utilize OTAs like Expedia as your research tool. Hotel owners can use OTA to shop other hotels in the area. OTAs are a powerful localized resource to see what your competition is doing in any given area.
  • Free advertising. The inherent benefit of OTAs is that you can advertise your hotel for almost zero upfront cost. Hotel owners don’t get charged if customers simply see their hotels on OTAs. Hotel owners pay the hefty commission if travelers book through the OTA.
  • Book Direct… Hotel owners should push to have guests book directly with them. Guests should use Expedia to search for the best value in hotels, but if they are booking through OTAs, hotel owners pay for royalties and OTA fees. If guests book directly with the hotel owner and brand, hotel owners benefit because they dodge paying the OTA commissions.
  • …and Invest in Loyalty. Of course, hotel owners need to recognize that it’s so easy for guests to use Expedia and Priceline. Utilize loyalty-building resources. Booking direct provides the opportunity to give guests loyalty points, and loyalty strengthens relationships between guests and hotel brands. Guests benefit from additional loyalty points and increasingly improved service from a long-term relationship with a brand, and hotel owners enjoy that loyalty in the form of increased bookings from repeat business (without paying commissions). If those points cost hotel owners 10% through direct booking by giving out those points, it is still cheaper than guests booking through Expedia and collecting a commission of 15-30%.

Marriott, IHG, and Hilton are some of the brands that have strong loyalty programs where guests earn free points for staying at affiliated properties, but if hotel owners are going to overcome high commission fees, action needs to be taken earlier rather than later. Appeal to hotel companies for higher degrees of support. This is something we are seeing more often now, and many hotel brands are actually asking their franchisees to leverage them further.10 Larger organizations like AAHOA can and already have taken steps to protect hotel owners.11 We’re confident in the ability of hotels to unite and overcome arbitrarily high commissions, and with strong efforts, hotels will be an even better real estate investment than they already are.

Sources

1. “AccorHotels Finds Competing with Expedia is Harder than Expected.” Skift.  Jul 31, 2017.
2. “Hyatt Isn’t Abandoning Expedia Just Yet as the Two Sides Reach Agreement in Principle.” Skift. Jul 31, 2017.
3. Schaal, Dennis. A Timeline of Online Travel Agencies Battles with Hotels and Airlines. Skift. Jun 21, 2017.
4. “About Us.” Expedia.
5. Page, Vanessa. “How Expedia Makes Money.” Investopedia. Aug 5, 2015.
6.Mandelbaum, Robert. “An examination of hotel labor costs.” Hotel Management. Nov 21, 2016.
7.Hobica, George. Battle Heats up Between Airlines and Online Travel Agencies. Airfarewatchdog. Oct 25, 2016.
8.chlappig, Ben. “British Airways will Start Charging a Fee for Many Third Party Bookings.” May 26, 2017. One Mile At A Time.
9.“Court Orders American Airlines Flights Back on Orbitz.” Consumer Reports News. Jun 2, 2011.
10.Mest, Elliott. “Hotel brands urge franchisees to leverage them further.” Hotel Management. Aug 21, 2017.
11.HNN Newswire. “AAHOA takes a strong stance on OTA issues.” Hotel News Now. Nov 9, 2009.

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Why Dual-Branded Hotel Developments are becoming Increasingly Popular

 

Dual-branded hotels are establishing themselves as a norm in the hotel industry. Several hotels of this kind have cropped up all across the world. As of January 2015, a study done for the 2015 ALIS conference showed that in the U.S. alone, there were 79 operational dual-branded hotels with 54 additional being under construction. According to this research, a projected 32 percent increase in dual-branded hotels, across the top three hotel brands: Marriott, IHG and Hilton.

