Hotel Online  Special Report

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Franchisees on the De-flagging Fence:
 A Gamble Or A Golden Goose?
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Former Franchisees Talk Specifics About Channel Loyalty and How They
Leverage VIP International Channel Marketing to Succeed as Independents

Calgary, Alberta, Canada – March 29, 2004 – As major brands become more expensive with franchise fees and marketing and reservation fees, franchisees are feeling the squeeze.  Because of new Internet marketing options, some owners are asking, “Would I make it on my own as an independent hotel?  Can I sacrifice the brand identity, but use the Internet to give me the same distribution, revenue management assistance and marketing as before, perhaps more cost-effectively?”  The answer for three successful independent operators is “yes;” but not without hard work and marketing savvy.

Reasons for going independent vary. Some owners feel they do not have the capital to make brand-required compliance upgrades; others have seen their revenues flatten or dip while franchise fees and expenses erode profitability forcing them to reexamine brand ROI.  For many operators the transition to independent status is a temporary measure while they shift to a different flag.  Regardless of their reasons, owners considering independent operation agree they need sales strategies and solutions that will continue to drive reservation volume after they leave their franchise.  Listen to three leaders in the de-flagging trend.

HVS Guides Boulder Property to Independence, Increases Revenue 40% 
 

Colorado-based HVS Hotel Management provides independent third-party management services to owners of lodging properties, particularly distressed properties in need of a turn around.  Daniel King, President of HVS Management, has good business counsel for operators evaluating independence.  “There are plenty of good reasons to go independent,” King explains.  “Brand value is key, but in many markets the top flags 
Boulder Outlook Inn and Suites
800 28th Street
Boulder, Colorado
are taken.  The options for operators in this situation are to sign with a second- or third-tier flag, or go independent.  We took the 160-room Boulder Outlook Inn and Suites independent and we have actually increased revenue by 40 percent and raised rates since going on our own.  Internet booking volume is key to the success of independent operators.  You need to play the game hard against the big flags, manage your rates and Internet exposure, and pick good partners. It takes real work.” 

King estimates that of about 187 hotel brands only a handful are strong, although fees are roughly the same.  He believes the key to running a profitable independent property is knowledge of your market’s demand generators and how to sell to them.  “A growing number of people are on the Internet buying rooms through Travelocity, Hotels.com, and others, and they are becoming channel-loyal, rather than brand-loyal,” HVS Management’s Dan King continued.  “If a property has a good presence on the right sites they can compete against the flags; but you cannot do it in a casual way.  We partner with VIP International, a reservation channel sales company, to maximize the Boulder Outlook’s eChannel bookings and revenue.   The bottomline is that it is important to work with a specialist in on-line marketing and sales, regardless of whether you are franchised or independent.“ 

An additional challenge concerning hoteliers evaluating independent operation is their property’s loss of brand advertising and priority placement on leading Internet search sites.  To reduce the potential loss of position, channel sales partners like VIP International help independent properties compensate for brand neutralization by providing search engine optimization services to give a client hotel’s website the most prominent positioning on most Web search engine results.  Often this positioning will put an independent property’s listing on the first page of search results.   This same reservation sales support is valuable in raising property screen ranking when independent properties offer rooms over third party travel sites.

Former Choice Operator Creates Independent Alaska Brand, Pulls 15% Web Reservations
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Aspen Hotels, based in Anchorage, is a five-property chain created four years ago by Carol Fraser and her partner to fill a need they saw for an Alaska-focused hotel group.  Ms. Fraser operated Choice properties and understands the big-chain dynamic and loyalty.  “The Alaska market is competitive; there are a lot of franchises, but none of them focus on helping Alaska.  This is why we started an independent chain,” Fraser said.  “Our goal was to create a niche, not a big flag.  Our market here does not respond to flag strength the same as in the lower 48.” 
Aspen Hotel of Juneau
1800 Shell Simmons Dr.
Juneau, Alaska
Aspen Hotel’s team recognized the importance of the Internet segment so it shopped for a solid GDS representation company to compete against the big flags in the e-booking environment.   Their eChannel strategy was successful; in 2003 over 15 percent of Aspen’s reservations came from Internet sources.  “How a company markets its properties is crucial.  Many small operators think they must have a franchise flag to access the GDS channels.  We found an aggressive reservation channel sales company that represents our rooms on the GDSes, and Orbitz, Hotwire and other sites.  We also have a frequent flier business agreement with Alaska Airlines, a company with excellent brand loyalty, that, in turn, creates loyalty for our properties.” 

