Boston is a city known for taking a stand: Boston Tea Party, David Ortiz. ‘Nuff said. Lee Pillsbury? While Pillsbury, co-founder of private-equity firm Thayer Lodging Group, may not have the notoriety of Larry Bird, he took Boston by storm during April’s Hotel Equity & Lender Perspectives Conference (HELP).
Pillsbury, who was CEO of Thayer before it was sold to Brookfield Asset Management, and also had a past career with Marriott, was at HELP to deliver a keynote address. Keynotes, usually, can vary from bearable to snooze fests, but Pillsbury, well, he took to the stage with gusto.
It didn’t take too long for him to make his most salient point: Hotel brands are losing value. Pillsbury, not a few days after I posted a story on the show, emailed me, writing: “I didn’t hear anyone from any of the brands dispute that.” And he’s not begrudging the brands; no, he’s frightened for them. He told me this: “Their challenge is to maintain and build their value to the consumer and to the owner. And the challenge is not getting any easier with companies like tripBAM, TripAdvisor and, soon, Google, Facebook and Amazon." That’s like Murderers’ Row!
Brands, historically, have been a beacon for reliability—a known quantity. When you pop open a can of Coke, you know what the taste will be and the satisfaction that comes with that. When you power up your Apple MacBook, the glow staring you back in your face says, “You’re so cool.” And when you turn the key in the ignition of your Rolls-Royce—like I do never—the purr from the engine, not to mention the gorgeous wood paneling, signal British craftsmanship.
Isn’t it the same for a Marriott-branded or Hilton-branded property, or any of the other variety of hotel brands? When you pull up to a Marriott hotel and walk through the door, there are two certainties: a photo of Bill Marriott and his father, JW, hanging in the lobby and the promise of a consistent stay.
In a 2012 Forbes article by Lois Geller titled, “Why A Brand Matters,” the author writes: “In one sense, perhaps the most important sense, a brand is a promise. Think of some top brands and you immediately know what they promise: McDonald’s, Coca-Cola, Budweiser, Ford, Apple, MetLife. You know what you’re going to get with a well-branded product or service.”
Conversely, in another article titled, “Why Brands Don’t Matter Anymore,” the author, John Jantsch, writes: “Think about the last purchase you made. You went to a search engine, checked out reviews, asked your buddies on Twitter, and maybe even visited a few comparison-shopping sites. Most likely your purchase was influenced by what countless others said was the way to go—regardless of brand name or even brand recognition. Now, I’m not suggesting that having a strong brand isn’t a good thing; I’m merely saying it’s not enough anymore.”
And there lies the truth: It’s not that Marriott and Hilton aren’t great brand names; it’s that the advent of the Internet and social media has rendered them less powerful. Hotel brands offered the promise of reliability and safety, without having to do a lot of research to find out for yourself. You were assured of it. Now, with sites like TripAdvisor, travelers can figure it out for themselves with just a few mouse clicks. And instead of believing the brands’ promise, they are relying on the advice of perfect strangers. Strange world.
More so than anything else, the online travel agencies have eroded the power of hotel brands. Once control over inventory is removed at the scale OTAs have been able to wrest it away, brand sway is enervated.
One point lost is this: OTAs are relatively new. Expedia and Travelocity launched in 1996. If you think about cars, they’ve never been sold direct to consumers; that job is taken care of by car dealerships. And we never hear complaints from Detroit about outrageous commissions, etc. Same goes for computers (well, until Dell) and General Electric doesn’t sell you that refrigerator direct, Sears does.
Lee Pillsbury might be right that hotel brands are losing some value in the value proposition chain, but the brands themselves have never been more polished. It’s how they are protected that will decide their ultimate fate.