By Manfred Abraham
Just as it did in 2011, the hospitality industry has stood resilient against the Eurozone debt crisis and wider economic challenges during 2012. Europe still represents the largest hotel and travel market in the world and, despite the uncertain environment, most cities are showing improvements in key hospitality measures.
This feeling of strength is mirrored across the globe as larger hotel groups make aggressive expansions into Asia. China is already the second-largest market for InterContinental Hotels Group, behind only the US, and the group is planning to nearly double its Chinese presence over the next five years. This will make it the biggest and fastest-growing international hotel operator in Greater China.
Looking past the figures, however, there are warning signs that the market has changed. Revenue per available room has been improving, but it still hasn’t recovered to the pre-recession peaks of 2007.
A new model suited to the post-recession digital consumer age involves delivering a branded experience that guests love — and for which they happily pay a premium.
Changing notions of value
While major hotel chains competed during the recession to offer heavy discounts, guests got used to the lower rates. At the same time, the ability to search online and seek “value clubs” and “fl ash sales” has made it far easier for consumers to compare and find deals on a desirable locale.
This represents a fundamental shift in consumers’ attitudes toward value, but it doesn’t mean that discounting is the way forward. In fact, some hotel brands are finding a low-cost, high-charge model that is perceived by their guests as good value. Current trends indicate that a new model suited to the post-recession digital consumer, age involves delivering a branded experience that guests love — and for which they happily pay a premium. This is the opposite approach to the “features war” that many luxury and premium hotels engage in to attract today’s sophisticated customers. At Interbrand, we call the new approach “post-glitz hospitality.”
This is a concept that goes beyond the idea of consumers valuing ostentation. Relevance, tailoring, and authenticity are the keys to success here. Post-glitz brands use only a selection of features that are truly relevant to their specific target audiences — such as superior service levels or informal dining — and they implement them expertly. At the same time, features that customers don’t need or that don’t fi t the brand are simply left out.
In New York, for example, the Americano Hotel offers a room service menu with only three choices fi t for the time of day. The meals (even the burgers) are served in bento boxes, which complement the hotel’s branded concept perfectly: a blend of ’50s chic and Japanese minimalist design, wrapped up in a Latin attitude. This convenient, no-fuss-yet-stylish approach is ideal for their guests, who typically stay for a couple of nights and are more likely to explore Chelsea’s happening restaurant scene than order room service — but it’s available and presented with fl air for those who want and expect the option.
On a larger scale, the Joie de Vivre Hotel Group has a brand proposition that promises “opportunities to live the joy of life.” It has a portfolio of more than 20 hotels and is expanding across the US. Each hotel is based on a unique experience concept that is executed to high standards and includes high levels of service. Though attentive, the service is delivered in a relatively relaxed style and the hotel environments are eclectically designed, with an aesthetic that varies from location to location. In this “curated” approach, the focus is on a more soulful, authentic hotel experience and local distinction, as opposed to uniformity.
Not all Joie de Vivre hotels share the same features, and no star rating is provided. But the features reflect the concept and correspond to the likely purpose of the visit — from colorful beach hotels to romantic retreats and sophisticated urban properties. Proving that customers will pay a premium for an experience that delivers beyond the usual expectations, some of the chain’s hotels, like the Ventana Inn and Spa, can command up to USD $1,000 a night for their comfortable, thoughtfully designed rooms.
Food for thought
These approaches show that a strong brand concept and a clear proposition can drive efficiencies as well as higher margins, and build loyalty among key target audiences by offering guests a meaningful experience.
However, at present, it seems that most of the hotel industry still hasn’t incorporated the idea of “branded experience” into their strategy, which would allow them to create carefully curated experiences for their guests. Perhaps this is why no hotel brand has taken a spot in the Best Global Brands rankings in 2012. Meanwhile experience purveyor Disney, who does have a place in the top 100, has successfully branched out into the hotel sector. It will also be interesting to see how IKEA fares in the space after recently announcing plans to open budget hotels across Europe in 2014.
Clearly differentiation, authenticity, style, and a tailored experience are becoming increasingly important in the hospitality industry, which has long been associated with either a pedestrian, cookie-cutter experience or glitzy ostentation. In the “post-glitz” (and post-pedestrian) era, guests — especially those who are willing to pay a premium — are looking for something different, something that reflects their lifestyle. They’re not just looking for a place to stay, they’re looking for an experience.