For instance, she cites IHG, which is concentrating on growth in three key segments – mainstream, upscale and luxury. “They announced a new brand, Avid, for the mainstream segment, which includes midscale and upper midscale. And in June, they revealed their new upscale brand, voco,” Kearns says.
“Marriott is also using segments to lessen the confusion on the brands and increase awareness with travelers and agents,” she notes. Marriott’s Starwood acquisition has BCD Travel’s attention, especially with their decision to keep 30 distinct brands.
“Then there is Accor’s acquisition of FRHI (Fairmont, Raffles and Swissotels) and their almost weekly announcement of other chain purchases,” Kearns adds. “They’ve taken on Mantra in Australia and most recently 21c Museum Hotels in the US. We all watched Hyatt announce their intent to make an offer for NH Hotels and then quickly retract it.”
Keeping Up Appearances
Hoteliers claim brands are important to travelers, but how do they impact the success of a corporation’s travel program? As more hotel brands come into the marketplace, the challenge for travel managers is to keep up with the new entrants and what their unique marketing promise is for travelers.
Pippa Williamson, senior vice president of sales and marketing for Shangri-La Hotels and Resorts, says constantly changing brands and programs can become a frustration to travelers and travel managers especially when there are so many brands and affiliations in the market. Therefore, the secret of success is to heighten brand awareness.
“Having a clean distribution model that supports the travel managers’ ability to book easily and with confidence is highly impactful,” Williamson says. “It’s important to not try to be everything to everyone.”
The consumerization of business travel has prompted a shift in traveler needs and expectations, according to Wes Bergstrom, vice president, hotel value and revenue management, American Express Global Business Travel. As a result travel managers and TMCs alike must embrace it and view it as an opportunity to meet evolving traveler expectations.
“Hotels are following the same path by creating brands that develop loyalty across a wide array of consumers,” he says. “We have seen a movement where travelers want the option to stay at more than one brand or chain. As traveler preferences change, so do our programs. We have more lodging content available to travelers now than ever before and this will continue to increase moving forward.”
Scott Brennan, chief growth officer at RoomIt by CWT, says the company maintains close relationships with hundreds of chains globally and are in constant communication with them to stay up to date on their new and emerging brands and initiatives.
“We work directly with these new properties or through third parties to ensure all offerings are relevant and adapted for each client,” he says. “Because every client’s travel program is different, we customize offerings to fit each client’s unique needs.”
Raise the Flags
Consolidation in the hotel business is certainly shaking up the industry right now, says Ross Hosking, vice president of sales and distribution for the Radisson Hotel Group. However he explains his company has made a strategic decision to not follow the trend.
“Several of our biggest competitors have 20-30 brands each through acquisition and they say they are going to continue. We differ from the rest in that we have seven brands, one for each category of hotels across the globe,” he says. “This makes it consumer and business friendly because it’s easy to know what you’re getting with clearly defined brands. Consistency within a brand is easier to create when you don’t have five or more brands within the same tier.”
Travel managers are challenged to create a safe, cost-effective travel program that not only meets their company’s goals, but also entices travelers to remain compliant. This is important because when travelers begin booking accommodations outside their company’s preferred hotel program, these out-of-channel bookings diminish negotiating leverage for travel managers reducing their ability to deliver agreed upon market share.
“With the consolidation of hotel chains, suppliers have more leverage than ever. In some cases, chains are choosing not to negotiate with corporate programs during the RFP season,” Brennan says. “In fact, most travel managers are willing to pay 8 percent more than their initial negotiated rate to guarantee last room availability. Unfortunately, that’s 5 percent too much. The actual break-even point on last room availability is a 3 percent rate premium or less.”
What’s the Deal?
Two strategies hotel brands employ to attract corporate programs are chainwide discounts and dynamic pricing. The latter works well when the hotel program has lower volume in a given market, meaning the travel manager is willing to navigate the ups and downs of the market and agree to ad hoc requirements. But that also makes forecasting and budgeting travel costs less straightforward, leading some organizations to desire the certainty and consistency of fixed pricing.
