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.

Data Security Considerations from FTC v. Wyndham

The world of ECommerce brought about a new paradigm of managing the digital footprint of today’s electronic transactions. Companies and Solution Providers are both faced with defining security as it relates to the data being exchanged with customers and implementing the proper protection for this information. However, the question of risk or lack thereof was usually a consideration.

What has Changed? – The result of FTC v. Wyndham Worldwide Corporation reinforces the teeth implied by the FTC Act. It clearly holds companies accountable for not only defining privacy policies and terms of service agreements, but requires those companies to adhere to them. While Wyndham was not fined, they are being held accountable by the FTC to uphold assurances they make within their own privacy policy.

According to the FTC, this is where Wyndham misjudged the implementation of their security practices. While it is easy to look at the situation in wonder, the reality is that companies make statements in these policies, but consistently have risks that may cause them to fall short in the actual implementation. The more global a business, the more intricacies may exist. This shows the level of responsibility that the FTC requires regarding how businesses and technologies must protect consumers for all transactions regardless of channel. Given that managing data and its security is a rather dynamic task sometimes fraught with obstacles, it requires a certain amount of diligence.

A Marketer’s Perspective – This should create a moment of pause for most companies that manage customer transactions containing customer and credit card information, whether through a Point of Sale, ECommerce enabled Website, Payment Solution or other technologies that are potential requirements for efficiently transacting business via multiple channels. The needs of each corporation are different and the appropriate people within them should seek guidance from qualified resources to understand if this affects their specific sales and marketing efforts or the products and services they provide to the marketplace.

As a guideline, a business may want to contemplate the following questions:

  • What impact does managing this data have within my business?
  • Are we protecting the data of our customers to the extent necessary?
  • What systems may affect compliance with our Privacy Policy and Terms of Service?
  • What additional technologies will enable us to efficiently manage this data?

Real Applications – Any technology that facilitates a touch point with customers presents an opportunity for transactions to occur and data to be exchanged. Mobile devices, computers and kiosks are just a few examples of solutions that capture this information. The POS, ECommerce, Payment and custom software solutions all may play a role in capturing, organizing and protecting the customer in compliance with a privacy policy and regulation. The bottom line is that this information has a lifecycle and responsibilities that go along with it during that time.

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The Intent of Social Media

Post 1 of 5 in a series

The following series of posts on social media analytics provide a sampling of what you should know about understanding, evaluating, selecting, implementing and managing a measurable social media program.  Use this information as a resource to guide you to the solutions, consultants and agencies that will enable success within your organization.

Introduction – Social Media Marketing enables companies to talk with businesses and consumers on terms convenient to them, as part of their day to day life.  If a particular social media site becomes a preferred and frequent channel of communication between the business and its audience, then the marketer has created an opportunity to have a dialogue with these prospects.  The sharing aspect of these sites enables the savvy marketer to amplify their message while staying within the bounds of restrictions that must be navigated by all marketing programs.

A New Form of Communication – This amplification provides the marketer both access to a broader audience and delivers their message from a friend, colleague or respected person within the receiver’s network.  This enhances the trust of the message and increases the possibility of engaging individuals within this audience.  These fundamentals are the same as those provided by traditional marketing channels since the beginning of time, but offer the added benefit of increased traceability.  Ultimately, the marketer is able to better attribute advertising success to the appropriate channels, content and people that influenced the results.

Each Site has a Purpose – Each Social Media site has specific strengths and purposes.  When a marketing execution is correctly aligned with the goals of the strategic marketing plan and it leverages the strengths of a particular site, each site becomes a precise megaphone for the company, its products and vision.  Furthermore, each site enables a company to integrate their messaging within the prospects’ daily lives and interact with them in a manner that feels comfortable and drives measurable results.

A Marketer’s Perspective – Traditionally, marketers understand the process that involves the four P’s and how a channel or site fit into the puzzle.  However, the explosion of social media sites, measured in the hundreds these days, has increased the complexity of reaching the prospective audience.  This forces marketers to be selective of the sites they choose and also requires additional customization of the content distributed to this intricate web.

Measurement & Analytics – Given the complexity of the channels, sites, devices, networks, content and sharing … metrics and analytics become a necessity.  The high traffic social media sites are now providing their own analytical capabilities within their solutions.  While this is beneficial, it creates a need to get a comprehensive picture of what is happening within and across each of these sites based on their respective strengths and capabilities.  Consistency, comprehensiveness and comparability are the marketer’s friend, but are often directly opposed to the results transpiring within the details of each site.

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