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Brand Asset and a Balancing Act in the Hotel Industry
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Asset Value of a Hotel Brand Rides on the Solid Foundation
of Balanced Marketing and Operations
by Dr. Gabor Forgacs 
July 2004

Branding is one of the most dominant trends in the global hotel industry. In the USA, brand penetration in the ratio of branded vs. non-branded properties is over 70% in the commercial lodging industry; in Canada it is just under 40%; and in Europe it is under 25% but growing. Branded hotels tend to outperform comparable nonaffiliated properties in most markets according to performance indicators. To solidify the advantage of an appreciating brand asset, it is fundamental to the success of branded hotels to master the dynamics of marketing management and operations management. A balanced approach is discussed and its model presented with the purpose of helping achieving brand integrity and consistency.

The integrity of any brand rides on doing well what the brand says and saying it right what the brand does every day at every point of guest contact. The most successful hotel brands understand that their value proposition must be relevant to their targeted customers and that they have to successfully differentiate themselves from their competitors. To achieve this, a hotel operator can choose to compete in any category or classification as long as there is brand clarity. What would that mean? It means guests easily identify a brand symbol or logo, are familiar with the brandís concept and knowledgeable enough to expect a certain set of benefits, which matter to them.

A frequent mistake is seen when hotels choose to compete only on rates. On the one hand the guests may flip their brand loyalty to price loyalty, on the other hand the price parity of an intangible product (room night) is a delicate issue. Hotel operators work so hard to earn the market recognition of their brand Ė all this credibility can be thrown out the window the moment a quality brand chooses to ask the customer the rate of lesser product.

A Model of Brand Asset Equilibrium

Branding has implications on each facets of hotel management. However, the management of marketing and the management of operations are the most critical in this regard. Different levels of management have to work together as a team to achieve a balance between these two categories because the brand asset value is riding on this delicate balance. (Fig. 1)
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The Mistake of Being Operations-Heavy and Marketing-Light

This balance is very delicate and it is not unusual to see a shift to either the marketing side or the operations side in management focus. What happens if a brand puts too much focus on operations and becomes less focused on marketing?

Lodging brands develop a set of standards to ensure the consistency and integrity of the services they offer. All the standards regarding property curb-appeal, guest service procedures, the maintenance of fixtures, furniture, equipment and providing a specific line of supplies can be strictly followed. However, clean carpets or the finest towels alone cannot guarantee fair market share. If the marketing of the hotel is not managed adequately, the hotel may not have a clear understanding of its strengths, weaknesses, opportunities and threats compared to its set of competing properties; the market of the hotel may be not be well segmented, target markets not be properly identified and the hotelís offerings may not be effectively communicated and promoted. When a hotelís positioning and promoting are inadequate, as a result the brand asset value may start to slip. (Fig.2)
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Right message, wrong remedy: When one of the leading international upper-midscale brands launched an excellent service promise campaign in 2002, the brand promised a discount to guests for service failures. Why is this initiative not necessarily helping to grow brand asset value?

If marketing and operations were well aligned, it would have been obvious that

  1. A significant portion of their clientele consists of business travelers. A cash discount to these travelers is not meaningful (relevant) to them.
  2. It is not enough to identify mistakes. They should be eliminated through preventive actions.
The brand asset value may start to slip for the following reasons:
  • The offered compensation is not meaningful to the brandís key customers;
  • The apologies and corrective actions are expected anyway without campaign commitments;
  • The marketing campaign invites the guests attention towards failures and mistakes in operation; and
  • A successful alignment of the marketing message of the campaign with operations should include a follow-up both on the operational side (to ensure the mistake will not be repeated) and on the guest relations side (to communicate to the guest what the hotel did about the incident, so it will not happen again, because we care).
The fact that the service guarantee program reached its second year means that the brand could not successfully eliminate the recurring mishaps although they were identified at the outset (see article re. "Top 10 Goofs"). If a brand would choose to differentiate itself by the level of service, discounts may not be a useful part of a marketing campaign. At the biggest North American trade show in hospitality, the IHM&RS (International Hotel Motel & Restaurant Show) in New York in 1999, the COO of one of the most successful chains at the time, said it bluntly at an executive panel discussion of luxury hotel operators when the issue of rebates and discounts came up: "If we ever promote price weíre dead." He knew it well that the wrong marketing message would throw their brand asset value out of balance in a New York minute.

The Mistake of Being Marketing Heavy and Operations Light

What are the consequences of being marketing-heavy and light in operations? In this case a "say-do gap" develops: marketing communications tells consumers what to expect from a brand but their experiences with the brand may not live up to those expectations. One never gets a second chance to make a good first impression: if a hotelís reservations department is understaffed and the caller is put on hold for long minutes, the future guest can quickly figure it out how important the call is to the hotel (?!).