A dual-brand hotel is a property that contains two different hotel brands, at a single location. For example, if a developer or investor was responsible for organizing a dual-branded project, they would be able to use Holiday Inn and Holiday Inn Express, or a Holiday Inn and Staybridge Suites concept. Often referred to as a “dual pack”, such hotels have been constructed and have operated at an extremely high efficiency rate for several years now. A couple of the more popular dual-brand hotels include the 65 storied Courtyard-Residence Inn in Central Park, NY—which is the tallest hotel in all of North America and the L.A. Live Complex which includes an 879-room JW Marriott and a 123-room Ritz Carlton.

What are some advantages of the Dual-Branded Hotel concept?

There are plenty of advantages associated with dual-branded hotels. First of all, hoteliers and developers enjoy the ability to tap into two different customer bases instead of only one. Here, hotel owners can fill up their hotel rooms by targeting different demographics, stay occasions and price points — stemming from the business traveler, to the extended stay visitor and family travelers. Each hotel brand focuses on a particular set of guests, whether that be millennials, gen-X’ers, or boomers. Additionally, each brand in a dual-branded hotel, offers different amenities but aims to consolidate many back-of-house expenses and costs, ie.) laundry, staffing, etc. Hoteliers are able to take advantage of the possibility of travelers and prospective guests experiencing new brands and what they offer, and ultimately becoming loyal-long term clients.

The potential for growth is in the ability to reach a more diverse group of travelers, such as those in need of extended-stay amenities versus others in search of a full-service hotel. Guests of a dual-branded hotel now have the ability to choose which amenities they want depending on the brands at play. For example, consolidating things like a swimming pool, fitness center, and meeting rooms allows the developer to build a nicer version of it. You essentially have two development budgets sufficing one amenity that guest of both properties can use.

Not only does a dual-brand hotel cater to a wider customer base, it also allows developers and hoteliers to save on costs as well. Generally, when you think of two hotel brands, you think of double the costs, but the reality is that there are some significant construction cost savings. You have some unique economies of scale at play. One of the great advantages of dual-branded hotels is that they are “designed to maximize resources while minimizing costs for owners and developers,” according to Ian Carter, the president of global development for Hilton Worldwide. Operational costs will be low considering that certain areas of the hotel, such as the laundry room and employee facilities, will be combined. Also, land costs will generally be lower because the footprint and site plan will consist of only one building. Additionally, from an operational standpoint, not only are construction costs decreased, but costs for staff and sales and marketing departments as well.

EquityRoots - Hotel Real Estate Investments Platform

Already in Motion

Although the dual-branded hotel seems to be a pretty normal trend in today’s booming hotel development industry, there are signs that this hotel concept has marked its spot and continuing to expand in popularity. At the moment, hotel owners and existing properties are starting to flirt with the idea of carrying three or even four flags from different hotel brands in one single location. Hilton Worldwide has already built a “three-pack” hotel in Canada which combines a Hilton, Hampton Inn and Homewood suites. Also, there are some properties out there that are starting to combine different brands from different hotel families while still maintaining each brand’s unique identity, such as White Lodging’s, Chicago River North project, which includes a Hyatt, Starwood and Marriott flag under one roof.

Your Hotel Investments:

Lastly, there are companies and tech platforms, like EquityRoots.com, that have decided to jump on board with the dual-brand hotel concept and explore the possibilities it has to offer. Currently, the crowdfunding company is scheduled to break-ground on a dual-brand hotel project in Schaumburg, Illinois. Specifically choosing two IHG products (Holiday Inn and Holiday Inn Express) to create a dual-brand hotel that captures 100% of IHG’s transient travel segment. Experienced developers, and crowdfunding platforms such as EquityRoots.com, have taken advantage of the dual-brand concept in order to maximize investor returns and investment profitability. Given the competitive advantages over single flagged properties, EquityRoots.com strongly believes that a dual brand hotel investment will out perform its single flagged counterparts.

