Branding - SA hotel industry's weapon in war with digital brands

Gillian Saunders

Gillian Saunders, global leader for travel, tourism and leisure and head of advisory services at Grant Thornton said its latest research indicated a need for hotel groups to tackle the online travel agents, aggregators, and review sites, who are fast growing into dominant players for bookings. “In recent years the power of hotel group brands has waned. Online travel agents (OTAs) and metasearch platforms have grown in popularity, frequently making price or location the key differentiator,” said Saunders in the report entitled The Brands Dilemma: Hotels’ Roadmap to 2020.

“Digital brands such as TripAdvisor, which judge the industry from the outside, are becoming the true ‘go-to’ resource for travellers. In 2015, as in 2014, not a single hotel group appeared in Forbes’ ranking of the world’s 100 most powerful brands.”

Brand strength is what sustains SA hotels, but for how long?

Saunders said that while South African brands were still “lucky” in the sense that they could rely on their strong local brand affinity, it is increasingly important that they fully leverage their positive brand association and value, to stave off the increasing digital economy competition.

“Our local chains are behind the curve in reinforcing their brand competitively in the digital economy compared to the global chains. In some respects, they are lucky because they are so well entrenched in the South African psyche. International chains coming into South Africa have found in the past, that it was difficult to win market share over the strong local brands,” said Saunders.

“This brand strength is still sustaining the SA hotel brands, but it will not endure the onslaught from digital brands and the digital response of the global brands that, while ahead of the SA groups, are still also grappling to be relevant in a changing world. Business disruptors, digital power and connectivity and the fourth industrial revolution are challenging standard business models and brands and the hotel industry is no different.”

She said that local chains would have to up their game because the steady migration to different types of digital intermediaries would impact them, first in the international travel market and ultimately in all markets. “Foreign travellers are increasingly choosing their next stay through review sites, aggregators, search engines and OTA’s. Local hotels that rely on their brand penetration in the international travel markets will be forced to compete head to head with the sophisticated strategies of the online players,” she said.

In this modern booking environment, Saunders said two trends stood out as being particularly important for the future. Firstly, hotels had to speak directly to customers via digital platforms and build direct and personal connections with them in order to own the relationship with their clients and generate brand loyalty and even create brand ambassadors. Secondly, hotel groups needed to significantly differentiate their brand and their brand experience in order to leave each customer with a more personalised experience that kept them satisfied and wanting to come back.

According to Saunders, hotel brands which adopt the new way of doing business in a changing landscape early enough would do very well.

Grant Thornton identified six areas in which hotel chains globally and in South Africa, will need to focus:

1. Build the online brand

Online intermediaries do not have a monopoly on digital expertise. Many hotel groups are building stronger brands online, forging relationships with consumers to drive direct bookings. Hotels also need to accept that many consumers today are “mobile first”. International hotel groups are taking advantage of this. Hilton Hotels, for example, is launching a series of marketing initiatives in 2016 including its ‘Stop clicking around’ campaign, which urges travellers to book directly through its mobile app.

Saunders said it was imperative that hotels focus on engaging content that could build their own media platforms including websites; social media and mobile sites.

2. Reach out to influencers

Another global trend that local chains could use is influencer marketing which works on a number of levels. Last year, the Marriott Hotel chain’s ‘It pays to book direct’ campaign featured YouTube personality Grace Helbig. Celebrity endorsements are also becoming more common. The Mandarin Oriental Group’s ‘He’s a fan, she’s a fan’ campaign, for example, has recruited actors and models to support the brand.

Brand association, such as working in partnership with well-known chefs to develop menus and thereby enhance the overall hotel brand profile, is another popular tactic.

3. Segment the brand

Internationally, segmentation is a tried-and-tested tactic for many hotel groups, enabling businesses to target niche market audiences using a customised brand identity. Many of the global groups have “lifestyle” brands aimed at younger markets and other newer chains design and operate for millennials; CitizenM being a leader here. The key is to build a detailed understanding of the niches your brands are designed to serve while working hard to avoid brand confusion through too many “sub-brands”.

“You must understand exactly what your customers want,” the report says. “It’s about building a brand tailored to the specifics.”

4. Deliver the experience

Guest experience is key to brand differentiation. Groups that engage meaningfully with consumers create ‘brand stickiness’. It all comes down to building a personality. Angeles Alarcó Canosa, president of Paradores de Turismo, said the company had developed three separate sub-brands offering distinct deals. Its Naturia hotels focus on the natural environment; its Civitia properties in cities focus on business tourism, and its Esentia chain consists of buildings of historical value.

“Often South African brands are caught napping with regard to experience and communication. Even your average business traveller experience has to be more than just a bed,” said Saunders. “The experience must be tailored to suit their needs from digital communication to the layout, lighting, and temperature of the room. South African hotels are – in many instances - miles behind in this regard.”

5. Focus on the physical estate

Despite all the talk about digital, hotel groups should not lose sight of the brand significance of their physical estate – the look and feel of their hotel properties. Canny investment adds huge value. Starwood sub-brand Ace Hotels bought the Crowne Plaza hotel in London’s Shoreditch out of administration in 2012 and restyled it to reflect the fashionable location. Last year, the property sold for £150-million.

Local groups could do more and think about incorporating technology into their properties. Sensor technology, smart devices that can personalise anything from restaurant offers, room temperature to television channels, for example, would assist hotel groups to better personalise and optimize the guest experience.

6. Consolidate for scale and power

Hotel groups that can build global portfolios of scale will find it easier to invest in the digital development needed to keep up with the curve. Further consolidation is possible in the South African market allowing for groups to further leverage brand affinity and introduce scale to take on the online aggregators, agents, and reviewers.

The deal still faces some hurdles, but Marriott International’s takeover of Starwood Hotels & Resorts was finally agreed in April. The merger is partly predicated on this ‘consolidation’ theory, and may herald a few more such deals in the sector at global regional and national level around the world.