Right attention to the wrong guest: a guest who asked for a late check-out and got it granted by the Front Office, finds in the morning his invoice discreetly slipped in under the door. Nice touch; a courtesy for early departures, who are in a rush. Although well intended, the message is clear: the hotel either did not log the request or forgot to let the cashier (or night clerk) know about it. Either way: the guest is under the impression that this hotelís right hand has no clue what its left one is doing (a late check-out vs. an early departure). The operations of a hotel must do more than simply produce satisfied customers; they must reinforce the brandís value proposition at every point of contact. As a result of an imbalance, the brand asset value may start to slip. (Fig. 3)
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Nobody is perfect and mistakes can be costly. A hotel guest of a luxury hotel who requested a room with a view, complained at check-out. The front desk learned that although the room was carefully assigned on a high floor with the best angle towards the sights, the tinted windows were less than perfect. Cracks and air pockets between the thin layers of the protective tinted film on the outside of the window pane caused some distortion as the guest explained. Apologies and rebates were offered and an upgrade on return. But most importantly: the hotel had to do something about those window panes to prevent future complaints.

If a hotel operator chooses to thrive for perfection, every mistake in operations will be costly and the brand asset value may start to slide in the eye of the demanding customer. If an economy hotel advertises vending machines on the premises and guests find it out of stock, more can be lost than the margin on a can of pop: the loyalty of a guest.

The Equilibrium: Key to Brand Asset Value

It is fair to say that the brand can be one of the most valuable assets a company can own. So far the presented model concentrated on the corporate side of the cohesion. Successful brands are perceived to gain a high level of awareness in the mind of the customer, therefore a brand asset equilibrium model should also include the customer-side relationships. These items are the strength and the stature of a brand. (Fig. 4)
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Marketing and operations play synergistic roles in driving brand asset value. No brand can be successful without building a base of loyal and satisfied customers who hold the brand in high regard (stature). A hotel brand can be strong in the eye of the customer if it does what it says consistently, it can be clearly differentiated from others and if its value proposition is relevant to its guests (strength).

The relevancy of product attributes is always specific to a given hotel and its clientele. To the guests of a budget category motel a well signaled easy access to the property from a highway and free parking can be just as important as premium cable channel selection and ice machines on the guest floors. To the corporate traveler guest of an upper-midscale property a rolling 24-hours check-out time policy, high-speed wireless internet access with easy connectivity and round-the-clock room service would be more relevant than free local calls.

Conclusion

In conclusion it can be stated that the asset value of a brand rides on the solid foundation of balanced marketing and operations. All this is held together by management and solidified by the perceptions of consumers regarding the strength and the stature of a brand. In organizations fully committed to driving their brand equity, the entire organization becomes united behind the brand.

Marketing and operations must be in equilibrium to avoid a say-do-gap. Successful brands offer consistent products and services with integrity. They do what they say and say what they do day-in and day-out. The balance between the brand components is dynamic: market forces and consumer preferences can shift any time and the beauty of operations means that each day will bring different challenges. Strong brands will meet customer expectations and keep the brand asset value in balance.

It is up to the management of each hotel brand to identify what product attributes will be perceived as relevant in the eyes of their guests. If the brand can successfully deliver on their promises, differentiate their offerings and communicate that to their well chosen clientele, their brand asset value will ride on solid foundations.
 
 

Dr. Gabor Forgacs, Assistant Director of the School of Hospitality and Tourism Management, Ryerson University in Toronto, Canada, teaches Revenue Management. He may be reached at gforgacs@ryerson.ca

Contact:

 Dr. Gabor Forgacs
School of Hospitality and Tourism Management
Ryerson University
240 Jarvis Street
Toronto, Ontario M5B 2L1
tel: (416) 979-5041 
gforgacs@ryerson.ca

 
Also See: Branding Experts Claim Hilton Hotels Founder Conrad Hilton's Great-Granddaughter Brings Publicity Money Can't Buy / December 2003
After Doing the Math, Some Hotel Franchisees Consider Going Independent; Full Utilization of Travel Web Sites an Alternative to Brand Franchise Fees / June 2004
Independent Hotels Converting to Franchise Brands; It's a Very Different Market Right Now / Jan 2002
After Operating As a Holiday Inn Franchise for Nearly a Decade, Mississippi Hotel Owner Returns to Roots As an Independent / February 2004
Starwood Puts Sharp Focus on Sheraton Brand; Tougher Standards Mandated, Franchisees Have Created Inconsistent Product / April 2002
Utah-based Crystal Inns Double Branding 13 Limited-service Hotels with the Rodeway Inn & Suites Brand / February 2004
Hampton Studies Guest Touchpoints; Results in New Product Standards and Technology to be Rolled Out Immediately in the 1,250-hotel Hampton System / January 2004
The Power and Potential of Branding Explored by HSMAI / May 2000
Destination Hotels & Resorts Ranked the Largest Independent Hotel Management Company in Hotel Business / May 2000
Marcus Debuts Baymont Inns & Suites - The Re-branding and Re-positioning of Budgetel Inns / Jan 1999


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