Sources:
http://www.cnn.com/2014/06/09/travel/hotel-two-pack/
http://www.bu.edu/bhr/files/2016/02/Dual-Brand-Hotels_Winter16.pdf

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My Home Away from Home — How Brand Loyalty Affects Hotel Industry Investments

by Kernisha Padilla 

 

I was recently asked to attend a conference in another state and was given the choice of hotels with a per diem limit. I was ecstatic at the thought. Why? Well I finally had the freedom to stay at the hotel of my choosing, which means I was looking for a place where I was most comfortable; in essence— a place that could be my home away from home.

 

My Home Away from Home — How Brand Loyalty Affects Hotel Industry Investments

 

We all have preferences in life and we stay loyal to certain brands, regardless of the array of options available to us.  Not only do we do this with choice of hotels, but everyday items as well. Take a moment and think about your choices for grocery stores, the toothpaste you used this morning, the coffee you drink and the type of computer you’re reading this from. All brand choices no doubt, which means we all are subjected to a sense of brand loyalty that manifests in numerous ways.  Brand loyalty is real and plays a key role in our everyday thinking. Our choices are often so engaged with brand loyalty and we do it so consistently that we often forget we are even making such choices anymore.

Ultimately brand loyalty was the motivating factor when I made my conference hotel choice. It came down to the top three hotel groupsMarriott, Hilton and IHG (Intercontinental Hotel Group). As far as the hotel industry is concerned, brand loyalty is one of the greatest driving forces behind the industry’s success. Marriott, Hilton and IHG marketing principles and driving forces towards increasing their brand loyalty is commendable. The reasoning is obvious; a large and loyal customer base yields an increase in profits for each of the hotel groups. Success through the expansion and growth of their assets and guest loyalty is a must for the hotel industry in today’s ever-expanding market.

 

 

EquityRoots - Hotel Real Estate Investments Platform

 

 

Brand Loyalty— What is it?

 

Brand loyalty is a surprisingly easy concept to understand. It is the extent of the faithfulness of consumers to a particular brand that is expressed through their repeat purchases and occurs irrespective of the competing brands. The choice of a brand in essence becomes less based on logic and rationale and becomes more of a go-to decision.
Taking a look at the hotel industry, brand loyalty is often supported by key factors that attract their customers and following. The availability of a wide range of hotels at different price points, and in different segments, all throughout the world means that hotel brands are looking to foster a deeper connection with their guest and cater to all of their personalized needs. Most travelers are seeking hotels that provide a good combination of key amenities, such as free internet and hot breakfast combined with a consistent quality standard. Expanding upon this, hotel owners have added the use of loyalty or membership programs to keep their customers coming back.

 

Why does brand loyalty matter?

 

The mere sheath of availability of the top three hotel groups alone means that there are approximately 10,000 hotels that have a large loyal customer base. Out of these 10,000 hotels, Marriott alone has 19 brands with approximately 4,500 properties in 87 countries worldwide and hundreds more in the development pipeline.  The long awaited acquisition of Starwood Hotels by Marriott will officially make them the largest Brand, with the largest brand loyalty following. Hilton offers over 13 brands, totaling 570 properties across 6 continents. IHG has over 5,000 properties through 12 brands across 100 countries. If the vastness and potential of the hotels to attract such a loyal customer base doesn’t attract you to learn more about brand loyalty I am not sure what will. Think about it. Each of these hotel brands has to invest such a large amount of resources, time and strategy in building protocols unique to each of its brands, positioning it to capture different market segments and different types of travelers, ensuring that their hotels and affiliate brands all are connected and attract more customers.

What’s the best way to get guests to stay loyal to the numerous hotels each group offers? The offering of a loyalty and membership programs that spans each group. Marriott, Hilton and IHG offer loyalty programs that are based on a tiered or membership level; meaning that every customer that remains loyal to the brand has a potential to earn rewards from their stay ranging from an increase in amenities or an upgraded room to free hotel room stays and airline points. These loyalty programs are individual based, rather than company or group based, which means that regardless of who pays for the room, the actual guest earns the points for later personal use.  This is important to note because many corporations book employee travel for training, seminars, meetings, etc.  And although the employer pays for the room, it is the employee (guest) who earns the loyalty points, often using them later for family vacations.  Each hotel group has found a system that works best for them, feeding off of the feedback from their customers and their needs.  This is why brand loyalty is so important. The goal is to increase the hotel’s customer base through the use of brand identity. In essence, to have an emotionally backed choice for the hotel that makes the customer feel as as if the hotel is their home away from home— familiar but one they would choose irrespective of the competition.

