What’s the future of hospitality brands? - Insights

What’s the future of hospitality brands?


future of brandsAs part of the Window 2 the Future Summit held recently at the Ecole hôtelière de Lausanne (EHL), a roundtable discussion with three leaders in the hospitality industry was convened to discuss emerging trends in the industry.

As part of the Window 2 the Future Summit held recently at the Ecole hôtelière de Lausanne (EHL) and co-organized by Lausanne Hospitality Consulting (LHC), a roundtable discussion with three leaders in the hospitality industry was convened to discuss emerging trends in the industry.

Participants included:

  • Jörg Arnold – General Manager, Hotel Storchen, Zurich
  • Andrew Katz – Partner, Prospect Hotel Advisors, London
  • Ted Teng – President & CEO, Leading Hotels of the World

When big brands merge, the individual brands within the new merged group are often at risk of losing pride in their brand essence and struggles to maintain a strong identity arise.

Case in point: when big brands decided to go asset light, they no longer felt obligated to implement the same brand standards that owners used to. Big hotel brands have traditionally wanted it all their way–with long, unencumbered contracts, set incentive fees and other terms that protect their fee streams and duration of contracts. But bargaining power is shifting as investors demand shorter-term contacts and fewer encumbrances.

So, when your parent company is now imposing its management style and operating principles, how can acquired companies make sure their brand survives the merger or acquisition? How can they maintain their overall brand perception?

Branded or not? It depends on customer acquisition costs

Originally, big hotel brands were hired by owners to do customer acquisition and run operations. Now, given OTAs and professional hoteliers (trained by big brands) are available at small management companies, the big question is, what are brands are going to do in the future?

The strategic decision to become part of a big brand needs to be made on an asset-by-asset and owner-by-owner basis.

For example, if a property is located in a vibrant city center near demand generators, business and customers can be more easily obtained.

In a “B” location, however, finding customers will be more difficult and time-consuming, and owners should “rent” a brand to get access to customers.

As a result, these decisions will not be a one-size-fits-all undertaking.

Social media and great content help hoteliers offer a “unique feeling propositions” and the possibility to reach and convert a well-targeted audience.  In the future, artificial intelligence, profiling, Google and Facebook may further facilitate this process. Yet, the challenge is to reach customers with a reasonable cost of customer acquisition.

What role will outsourcing play?

Many hotel functions (e.g., housekeeping, Food & Beverage and revenue management) are already being outsourced.

“Why have laundry facilities in the most expensive real estate in the city?”, observed one of the speakers at Window 2 the Future. Revenue management, e-commerce, digital marketing, and technology are other areas increasingly being outsourced.  On the other hand, speakers advocated switching from “customer hunting” to “customer farming”, hence more insourcing of customer acquisition.

The panelists predicted that outsourcing will continue to grow as financial investors question all aspects of operations and push owners to change. This is especially true for larger companies who can take advantage of division of labor and economies of scale. Luxury properties, in contrast, typically outsource less so they can maintain tight control over service and quality.

What’s new?

The hotel industry is a slow changing industry.  With the exceptions of distribution and hotel ownership structures, what has changed in the past 30 years?

The total travel base has doubled in the last 20 years and should continue to increase and provide opportunities. Looking into the future, new destinations (e.g., Vietnam, Croatia) that were not even considered a few years ago are surfacing, and new sources of customers such as Brazil and China are emerging as well. Human beings, creatures of wanting to discover, are going to new destinations. This may become more challenging for some hotel brands not present at these new destinations or not reaching these new customers.

On the topic of customer data, panelists agreed that hotels should get rid of the annoying surveys that hit your email post-departure. Customer surveys are one point of data, but there’s a wealth of information already in the public domain (for example, via Google, TripAdvisor, Instagram, and others) that can be harvested to get a clear picture of how a property is doing. Ideally, operators want live stream feedback throughout the entire customer journey, so they can resolve issues immediately. The question remains of how to actually get this kind of real-time feedback.

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