However there are still opportunities for negotiating rates, Bergstrom says, depending on the market and the size of spend. “Hotels that rely on business travelers also desire ‘base accounts,’ organizations with travelers who regularly use hotels year-round,” he explains. “Many prefer a larger number of smaller-volume base accounts over one or two larger accounts, and this can be leveraged to receive discounts and better rates. Areas where supply is higher than demand are ultimately the best locations for this approach.”
Kearns notes most brands look at their core market and use campaigns and promotions aimed at growing those businesses. For example, they may create standards that apply to all properties operating under a particular brand to help build loyalty among their target markets. An example of a standard might be a certain kind of pillow, coffee maker in the room or free breakfast.
“Brand differentiation and recognition assists the travelers in narrowing the field of choices,” she says. “Do they need or desire full service with a restaurant, bar and full staff? Or will a mid-scale brand offering complimentary breakfast, free parking and Internet fit the bill? The hoteliers want to be able to offer the right product for the right trip to their loyalty members.”
As Millennials continue to increase their presence in business travel, Brennan says RoomIt is seeing more chains cater to their call for customization by creating new, lifestyle brands that offer a more boutique atmosphere. “Apartment-style properties continue to grow in interest for business short-term stays, mimicking the leisure trend,” he says. “They often offer more choices and savings opportunities.”
Gus Vonderheide, VP of global sales, Hyatt Sales Force, notes wellbeing is a currently a top trend in the hospitality space. “As more guests and customers prioritize wellbeing, we are strengthening wellbeing touchpoints across our brands,” he says. “With the recently announced next generation of our Hyatt Place brand, guests will be able to access fitness and mindfulness programs, created by our wellness brand Exhale, in their rooms. This streaming content will also be available on demand through the World of Hyatt app.”
Brand Distinction
Hotels are using loyalty programs to entice travelers both to become first-time customers and then to bring their business back repeatedly. “It’s a big reason why so many travelers are willing to book outside of their corporate travel policies – so they can take their favorite brand’s points and apply it to leisure travel,” Brennan says. “Plain and simple, business travelers want points. And travel managers want their business travelers to book within program.”
That basic departure in priorities comes from a set of expectations born of today’s hotel shopping experience. Modern business travelers want the same flexibility and freedom from their company’s hotel program they would have when traveling for leisure. On the other hand, travel managers are tasked with lowering costs within their companies while increasing their traveler’s satisfaction and program adoption. The travel manager is looking for discounts, relaxed cancellation policies, complimentary WiFi, breakfast and other amenities that the traveler could not otherwise receive.
“Travel managers want to be assured that their travelers will not need to go outside of policy or outside of their booking tools to make their hotel reservations,” Kearns says. “These are important issues for travel buyers, which is why we invested heavily creating our traveler platform called TripSource, which offers over one million distinct hotel properties and rates from various content channels.”
However with hotels across virtually all price points already focused on delivering a high level of quality, consistency and security, it may ultimately come down to brand identity to offer key differentiators for both the negotiating and the booking decision.
“Each of our brands is rooted in research and designed for different guest mindsets, which can change depending on the purpose of travel,” Vonderheide says. “For example, for a leisure trip, a guest may select an Andaz brand hotel. When traveling for business, the same guest may select a Hyatt Place hotel.”
Hosking notes the secret to a strong relationship with a travel program is to consistently deliver the quality and value the hotel promises. “The guest experience is at the heart of that strategy. Our culture is ‘every moment matters.’ It’s the core of how we do business and how we treat our guests,” he says. “And we are third-party friendly and recognize the customers for their significance in our business mix as they continue to provide a valuable service to corporate customers.”
Effective communication and collaboration are essential between travel managers and their preferred hotel suppliers for developing a successful hotel program that fulfills the corporation’s – and the traveler’s – business objectives.
“At the end of the day, a travel manager’s fundamental responsibility remains the same: ensure the traveler is productive, happy and safe, while managing costs,” Bergstrom says. “By effectively understanding and capitalizing on data and spend patterns, you can develop a hotel program that streamlines booking processes, drives compliance and savings, offers the widest choice of accommodation content on one platform and optimizes leverage with suppliers to support your business travelers.”