 

So what does brand loyalty have to do with investments?

 

Put simply, investments are driven by interest and the ability to lower risk as much as possible. While no real estate investment can ever be fully guaranteed, there’s something to be said about a hotel investment that carries a Brand License with a steady history of customer loyalty and a large customer base. The effort that the hotel brands put into their loyalty program helps to lessen the risks of investing into this type of real estate.  A Holiday Inn Express performs with a certain sense of stability and predictability than… let’s say Bob’s Bed & Breakfast.

If you’re looking to invest in a hotel, be honest with yourself. While investing generally involves making logical, calculated risks about land and construction cost, make sure to take into account the brand’s loyalty as well. While brand loyalty may often become a subjective decision on behalf of the customer, the success of such loyalty should speak volumes to an investor. Brand loyalty shouldn’t be overlooked. The ability for the major hotel chains and their various brands to attract such a grand following helps ensure that a licensed investment in such an establishment would be worthwhile. As a frequent traveler you wouldn’t ignore your natural brand loyalty and you shouldn’t do so when considering investing in hotels as well.

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Independent Hotels: Using Soft Branding to Gain Advantages in the Hotel Industry

3 min read

Soft Brands and Independent Hotels Starting to Make an Impact in the Hotel Industry

Independent hotels are not a new trend in today’s hospitality world. This concept has actually been around for some time now. These are hotels that neither belong to a hotel chain nor are they linked to any central reservation system. Over the years, independent hotels have been trying to scratch the surface in terms of obtaining a piece of the action. In other words, it has been a tough road for them to acquire some market occupancy shares in the lodging industry when they have to compete against the likes of the already established hotel chains such as IHG, Marriot International, Hilton, and Hyatt.

Part of the issue for independent hotels is that they don’t have enough resources—meaning that they don’t have the necessary distribution channels and marketing support like a hotel chain would have. In addition, these hotels are already at a disadvantage because of the lack of a loyal customer base. For example, there is no frequent guest program which offers rewards. As a result, independent hotels have to resort to a terminology called “soft branding” to target and develop a loyal customer base.

EquityRoots - Hotel Real Estate Investments Platform

What is Soft Branding?

According to Cindy Schoenauer, a senior consultant of PKF Consulting, Inc., soft branding is an opportunity for independent hotels to keep their reputation as an independent boutique hotel while benefiting from a global reservation system with a proven track record for sales and marketing efforts. Here, independent hotels are gaining tremendous momentum in the area of distribution through universal distribution systems and through internet coverage. They are also teaming up with major hotel chains to have access to their customer base in exchange for a franchise fee. By capitalizing on soft brands, independent hotels are making an impact in major markets and in special resort locations.
Furthermore, while using the resources of branded hotels and taking advantage of third-party distribution systems to target prospective guests, independent hotels still manage to be different and retain their individual identities. Here, independent hotels take into consideration what their customers prefer and what they are fond of when using a particular product or service.

Ideally, hoteliers want to create independent hotels that will connect them to a specific niche within the consumer base in the hotel lodging industry. They hope to attract consumers who express an interest in hotels that can identify with their own lifestyle or personality. There’s no doubt about it, independent hotels and boutique products have taken a new approach in catering to a niche market like Millennials, and have proven to become profitable in doing so – but the overwhelming majority of new development is still led by the select-service products catered towards a corporate traveler offered by chains such as IHG, Marriott, and Hilton.

Learn More About Soft Branding | Contact Equity Roots

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