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Brand is now the key to success.
Monday, 17th September 2007
Source : Hospitality 2010 by Deloitte
In the increasingly competitive hotel industry, recent trends indicate that brand is fast becoming the most important ingredient for success. This according to Hospitality 2010, Deloitte's latest research in the future of the tourism industry.

This should lead to improved experiences for hotel customers, both business and tourist.

Brand's role in saturated markets

"Hotels in Prague are traditionally differentiating themselves by their location, facilities, service and loyalty programs. However, brand is becoming increasingly important in the customer choice of hotels," says Gorjan Lazarov, Director of Revenue Strategy for the Prague Marriott Hotel, Renaissance Prague Hotel and Marriott Executive Apartments. "The supply of hotel rooms in Prague is growing at a rapid pace, particularly in the four and five star segment. The city has developed to a point where it is becoming saturated in terms of international hotel brand presence. In addition, many independent small boutique hotels have appeared recently and are ‘fighting' for their share of the market," adds Lazarov.

Deloitte's research has identified some key obstacles and challenges which go to the very heart of the hospitality business model, and which will need to be addressed if companies are to deliver their brand promises more effectively.

These include the difficulty of managing the brand of a regional chain of hotels to a similarly high standard; dealing with the new dynamic as Brand Managers become more important in the companies; and making appropriate development decisions on future properties to ensure the brand is not obscured by the chase for more revenue.

Dangers of hotel development

"Hotel operators are desperately seeking new properties to meet the current high demand for rooms. Development teams often have a capacity-driven approach, driven by growth targets and the size of deals rather than encouraged to follow specific brand criteria. While the brand team often has a role in the decision making process, ultimate authority tends to rest on the development side, and all too often the interaction between the two teams is weak.

The danger is that the pipeline of future hotel development may not match the strategic goals of the group. In some cases hotel properties have been opened in locations inappropriate for that brand, leading to inconsistency and a further dilution of the brand promise," says Jim Pickette of Deloitte Czech Republic whose clients include the Strategic Hotels and Resorts, owners of the Intercontinental Hotel in Prague.

Brand management and development integration

Close collaboration and tight structural interaction between the development and brand teams is crucial. Marriott is an example of how this can be achieved via a centralised development function which requires agreement from both operations and brand managers before a development decision can be approved. "Operations, development and brand teams, across both regional and central levels, must be integrated seamlessly if a hospitality organisation is to successfully deliver its brand promises," says Jim Pickette.

However, Deloitte has also pinpointed a further group of stakeholders who are the leading actors in the brand story – particularly outside of the budget sector – and whose alignment behind the brand is crucial: hotel employees. "Mid and upscale brands are discovering that in order to deliver a great customer experience they must first invest in creating a great employee experience," says Pickette. Employees must believe in the brand and deliver it every minute of the day – they must realise that every action and interaction reflects their company to their customers. However, managing the brand in this way is far more unpredictable and difficult to replicate than harder, product-driven brands.

Key benefits for customers

What does all this mean for customers of the hotels? In theory it should have two major benefits for customers:

  • Hotels will be striving to ensure that the experience of staying at the hotel and the interaction with the staff is of the highest possible standard – not only that the rooms are clean and the furniture fashionable. This should lead to a far more enjoyable hotel experience for all customers.
  • The drive to create a consistent brand across chains should mean that the customer gets a far more consistent experience wherever they stay in the world, which should result in a ‘raising of the bar' in many locations.
Factors leading to increasing importance of brand

  • Loyalty schemes, traditionally the preferred tool for winning and retaining hotel customers, are having a declining impact. Many hotel guests now own loyalty cards for all of the major chains, therefore such schemes are no longer a dominant factor in their choice of where to stay.
  • Many hotel groups are divesting their real estate interests and pursuing an ‘asset-lite' strategy in order to free up capital for expansion. Ownership of bricks and mortar is giving way to ownership of the brand itself, in both its physical and intangible aspects: a major cultural shift in the industry.
  • Hotel expansion is intensifying competition; most gateway cities, such as Prague, are reaching market saturation with leading brands sited close to one another, and travellers frequently spoilt for choice. There are now clear signs that hotel groups are beginning to recognise the importance of brand management within their organisational structure. However, this remains very much a work in progress.
Contact: Václava Seibertová
Deloitte Czech Republic
+420 731 621 411

www.deloitte.com
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