To increase booking efficiency Aspen Hotels is leveraging its channel sales provider’s technology to distribute Aspen’s availability and rates through a single point of contact with all the third party Internet sites selling its rooms.  Carol Fraser explained, “We give our vendor one rate and they sell our brand and rate across the Internet, GDSes, and to TAs.  The system works; over half of Aspen’s reservations came from the Internet last year.”   Almost 13 percent of the chain’s reservations come through its website, and it is viewed as another key revenue source.  Rooms for all five properties are sold from the Aspen site through its channel partner’s booking engine, which is invisible to guests.  “Revenue management is my specialty, and this is why I like VIP,” said Fraser.  “They specialize in driving sales for independent operators and make us look like a big franchise to shoppers and travel agents.”

Operator Goes Independent with Health & Fitness Focus


Owners of the Krystal Aire Inn and Suites in Springfield, Missouri wanted to have a health and fitness-focused property, but none of the chains they evaluated were ready for the concept – so they took their hotel independent.  The property is the first of a proposed new franchise idea managed by Missouri-based Rolling Oaks Hospitality.  Rolling Oaks President Lonnie Funk, a former Executive Vice President of Operations for John Q. Hammons, described the reasons behind their decision.  “There were simply no 

Krystal Aire Inn and Suites
2745 North Glenstone Avenue
Springfield, Missouri
flags available in our market that gave us what we wanted in value proposition or price for our residential motif property, so we founded our own.  To market our concept on-line and generate reservations fast we knew we needed representation on the GDSes and Internet booking sites, so we partnered with a top reservation sales provider that could represent our property on the most productive electronic channels.  We began receiving reservations based on our health and fitness niche the first day we ‘turned on’ our relationship with a strong channel marketer.” 

Kelly Blake, President of VIP International, the second largest channel reservation sales and marketing provider, explained that it is imperative hoteliers understand the myriad of marketing options available to them and how to optimize each alternative.  Blake said, “The key question franchises are asking themselves is, ‘What does a brand offer me that I cannot get elsewhere for a lower price and often with better quality?’  The marketplace sees brands as vanilla offerings with little differentiation.  This is one reason why Expedia and other ‘on-line brands’ are successfully making the game all about rate.”  To optimize revenue, hotel operators must understand how to play the revenue management game on the top e-Channels.  Being profitable is a matter of finding the proper sales channel mix that maximizes revenue and profitability.  “The move to be independent has never looked so good,” concluded Blake.

About VIP International

VIP International (www.vipintcorp.com) is a channel marketing organization that drives revenue for hoteliers, car rental owners and regional airlines through a multi-channel reservation sales center, the adoption of leading-edge technology, and partnerships with clients to provide ongoing education.  Founded in 1979, the privately held Calgary, Alberta-based firm pursues a mission of being "The number one producer of bookings per client." This is accomplished through mastering the electronic channel marketing environment, developing and implementing strategies for each client's unique position, and educating customers about how to optimize participation in the changing electronic marketplace. VIP International is the industry's second largest provider of reservations sales services with more than 5,000 clients worldwide. A sister subsidiary of VIP International acquired Lexington Services in November of 2003.  The combined companies are a central distribution point to every viable Internet web site, and to all of the major global distribution systems including Sabre, Galileo, Pegasus, WorldRes, Amadeus, and Worldspan. VIP International is headquartered in Calgary, Canada with a USA headquarters in Dallas, Texas and significant development office presence in Denver, Colorado, London, United Kingdom, Hong Kong and other cities located around the world.

