Be my guest - Hans Koch discusses independent brands

27 July 2016

In the world of hospitality – where huge groups, chains and brands dominate, and booking engines skim the top layer off margins – staying competitive as an independent hotelier may seem daunting. But there remains a strong captive segment of travellers looking for that individual touch and myriad means to attract them. EHMA president Hans Koch discusses the issue.

Recent months and the latest deals – like the merger of Accor and FRHI, or the intended amalgamation of Marriott and Starwood – have seen exciting developments that reverberated throughout the entire industry. International experts anticipate that such huge hotel chains will start fighting for pole position as the biggest player worldwide.

In addition, we have seen a trend of increased generic growth, expansion and acquisitions. These strategies seem
to be the preferred solutions for many hotel chains to successfully position themselves with different products, categories and in attractive locations, as well as to deal with current developments and an increasing pressure on margins.

To identify, respond to and cover the latest trends and needs, the number of brands and sub-brands is on the rise. According to MKG Hospitality, today’s top ten global hotel chains hold 116 different brands between them. Their goal is always the same: to capture and satisfy all types of guest, from individual to corporate and budget to top luxury travellers.

The plight of the individual

Despite the imposing numbers, however, independent hotels remain the majority around the world. According to analysts at Morgan Stanley, the above-mentioned top ten hotel chains only account for about a third of the estimated 17.5 million hotel rooms available worldwide.

Besides the new and ultra-rapidly growing service providers like Airbnb, classic booking engines such as Expedia and are giving every hotelier a hard time. They have extreme marketing power in today’s travel industry, particularly as booking windows are becoming increasingly narrow. A hotel typically pays more than 20–25% for bookings through such engines, and even more if they want to have a top listing on the engine.

Furthermore, there are newcomers in the pipeline, like Google, with extraordinary possibilities in terms of distribution and marketing, and with a great deal of data in their control. Such data becomes increasingly important in relation to acquisitions and consolidation of hotel companies – it often factors in even more than traditional criteria like destination and location when adding new properties to the portfolio of a company.

Swimming with sharks

So what do independent hoteliers need to do to better cope with the enormous pressure from and power of the various booking engines, and to avoid the very high, often unreasonable, commission?

The simple answer is: everything possible. Hoteliers must try everything within their means to reach potential customers through their own homepage and customer loyalty programmes.

Large hotel chains with diverse brands and sub-brands of course enjoy a big advantage compared with individual hotels here, as they often offer very attractive points programmes across their portfolios of hotels. It is obvious that data collected via such loyalty programmes will become increasingly important in the future and that companies, or even individual hotels, that fail to offer a working loyalty programme today will most likely face an additional challenge tomorrow.

One of the first things Marriott did after announcing its intended merger with Starwood was to reveal via Twitter that, in the coming months, the companies would develop a common strategy for the Marriott Rewards and Starwood Preferred Guest programmes.

The bare facts are that this merger will create the world’s largest hotel company, with 1.1 million rooms in over 5,500 hotels globally across 30 different brands and sub-brands. For private hoteliers, those developments and numbers are, of course, just soap bubbles. So what can they do to compete in today’s market environment while swimming in the same pool as the very biggest of the fishes?

A key strategy for independent hoteliers will be individualisation of respective products and services in the form of strong USPs. This can cover design, service, personality, quality, food… the list is very long. The good news is that the customers and clients of such individual hotels are among the most loyal: they will not jump ship to the next operator just because of points programmes covering more destinations and brands, while these customers also mostly don’t want to stay in chain hotels for their holidays or even business travel.  ?

For more on Google entering the booking engine market, turn to page 50.

Hans Koch is president of EHMA and official delegate for EHMA’s Swiss chapter. Throughout his 35-year career, he has worked at hotel operators all around the world, ranging from Hilton Internationalto ITC Hotels. He is also CEO of KKL Luzern Management.

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