Hotel brands: good at confusing the marketplace
September 24 2014 09:57 PM
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W Hotel Doha and Residences

Six months ago during a conversation with a leading hotelier in Qatar, I asked a simple question to which I got a very terse response.

“Why are hotel companies so obsessed with segmentation and introducing multiple brands under a single umbrella?” I asked.

In a frank admission, he responded: “we like to confuse the customer.”

It was a short, sharp comment that clearly acknowledged marketers love to put into practice theory learnt in business schools.

My question arose because of a fascination with hotel strategy and corporate vision that has seen a plethora of hotel brands develop over the years.

The Marriotts, Sheratons, Hyatts, Hiltons and Accors of this world have all made a huge foray into the world of segmentation, creating sub brands to appeal to an evolving customer base looking for something that meets their different budgets.

In the US, hotel chains have grown accustomed to sub branding. Due to the nature of the frequent US travel corporate, always on the road, families and couples travelling cross country, hotels in various price bands emerged in huge numbers.

From budget, to mid-scale to deluxe and super luxury, the concept of sub branding spread rapidly to Europe, Asia and rest of the world over the past four decades. Not to say the variant price and service bands didn’t exist globally. They just mushroomed.

Airlines set the scene for the huge proliferation of brands.

Remember Le Meridien, the French hotel chain. It was once owned by Air France. Or Swissotel, previously owned by the old Swissair, and now part of a hotel operator that owns the luxury Fairmont and Raffles brands.

And there is Intercontinental, the doyen of hotel chains founded by the US giant of the skies Pan Am, now defunct.

These hotel groups became synonymous with quality thanks to high service levels of their airline parents of yesteryear.

It was a simple business philosophy; airlines flying passengers around the world on their jets and offering them accommodation at their hotels.

However, entering a business not core to their day to day operations was a costly exercise that eventually saw most airlines off load their property chains to concentrate on what they do best – flying aircraft.

But with air travel becoming such an important tool for both business and leisure which has seen a surge in the number of airlines connecting cities within countries, within continents and between points around the world, hotels were simply a necessity.

Differentiation, understanding customer’s needs and battling for competitive edge are key ingredients in a commercial environment in which all businesses are hungry to succeed.

Like the commercial aviation industry, the hotel sector is no different.

A hotel with a 24-hour concierge, a round-the-clock business centre and full length pool would be the difference between a five-star luxury hotel and a one category down four-star property without such services.

To build a brand is a tall order. It takes time, effort, energy, tremendous promotional support and, more importantly, customer buy-in to make a difference.

With ever-changing market conditions, businesses that are able to adapt easily and quickly to a fluctuating environment are seen to be visionary.

In the hotel industry, companies have for years been segmenting and significantly increasing their portfolios – and there doesn’t seem to be a stop to it.

We are in an age where the introduction of brands by the established players is becoming the norm.

In a bid to secure market share through scale, we have seen takeovers and mergers involving some of the biggest hotel chains, including the acquisition of the once airline-owned groups.

Important to note here is the widespread perception that hotel companies own properties. This is far from the truth.

To protect shareholder interest and not get tied down to owning expensive assets, most go down the route of management contracts or franchising.

The market is dominated by key players that have grown organically largely through acquiring hotel brands in different parts of the world.

Earlier this year, hotel conglomerate Marriott International boosted its fast growing empire by adding Protea Hotels – a collection of 126 three, four and five star properties across 10 countries in Africa.

Protea’s market presence as the biggest hotel chain on the African continent was one Marriott could not ignore. It will be interesting to see when, rather than if, Marriott adds its name to Protea to give the African chain a more international appeal.

Marriott has been by far the most active chain in the branding arena over the years. With over 4,100 hotels worldwide, there is nothing stopping this US-based hotelier.

Around 12% of the group’s properties belong to the Marriott Hotels and Resorts signature brand.

The rest are split across almost 20 different sub brands.

In 1995, it took the industry by surprise by acquiring the Ritz Carlton chain, a collection of fine hotels, to complement its upmarket JW Marriott brand giving it a stranglehold at the top end of the market. A smart move, indeed, of consolidation.

The swanky Italian luxury goods giant Bulgari ventured into the hotel business 10 years ago by forming an alliance with Marriott’s luxury division to open select properties around the world to cater for its upmarket clientele.

But it was recently that Marriott really stepped up a gear in a clear move to tackle rival Starwood, a 1,200 property international hotel group. More further into this column.

Starwood, whose renowned brands include Sheraton, Westin, St Regis and Le Meridien, made a mark with its chic W boutique brand that redefined the way traditional hoteliers have gone for business.

The runway global success of W since its introduction more than 15 years ago has been unmatched.

