Branding in Hotels.
By Patrick Goff
Thursday, 26th January 2006
It is the grain of sand that irritates the oyster that makes a pearl. Grains of sand are irritants in machines and engineers try to remove them to ensure smooth running. Smooth running is routine. Routine does not foster innovation or change, but inertia and, eventually, decay. No grain, no gain!

In the UK we mourn the 'homogenization' of our high streets, but here the retail is the area where the chains dominate - every high street with the same shops. In Europe the balance in the hotel market between the homogenized chain and the unique individual property has been healthy with only 20% or less of hotels etc. being chain owned. The small independents have proved to be places of style and innovation, spawning the boutique movement, new approaches to design and operation in dozens of bars and restaurants across the continent (as well as serving up sometimes decrepit hotels with poor food and awful standards - you get both extremes).

Now the story is changing. In France for the first time the chains approach 30% of rooms as independent hotels and the famous zincs (pensions and bar cafés) slide out of business, killed by concepts of employment protection, the working time directive and punitive taxation levels. The result is a growth in the number of French hotel rooms owned by international brands as a proportion of the overall ownership of the hotel industry.

Branding is becoming the prime marketing concern for the international hotel industry. The US market is dominated by the brands with an estimated 80% of rooms owned by major chains. The chains are eagerly pushing into China to try to build up brand loyalty there, amongst a third of the world's population. It has resulted in some truly boring and unadventurous hotel design, although there are exceptions to this as there are to every generalization. In Europe the variety and competition from the smaller hotelier has kept the chains on their toes in design and operational terms.

Whilst tourism and occupancy rates have risen, the cost of development has risen too, putting smaller players at a disadvantage. For the large brands the issues are how to manage the branding across continents. As travelers increasingly use the web to book (over 50% of some major chains bookings are now generated over the web) they see branding as a quality mark. There is no agreed international standard for judging hotels, and the star system doesn't work, as a five star in one country will be equivalent to a lower rating elsewhere. Sometimes stars are awarded without physical inspection, or the payment the rating authority receives warps its judgment and the award of the rating is inappropriate for the hotel visited. This just leaves the brand as the quality mark.

The management of the brand standard becomes a major issue for a company, with not only differentiation between its own brands being at stake, not only the perception of the brand by the guest, but also the perception of stock holders and franchisees and thereby the value of the company itself. Within a brand the management of innovation can be problematic. The imposition of standards can lead to the stifling of any variation from those standards in the interests of maintaining an equality of experience for the guest – no variety or innovation means homogenization. Everything will tend to drift to the lowest common denominator.

The challenge for chain hotels is how to manage innovation. How does the group stay at the front of design and innovation in the provision for its guest as, briefly, Le Méridien group did? How does a hotel stay ahead of domestic changes so that the ‘wow' factor is still present in its properties? It can be done, but skillful management and genuine leadership are needed. What are a company's policies on innovation and design leadership? How does it plan to avoid perhaps not an actual decline in standards, but a perceived one due to a failure to raise them as the rest of the hotel world moves up market? Maybe worse, is it becoming a boring brand?

If the trends to scale and international branding continue, spread, and lead to the collapse of the independent hotel groups in Europe, it may lead to the market dominance of the chains on this side of the Atlantic as well as in the USA. Then we will all be losers.

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