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 groups:  Marriott, 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.

 

 

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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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The New Industry: Hotel Crowdfunding

The New Industry: Hotel Crowdfunding

Crowdfunding has revolutionized the way people raise money to start new businesses, and the model has caught on in a number of other industries. Hotel crowdfunding is at the front of this new fundraising model. It gives investors the opportunity to cut out the middleman and invest directly in properties they believe in. Simply put, hotel crowdfunding gives everyone, from the seasoned investor to the newcomer, a way to invest in qualified hotel real estate properties.

 

How It Works

 

Potential hotel investors sign on with a hotel crowdfunding company, create their user profile and browse for deals they might be interested in. Once they find a property that fits their investment goals and budget, they can transfer funds and start their investment. Online dashboards provide feedback and information about each of their investments.

 

Who Can Invest?

 

Recent changes in regulation for the industry have made it possible for virtually anyone to own a piece of a hotel property. Investors fall under the categories of “accredited” and “unaccredited.” Accredited investors are those who have a special status under financial regulations, which typically means they have a net worth of at least $1 million or meet other income thresholds. Those who are unaccredited can still invest, but may be limited to certain offering types that become burdensome or take away general solicitation privileges from the sponsor.  And heck let’s face it, how are you going to find an investment opportunity if the deal can’t be generally solicited? That’s all about to change when crowdfunding companies like Equityroots.com take advantage of the newest securities laws such as Regulation A+, which carves a path for non-accredited investor participation.

 

Why Is Hotel Crowdfunding Becoming So Popular?

 

Besides hotels being an exciting and rewarding asset class, hotel crowdfunding offers a unique and innovative way for people to manage their money. They can invest in the hospitality industry without having to raise the capital to buy a franchise on their own, and they get the benefit of being able to invest alongside industry experts who know how to operate the property.  Many times, the investors are thinking about who they are investing with just as much as what they are investing in.  As of 2015, there were more than 300 securities-based crowdfunding real estate development offerings, and that number is only expected to get bigger as time goes on.

 

 

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Hotel crowdfunding is disrupting the traditional way of real estate investing, and it is also becoming a disruptor as a finance mechanism for large-scale projects. Investors can influence the outcome by choosing what they want to fund, and companies building hotels can raise the equity capital they need from the local community, or an online crowd of like-minded investors, rather than relying on some form of institutional Wall Street capital.  Money is money after all, no matter where it comes from.  Letting the masses have a shot at the risk and rewards is undoubtedly progression of our capital markets and financial Democracy.

 

Link: http://www.cnbc.com/2015/10/02/hotels-join-the-crowdfunding-craze.html

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Intrastate Crowdfunding, a Game-Changer?

Intrastate Crowdfunding, a Game-Changer?

The state of Illinois recently proposed a bill for intrastate crowdfunding. The intrastate crowdfunding law proposes the ability for unaccredited investors to participate in offerings that have a physical presence in the same jurisdiction where all investors are domiciled. For example, the intrastate crowdfunding law would allow all non-accredited investors that live or reside in Illinois to invest into a hotel crowdfunding project that is also located in Illinois.

So what’s the catch? All investors must be from Illinois. Not a single investor can reside out of state. Albeit, limitations in place— intrastate crowdfunding might be a solution for non-accredited investors that are often denied from investing into businesses. Despite being financially savvy and stable, many non-accredited investors are often prevented from investing under 506(c) public offerings. Many States are tired of waiting on the Federal Government and the SEC to finalize rules that would allow more unaccredited investors to participate, hence States have independently taken action into their own hands with State sponsored legislation.

House Bill 3429, regarding intrastate crowdfunding, in Illinois was well received by local business owners and entrepreneurs. The bill balances the needs of investors with the needs of businesses looking to raise capital. If and when the intrastate crowdfunding law becomes effective, EquityRoots.com will be on the verge of being able to allow non-accredited investors to participate in intrastate offerings. Equity crowdfunding could possibly be a workable source of capital and game-changer for Illinois small businesses and entrepreneurs. Check out the article published at crowdfundinsider.com for more information on the proposed bills regarding intrastate crowdfunding.

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