Blog

The Balance of Power for Selling Hotel Rooms

Traditionally, Marriott is a business driven by franchise and management company contracts. It is known for its branding, service and operational expertise. Starwood in recent years is placing additional emphasis on a similar path and shedding owned hotels as part of its “asset light” strategy. The resulting combined company sells franchise and management contracts while providing numerous services that effectively provide marketing and management capabilities to its hoteliers. Therefore, these specific brands and their parent companies are less driven by the real estate markets and more driven by consumer and business demand for their branded hotels. Multiple industry participants view the recent spurt of hotel consolidation as a trend that fuels a rivalry against the major OTAs. While there are other overarching factors, this is certainly a facet to consider.

While each chain and brand has defined a specific set of tactics for distributing rooms within the OTAs, Marriott and Starwood continue to aggressively steer consumers toward their brand sites even to the extent of foregoing top search placement within the OTAs. It appears these two brands view the major OTAs as expensive alternatives and want to control terms of distribution while providing lower cost distribution solutions to their branded properties. However, from a property perspective, owners and management companies may have different interests. If they are able to generate reservations at a reasonable cost, all things considered, then they may not have as much preference as to where the booking originates. That said, distribution costs do vary across channels and sites and consolidating two major hotel players could deepen the competitive divide between these particular Brands and the OTAs.

This consolidation will also continue to affect other segments of hotel distribution, such as managed travel and group bookings. Most major hotel companies are responsible for a significant portion of a branded property’s marketing. Corporate negotiated rates play a role in this since the chain will have more control over inventory and pricing for any market where they have a significant share of inventory. It is likely that this will enable the combined company to tactically respond to RFPs and more confidently set pricing levels for their existing and potential contracts. However, this doesn’t change demand levels within a market unless they apply these tactics to shift business from certain destinations to other locations more than occurs today. CWT’s Whitepaper recently summarized markets where the combined Marriott and Starwood brands represent a significant portion of their corporate negotiated business.

Although we only covered a few reasons above, there are many areas of influence for properties to consider when it comes time for marketing and distribution. Each of these has technology underpinnings. As a result, technology that supports marketing and operational business processes will play a meaningful role as hotels continue to balance the value offered by a major marketing partner, such as a Brand or an OTA, against the ability to pursue their own marketing initiatives while minimizing any contractual limitations placed upon them. What’s important for properties to maintain is the ability to react to changing customer demands and market dynamics by quickly launching relevant marketing initiatives for any segment of business. This is crucial to achieving sustainable success and requires a pliable marketing and technology infrastructure.

Marriott and Starwood’s paid media spend was estimated at $96 and $55 million for 2014 by Kantar Media. This equates to spending $23k per property or $134 per room for Marriott and $45k per property or $155 per room for Starwood on an annual basis. Expedia and Priceline on the other hand spent approximately $2.8 billion and $2.6 billion in 2015, respectively. Most of these marketing budgets are directed at core marketing capabilities, such as branding, destination marketing and the marketing technologies required to attract and convert travelers from across the globe.

The following table shows the estimated number of solutions that are part of the marketing technology infrastructure for each of the aforementioned companies as it relates to their digital presence. These encompass software capabilities across multiple categories such as: Website Development & Management, Search & Social Marketing, Data Management, Advertising Infrastructure & Networks and Analytics solutions. However, these numbers represent only a sample of the full list of technologies each has in place to manage their digital and offline marketing presence as a whole.

Company

Solutions

Marriott 70
Starwood 88
Expedia 94
Priceline 85

* Data provided by Accubase & Datanyze.

Therefore, when a hotel purchases services from a Brand or OTA, part of the result arrives in the form of reservations. The investment made to generate those reservations is significant even when only considering the marketing spend and the underlying marketing technologies. It is also important to note the similarities and differences in how these dollars are being allocated in their efforts to reach a preferred customer audience. When combined with the marketing that happens for an individual hotel, it is evident how complex the marketing world is for a given property.

Evaluating a slightly broadened hotel marketing landscape for a moment shows the strengths of the companies in each segment as compared to a hotel’s own website. Hotels have numerous decisions to make when considering how to market their property online and deciding what resources are needed to achieve their goals. When concentrating on the Search and OTA segment, given the significant amount of overlap across them, this table shows the general value of each.

Value Search Engine Meta-
search
OTA Brand Website Agency/
Hotel Marketing

Hotel Website

Hotel/Brand Awareness
Destination & Property Search
Advertising
Benchmarking
Customer Loyalty Rewards
Shared Customer Information
Distribution to Multiple Sites
Reservations

There are many negotiating levers that may be material for any given OTA agreement, whether the agreement is with the Property, Brand or a combination thereof. It will be interesting to see how the OTAs continue to innovate their products and services to provide sales and marketing solutions to hotels and other travel service providers.

Consolidation at the hotel level, whether it occurs from deals like Marriott and Starwood, Accor or aggregations at the owner or management company level, may continue to change the allocation of leverage amongst the hotels, brands and OTAs involved. Ultimately, the parties have to find a reasonable solution based upon their knowledge of the market and control of these levers. Many levers exist, such as Pricing, Commissions and Placement within the OTA search results that will define the marketing agreements between the hotel and OTA.

