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Hotel Brand Erosion and Commoditization

A lot has been written and talked about hotel brand and price erosion in the past few months and years. Hotels have vocally expressed their disgruntlement about the commoditization caused by online travel agencies. Indeed the increase of online distribution in the hotel and travel industry has created a high level of price transparancy and rate parity strategies contribute to the commoditization of the hotel product and services.
 
 But what are hotels doing to avoid brand erosion? Do you have an active strategy in place to build a brand value proposition for your hotel? Unfortunately in the first quarter of 2009 we have witnessed many hotels 'slashing rates' and 'dumping rooms' to offset weakening demand. Some hotels have even gone as far a launching 'anti-crisis' offers. See some examples below;
  • ANTI-CRISIS Prices - Rafael Hoteles
    The crisis won’t hold you back anymore !!!
    We want you to have fun even during crisis times, so we have created the ANTI-CRISIS PRICES: chose a stay in any of our hotels at a special amazing price adapted to your needs. See example
  • Hotel in Rome-Low rates for the crisis  - Hotel Brasile Roma
    To face the crisis..., light rates availability.. beginning from Euro 90,00; example the double/triple rooms without breakfast, double rooms economy(an a little smaller than standart, but with the same comforts). In the price you will have SKY-TV, map of city. You can choose among the numerous services that we offer: transfert, the city tour,bus subway tickets... CONDITION OF SALE: valid from 1st April to 30 June 2009. See example
  • Pack Intégral: new Anti-crisis Actions for your corporate events! - Lucien Barriere
    Choose the Barrière Event Solutions Anti-crisis Actions from February to April 2009 for your meetings and incentive in France. The Full Package, our “all-in-one” solution, offers competitive fixed prices, starting from €190 to €277 and includes: the residential package, airport/railway station transfers*, a buffet-lunch* option (no extra charge), video-projectors in every meeting room, unlimited broadband Internet connections in meeting rooms and bedrooms, and 1 drink per participant at the hotel or casino bar during the event. See example


So what happens if you promote purely on price?

  • We educate consumers the only difference between our hotel and the competition is the price or rate. So the only thing we can compete on in the end will be price.
  • More consumers will be conditioned to wait as long as possible before booking. As a result you have to sell more rooms as discounted rates.
  • Price levels erode and thus margins decline. As a result service levels and standards will need to be adjusted. Expectations of your repeat and new clients will not be met . They will not come back.
  • Complaints on travel websites with public reviews will lower the amount of bookings made for your hotel.


As you can foresee, by long term and heavy price discounting you will end in a vicious circle that will only drive down prices even more. It is a hollow strategy...

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So what to do in the times of crisis to avoid brand erosion and how to avoid to turn your hotel into a commodity?

  • Sell Direct - Implement a direct sales strategy with your hotel website to increase direct bookings. An effective search engine optimization and online marketing plan has to be put into place.
  • Diversify - Work with more online distributors. Less dependency and increased demand will allow you to better maintain price levels.
  • Differentiate - Offer something different from the competition. And we mean really different. Too many hotels are conservative when or not very creative in this. What are your real USP's (unique selling points).
  • Add Value - Don't compete on price only anymore. Added values to existing price levels can make your offer more attractive.
  • Destination Experience - Use what your destination has to offer to create an experience beyond your hotel product. In the end people do not come for your hotel, but for the city or destination, so you might as well make it part of your sales pitch.
  • Themes - Build special offers around keywords like weekend break, romantic getaway, spa package to create a unique value proposition to consumers. Besides it helps with SEO if done correctly.
  • Reward - Some deals should only be available on your own website. You need to incentivize consumers to book with you. And remember deal does not necessarily mean a lower price. Implement a loyalty scheme or reward system for repeat guests. Or just give a free bottle of wine or wifi. They need a reason to book directly on your website.
  • Pavlov Approach - Surely you remember this. It is all about conditioning consumers to book ahead in time. Teach them by communication clearly early bird offers.
  • USP Communication - Make sure you clearly state your USP's and they are explained in every offer. Don't let the potential guest guess for himself, help him by saying it again and again.
  • Train - Your employees need to be well trained in explaining why your hotel is different and better then the competition. If not, what else do they have to bargain with but the price. Give them tools.
  • Deliver - Make sure your employees deliver the brand experience and rise to the occasion each and every single time to meet guest expectations.
  • Exceed - Even better would be to exceed guest expectations. You will need to train and incentivise your team if you want them to go the extra mile. Invest in your most valuable assets!
  • Learn - Talk to guests and non-guests and ask if and how you are different from other hotels. Read online reviews about your competition to find out what consumers like about them. Learn and get inspiration, involve your staff. It is quite easy on the internet.

 

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These are just a few examples, but there are many more ways to create a real value proposition to consumers. To avoid commoditization or product value erosion of your hotel it is important you start competing on more then price right away Involve your team, you will be surprised the ideas the will come up with.

 

 

Cheers,

Patrick Landman @ Xotels

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