Most hotel brands usually come with signing a long-term contract, like a franchise or management agreement. The focus of brand choice is often based on the contract’s conditions (price, duration, cancelation clause, etc.) rather than the deliverables. By deliverables, we mean what the brand brings to the asset. What you pay only makes sense when you compare it to what you get. So, what do you get, or what should you get?
This calculation has the following variables: recognition, market, image and guests. Please note that we have not mentioned contract conditions at this point. So what do these variables mean for the asset?
- The recognition: Firstly, the brand should save time for the asset owner, i.e., by signing up for this brand, I get immediate recognition and don’t have to spend time and money on building it.
- The market: Secondly, the brand should drive market share to my property, and it should drive more than if I don’t sign up for that brand.
- The image: Thirdly, I do not need to explain who and what we are because the guests already have a relationship with the brand and immediately understand what we’re about. This image should allow us to charge more than a non-branded version and, at the very least, put us on top of the choice list.
- The guests: Fourthly, the brand must have value for the guest. This guest identifies with their lifestyles and what’s important to them and can feel represented by tangible (design) and intangible (shared values) features.
In other words, the brand should have a brand value proposition and brand equity:
- A brand value proposition clearly states what a company’s product or services are offered to customers. The brand value proposition is a commitment made to target customers, including a reason as to why consumers should buy the brand’s products or services.
- Brand equity refers to the brand’s ability to capture customer attention and preference.
Examples of brand value propositions:
- Hilton: “To fill the earth with the light and warmth of hospitality by delivering exceptional experiences—every hotel, every guest, every time.” Or, “Above all, Hilton seeks to build loyalty among its customers by aiming to delight them and anticipate their ever-changing desires while ensuring that team members, who are essential contributors to meeting this objective, are also satisfied (and ultimately loyal).”
- Marriott: “To enhance the lives of our customers by creating and enabling unsurpassed vacation and leisure experience.” Or, “Creating life’s unforgettable moments—local heroes conceive them to create original experiences that provide lasting memories.”
- Ritz-Carlton: “We are ladies and gentlemen serving ladies and gentlemen.” Or, “The Ritz-Carlton is a place where our guests’ genuine care and comfort are our highest mission. We pledge to provide the finest personal service and facilities for our guests, who will always enjoy a warm, relaxed, yet refined ambiance.”
My aim here is not to promote brands but to highlight the importance of brand value proposition and brand equity when you choose it for your asset. In this way, we can “simplify” it down to two central questions: Does the brand’s value proposition suit your asset, and does the brand have brand equity in your market?
What to Do
Sound simple? The reality is, of course, complex, as we all know. So, what makes it difficult and what to do about it?
Too much choice! Some companies have 20-plus brands, making a choice very hard. The brand owners will recommend and explain but remember; the guests are everything! The key is knowing who your customers are and the value proposition that suits them. Secondly, check their other brand locations’ guests. Is this a match for your guests? Thirdly, ask your marketing persona (yes, real people), if they have heard of the brand. If not, all red lights should start blinking. Branding is marketing, so the brand must fit your marketing persona(s) and be known by them.
Asset types and locations usually fit certain brands (because they’re made for them). An example could be historical buildings in high-end city-center locations matching historical brands with high-end clients. You can play with contrasting brands and break the rules. However, you should try not to damage the asset and guest levels, which means you should have a product/brand that fits the location and its pricing level. Alternatively, have some brand/product features that allow you to drive profit, even if you’re out of the normal level. An example could be a citizenM with smaller rooms and high-end “oomph;” the square meter price is still high, even if the room price is lower than competitors.
What about highly branded markets with lots of brands present? This means that you DO need a brand. However, if your asset suits a Radisson Blu and there are already five of them in the location, can they handle and fill one more? It could be better to go for a similar but competing brand with less presence or go into a narrower “niche” market. However, it means that you need to be very sure of your source markets (where your business is coming from) and marketing personas. Brands are only known in some places, so you need to choose a brand that is known in your source markets.
Regional locations with no brand presence, ahh, now that’s interesting. On the one side, a brand will set you apart, but will it drive traffic? Driving market share is a critical concern. In general (without making it a definite rule), brands will be stronger in capitals and key cities/destinations (it’s their focus, of course). Even if the brand does not drive market share here, it may still drive more revenue because you have the image and can charge more. There are two concerns: Can the market handle a more expensive product? Or does your asset with the brand fill a real need in the market, i.e., a better midmarket product at the same pricing level that drives market share away from the competition? Concerning the brand driving traffic to this location: Focus on the demand generators in the area. Is there something at this location that the brand’s key guest types might be interested in? If yes, then the brand should be able to drive traffic; if not, go back to the first question.
Local or “closed” locations, visited by local travelers only and little foreign/outside traffic. This could be like the previous section. However, move cautiously since locally branded assets are likely to work better.
Vested interests! Most brand owners have targets and own agendas, i.e., we want this brand here. If it matches your asset and guests, go for it; otherwise, not! Make sure they give you a sweet deal since you’re simultaneously solving their challenges.
And now, please go back to the contract and ensure you get the best deal possible!
Blake Anderson-Buntz is managing partner of Horwath HTL.