In summary, the mega hotel mergers that are happening today, will continue to change the marketing and distribution landscape and the technologies intertwined within it. The combined company of Marriott and Starwood will cause changes in both the industry and its own resources. However, it will have to make many decisions regarding how the uniqueness of each brand will survive and how this will influence the next generation of marketing initiatives and supporting technologies at the chain, brand and property level.

Buying Marketing Technology & Services

There are numerous possible categories with regard to analyzing and evaluating marketing services and technologies as it pertains to your business. While only a subset of these may be a priority for any specific need within your marketing team, the coverage is important. It allows solutions to be identified that meet your objectives and requirements.

As a result there are two primary considerations. First, is understanding the core needs for you, including your unique set of business requirements and combining this with a thorough understanding of what’s possible from available solutions in the marketplace. Second, is evaluating technologies against your unique needs and accelerating your time from the identification of a marketing need to implementation, while improving the probability of success.

When embarking on a project, it is always important to review possibilities with respect to building and buying the set of solutions that enable you to get from point A to point B. This may entail complementing your internal resources with any of a number of potential resources or simply getting a better understanding of your options.

What are the benefits of hiring a company for their marketing services or marketing technology? There are many potential benefits, but here are a few:

  • You are hiring passion and people who excel at what they do
  • They may make your employees better by exposing them to new perspectives
  • Depending upon the maturity of the solution, you may get more capability than performing the same work or building the same technology yourself

In addition to general and detailed capabilities and the standard considerations associated with buying this type of service or technology, a few of the categories a buyer could consider are:

  • Total Cost of Ownership
  • Specific Integrations
  • Migration Considerations
  • Privacy Implications
  • Supportability
  • Sustainability

These and many other categories enable you to easily evaluate the technologies and services most suitable to your company’s needs while taking into account those potential marketing and technology capabilities best aligned to your strategic objectives.

Enter your email address to follow this blog and receive notifications of new posts by email.

Roadblocks to Successful Marketing Campaigns

What are marketing campaigns without roadblocks? We just do what we can to go around them, remove them, satiate their needs or mitigate their corresponding risks. When considering new marketing opportunities, these hurdles may consist of examples such as lack of budget, inaccurate data or misaligned objectives with the selected marketing tactics (see Demand Gen Report).

If a budget issue, it could be a lack of the necessary budget for any of the required MPTT resources of money, people, time or technology. If the issue is the amount of allocated funds for a project, then understanding what people or committees are responsible for approval of budget items plays a role, but building a well constructed business case is the real need, depending upon the level of rigor required for a given decision. If the limited resource is people to either complete the work or manage it going forward, then finding qualified personnel is the priority whether it is in the form of reallocation of existing people, the addition of new staff or external resources from agencies or consultants.

When dealing with data, it may be incomplete, out of date or even insufficient for the task at hand. Thankfully, there are many data sources and technologies to improve these situations. It’s possible to implement these data sources to supplement a marketing campaign, ensure compliance or even use it as a primary source to build an initiative for a new market segment or new product launch.

Time is yet another story. How does a company manufacture time that doesn’t exist? Short of turning back the clock, this seems to be a fruitless effort on the surface. However, with standard changes such as adding or sharing resources and an ounce of creativity, you will be on your way to finding alternatives that get more done in less time.

If technology appears to be the hurdle, you may find that multiple MPTT issues exist and may be solved by the ingenuity of solutions. As a general rule of thumb, technology today is easier to install, implement, integrate and manage in many respects. This is the result of cloud based solutions, vendor ecosystems, APIs as well as data interchange standards. Of course, that statement is not without exception. Lastly, technology has to do what you need it to do, even if it comes in a slightly different form than you originally had in mind.

And finally, because an extraordinary number of solutions exist in the marketplace today, companies have the luxury of finding marketing services and technologies that align well with their specific corporate objectives. As an example, if an organization places emphasis on sustainability for its own products, finding solution providers that do the same could be a great fit with their goals as corporate citizens within their industry or the world as a whole.

Regardless of the people responsible, either someone or a group has a fiduciary responsibility to make investments that will align with the criteria important to the company and marketing effort. While you may not understand all aspects of this reality due to your position or role, it makes sense to minimize the risk and maximize the reward for the marketing effort, doesn’t it? Whether you are a marketer, consultant or agency, you have to determine what part you play in these decisions. Furthermore, you need to understand the level of due diligence that is necessary to create the best chance that the investment being pursued will generate the intended results. If your company has decided that a purchase of technology must meet certain criteria, align with one or more corporate strategies or even meet certain compliance restrictions, then these become guidelines for getting to a solution whether you build, buy or lease it. The list of possibilities is long and distinguished, but determine what is imperative to you, the team, the organization, customers and shareholders as appropriate. Additionally, seeking the assistance of a trusted, competent resource for guidance is always a beneficial approach.