Do hotel brands still matter? The answers to that question vary, not surprisingly, depending on whom you ask. Query the head of a major hotel chain, and he’d tell you absolutely they do. Pick the brain of an industry pundit or academic, and they’d argue the opposite, citing commoditization and consumers’ adherence to price.
But perhaps the answers aren’t as important as the question itself. Every time a new brand is announced, some within the industry roll their eyes and dispute its necessity or need. But lately, those individual protests and the underlying questions of brand validity have reached a boiling point.
Exacerbating the debate is the influx of new brands hitting the market. Hotel veteran John Russell, who during the past five years has personally launched two new brands, put the tally at 35—in the past 35 months. Bjorn Hanson of New York University’s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management has his own strong estimate: 60 new brands announced in the past six years. That includes brands that were announced as though they would be the first in a series of hotels, with at least some planned future development in the United States.
Such a noticeable bump in supply—and competition—is a tough pill to swallow for cash-strapped hoteliers.
But there exist other sources of heat fueling this conflict. Peter Yesawich, chairman and CEO of Ypartnership, suggested two in particular.
1. Price and value
First, the macroeconomic decline experienced during the Great Recession has shifted consumer priorities like never before. This is the dawning of the age of price-consciousness and value, Yesawich said. Travelers are more likely to seek out hotel rooms based on rate rather than the name emblazoned on the side of the box.
chairman and CEO
Ypartnership’s 2010 Portrait of American Travelers survey confirmed as much. Out of a list of 30-some attributes that influence booking decisions, respondents rated “room rate” the most important—followed closely by “value for the price.” Where falls the “brand name of the hotel/resort?” You’d have to look further down the list at No. 14. (Notable was the attribute that ranked a spot higher: “free Internet access from guestrooms.”)
Complementing this shift in purchasing behavior is the accessibility of price-comparison shopping with online travel agencies and meta-search engines. Hoteliers have long bemoaned the evils of websites like Expedia, Priceline and Travelocity, which allow consumers to search and buy rooms based solely on price. Industry professionals play victim in return, crying foul over allegations of unwelcomed commoditization of their vastly diverse product offerings.
“People say, ‘I didn’t stay at a Marriott or Holiday Inn, I stayed at an Expedia hotel,’” said STR co-founder Randy Smith during the keynote address at this year’s Cornell Hospitality Research Summit.
2. The rise of gen Y
The second factor fueling the debate is a fundamental shift in demographics. “As the next generation of travelers begin to impact the business … one of the things that’s very clear to us is that their brand preferences differ quite dramatically,” Yesawich said.
“Millennials”—the term has become something of a dirty word in the hotel industry, representing an overly demanding workforce that requires coddling and adherence to personal preference. But workplace issues aside, this demographic also represents an increasingly powerful segment of travelers.
They’re fickle. They demand authentic guest experience. And above all else, “millennials are less brand loyal,” Yesawich said last month during a panel at the AH&LA Hospitality Leadership Forum.
Where do we go from here? Do we through in the towel, halt development and shut down the creative outlets behind some of the most exciting new brand concepts?
Of course not.
If Yesawich was clear on anything, it was the fact that brands still matter. “It’s not that brands are unimportant,” he said, pausing for emphasis. “They’re just less important.”
So while the hotel industry must keep churning the wheels of progress, it must do so smarter. It must take into account the changing landscape and the changing needs of travelers.
This special report aims to point the hotel industry in the right direction. It starts at the beginning, exploring the creation of the brand in an attempt to understand the sudden swell of them. It then examines how to differentiate brands in what many consider an overcrowded, commoditized market. Finally, it casts its vision forward, offering some predictions on what the future holds for brands and their place in the industry.