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Contact:

HVS Hotel Management
Dan King, President
777 29th Street, Suite 100, Boulder, CO 80303
Phone: 303.554.9766
Email: information@HVSInternational.com
Website: www.hvshotels.com

Aspen Hotels
Carol Fraser, Vice President
108 E. 8th Avenue, Anchorage, AK  99510
Phone:  866.483.7848
Email:  Info@aspenhotelsak.com
Website:  http://www.aspenhotelsak.com

Rolling Oaks Hospitality
Lonnie Funk, President
1045 South Farm Road 193, Springfield, MO  65809
Phone:  417.268.5480
Email:  lonniefunk@prodigy.net
Website:  www.krystalaire.com

VIP International
Rick Shaum
Senior Vice President Sales and Marketing
VIP International Corp.
(719) 487-0789
rshaum@vipintcorp.com
www.vipintcorp.com



 
Also See Lexington Services Launches Galileo's Next-Generation Seamless Solution, Inside Shopper™; Gains Access to Real-Time Rates and Availability / March 2004
Midscale Franchisor Hands Franchisees 22% Increase in Internet Bookings; Country Hearth Inn Fuels 22% Growth in 2003 with New Internet Booking Technology, Branding Strategy for Franchisees; Projects 28% Growth in 2004 / February 2004
Study: Room Rates 6.5% Higher For Reservations Booked From Hotel Sites - VIP International Launches Website Services to Drive Traffic to Property Sites / December 2003
An Affiliate of VIP International, Reaches Definitive Agreement to Acquire Lexington Services / November 2003
VIP International Boosts Hotel Reservation Services, Selects Voxify to Reduce Costs for Clients, Enhance Call Center Efficiency / October 2003
#1 Provider of Car Rental Software Teams with VIP International to Fuel Independents’ Reservation Volume / October 2003
Business Travelers, Consumers Grab Lower Rental Car Rates, Book Online from Independent Agency Site / September 2003
E-Z Rent A Car Perfects Internet Strategy to Boost Reservations 20% in 2003 / September 2003
WorldRes Agreement Gives VIP International Hotels Second ‘Low-Fee’ Merchant Model Program / Aug 2003
Top Channel Marketing Provider VIP International Taps Industry Veteran to Power Marketing Efforts, Funnel 158% Growth  / Aug 2003
VIP International Cements Reputation as Leading GDS and Channel Marketing Provider for Asia Pacific / Aug 2003
Hotel Owner/Operators Disclose Secrets of Web Booking Success / June 2003
Dave Crawford Appointed Director of Airline and Auto Rental Business Development for VIP International / June 2003
Hotel Company Sharpens Channel Management for 22% Increase in Average Length of Stay for GDS Bookings, 14% Jump in ADR / June 2003
Interstate Hotels, Candlewood Suites, Regal Hotels, Canadian North Airlines Shift Call Center Responsibility to VIP: Interstate To Pass Along 8% to 10% Savings to Properties; Regal Hotels up 26% / May 2003
Zero Transaction Fees: Independent Hotels, Chains Profit from Landmark Agreement; Manage Discounted Rooms Through Central Res Systems at No Cost / May 2003
Interstate Hotels & Resorts Signs Five-Year Agreement with VIP International to Outsource Call Center; Expects to Pass Along 8 Percent to 10 Percent Savings, Increased Revenue to Hotels / April 2003
Hong Kong’s Largest Hotel Operator Sees Reservation Numbers Jump 26 Percent In First 10 Months of 2002, Increases Global Presence with New Reservation Sales Provider / February 2003
Canadian North Chooses Calgary-based VIP International to Provide Voice Reservation and Support services / January 2003
Midwestern Chain Targets Value-Conscious Senior Market; Picks New Channel Marketing Provider to Power Goal of 100% Increase in Bookings / January 2003
Midwestern Management Firm Gains 69% Increase in GDS Reservations YTD at 12 ‘Enhanced Limited-Service’ Properties / Dec 2002
Texas-Based Hotel Chain Captures 104% More GDS Reservations YTD, Speeds Ahead of Economy / Dec 2002
Four Star Calgary Hotel Reports 42% Increase in Bookings During Initial Period With New Channel Marketing Provider / Nov 2002

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