An interesting session presented by Michael Jones, managing director of Delta Squared, was called “Brand Evaluation – criteria, costs and benefits”, and looked at the pros and cons of signing up with a hotel brand.
Jones set the debate against the background of what he called “channel warfare” and stressed the importance of effective distribution, posing the rhetorical question: “What is the point of a brand if Bookings.com is delivering 30 per cent of my business?”
Jones went on to say that OTA commissions are costing 25 to 27 per cent of top line revenue, and that the recent CMA/OFT investigation in to online pricing has left the industry in a form of limbo. “The judgement went in favour of the hotels but didn’t help or change anything as it also forbade hotels from charging less then OTAs.”
Being part of a big brand delivers an effective website and booking engine – Hilton and IHG deliver around 70 per cent of their online traffic through their own websites said Jones. This is becoming particularly important with the rise of real-time mobile bookings – it is now essential to have this facility and it is very expensive to develop your own, whereas a brand can provide it.
Jones said the cost of carrying a big band amounted to $2 to $3 million annually for a 200 to 300 room hotel – or an average of 10 to 12 per cent of room revenue. “Some US brands are also charging a fee against F&B revenue,” he said. He also warned of the problems that can arise when disengaging from a brand: “Who owns the customer and the data?, the brand or the hotel? It can be difficult to get your customer information back from the brand’s central information system.”
He also said that the emergence of Google as a distribution channel will initially help both branded and independent hotels to find a cheaper route to market, but “whether they do that and then ramp up the prices remains to be seen”.
Hotels can use tools such as STR and Hot Stats figures to assess brand performance, said Jones, who pointed out that “franchised hotels are often less skilled at using the tools provided by the brands than managed hotels”.
Soft brands and consortia provide some of the same services as a brand for two to three per cent of revenue – a considerably lower price – and are worth considering if your hotel is in a primary location, said Jones, but be aware that they offer a limited range of services.
Major US brands are generally not particularly good with resort hotels, particularly in Europe, warned Jones.