W’s mandate was to offer guests a contemporary iconic, lively, trendy and dynamic environment with mod cons thrown in to appeal to creative, music and fashion types. The concept quickly appealed to the traditional corporate market wanting to stay in a non-traditional property.

With its design-led lifestyle experience, the W brand was seen as the birthplace of boutique hotels among the big players.

There are currently 32 W properties around the world, the majority being in North America. With one-third of the 30 or so new developments over the next few years in high demand markets such as China and India, Starwood’s W brand has also unexpectedly excelled beyond urban centres to popular resorts.

In a move to take on W, Intercontinental Hotels Group ventured into the boutique sector with Hotel Indigo, which has a retail-inspired design concept. Interior design and public spaces are transformed periodically to freshen up the guest and visitor experience.

Since its Pan Am days, Intercontinental has had owners from the brewing and soft drinks industries. Today, the company operates over 4,500 properties across more than 100 countries. Of its nine brands, there is the ever-familiar Holiday Inn.

The addition of Indigo in 2004 with 40 now in operation mainly in North America, has given Intercontinental an edge in this segment, but will only make a difference when its expansion becomes truly international.

Six years ago, Starwood capitalised on the strength of its W brand by introducing another boutique division to its burgeoning portfolio. Aloft Hotels, a chain of North American city centre and airport properties, referred to as “A Vision of W Hotels”, entered the scene.

Aloft has quickly established a presence in over 100 locations worldwide, but has yet to have the same appeal as W.

A design-led brand, notable for its modern architecture and buzzy atmosphere, Aloft’s aim was to “encouraging socialisation” among guests with increasing emphasis on the Gen X and Gen Y traveller.

Confused?

Generation X, commonly known as Gen X, is the baby boom period of post Second World War, while Generation Y, or Gen Y, refers to those born from the 80s upwards and raised during the hi-tech years.

In ‘marketing speak’ this is also known as the millenial era. The young, savvy traveller accustomed to modern gizmos and intrigued by the next big thing, always looking for something different to the norm.

The emerging boutique brands at various price points, is certainly seen as the answer.

Hyatt, which has far fewer brands than Marriott, including the top-of-the-range Park Hyatt and the luxury Grand Hyatt, was relatively late in the game with boutique properties.

With currently only a handful of boutique hotels dotted around the world under the brand name Andaz, Hyatt is adopting a carefully selected approach to the stylish boutique concept.

It talks of offering a more inviting touch making lobbies more like a living room but typically with a similar guest profile as its rivals – affluent entrepreneurs, celebrities and professionals seeking a vibrant place to stay.

Still confused?

It’s back to brand supremo Marriott which has now arrived on the boutique circuit by taking W head-on.

Earlier this month, Marriott opened its first boutique hotel under the brand name Moxy at Milan’s Malpensa Airport with others set to follow in key cities around the world. Its USP is affordable rates aimed at the budget savvy traveller.

Designed for travellers looking for something fun, stylish and “a bit edgy” in a lively environment with a “buzzy” lobby and tech-savvy guest rooms, Moxy is seen as an alternative to traditional and often uninspiring economy hotels.

According to Marriott, Moxy reinvents the traditional economy hotel experience, yet taps into the W way of thinking.

The millennial traveller is also very much on the minds of single or dual brand hotel companies.

Far East-based Shangri-La created a mid-scale brand, Traders 20 years ago to cater for a business clientele that wasn’t necessarily prepared to pay five-star rates. But in line with the thinking behind Gen X and Gen Y, Shangri-La announced this summer it was rebranding Traders into Hotel Jen.

All Traders properties will be rebranded over time with the millennial traveller very much in mind. And technology will play a huge role with free mobile and free mobile charging stations, as well as offering guests more flexibility such as free snack boxes “on the go” after breakfast.

The Hotel Jen brand is inspired by the guest who loves life, travel and the adventure of discovering new places.

“We are recognising and responding to the global travel trends and particular needs of this new generation traveler. This will keep us competitive for the next 20 years,” said Shangri-La president and CEO Greg Dogan.

“They appreciate important things done well; demand quality, comfort and value, efficiency, together with an honest and authentic service.”

Brand integrity is vital for long term success which is why hotels spend so much money ensuring they can preserve their identity.

Ironically, as a parting shot, Marriott’s three hotels at the City Centre right here in Doha, have all undergone a name change just three years after opening.

The Renaissance Doha, Courtyard Doha and Marriott Executive Apartments are now simply called the Marriott Marquis City Centre, a welcome move to ease confusion in the marketplace about three properties housed under one roof.

Branding and the hotel industry truly are a fascinating combination.

 

*Updesh Kapur is a PR & communications professional, columnist, aviation, hospitality and travel analyst, social and entertainment writer. He can be followed on twitter @updeshkapur

 

 

 

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