How Independent Hotel Brands Can Move Forward During a Difficult Period in the Travel Industry

There is simply no doubt about it, 2020 has not been kind to the travel and hospitality industry. And the devastation has been felt not only by small independent and boutique brands but by the global brands as well.

While this article was originally published earlier this year, before COVID-19 struck, the purpose of Global Hotel Alliance (GHA) and independent brands working together has never been more relevant. GHA’s focus to help member brands in the alliance navigate the current crisis as well as accelerate their recovery into 2021 is even more important as we face these challenges together.

As hoteliers are reopening, trying to regroup, and determining the path forward, there are many questions on the best route to take. Typically, we see one of four scenarios being reviewed by independent hotel brand operators:

1. Staying independent – being truly independent and, in a perfect world, selling rooms directly to guests, owning the guest relationship, and not relying on third-party intermediaries, such as OTAs. In the luxury segment, these properties include some of the world’s most well-known and iconic hotels. Individual hotels (some even part of a small brand) enjoy high repeat guest rates, although guests often overlook the actual brand, resulting in low cross-visitation between sister hotels. These brands also find it challenging when expanding into new markets, where they lack brand recognition and have to build a new customer base.

2. Outsourcing distribution – potentially giving away the guest relationship and control of your distribution almost entirely to the OTAs or tour operators and wholesalers in the case of resort brands. By relying on intermediaries (selling between 50% and 100% of the brand’s inventory), this undermines the brand’s efforts to build their distribution capabilities and brand awareness, and there is also the risk of losing the guest’s loyalty to the intermediary – reflected by low repeat stays by guests booking through OTAs.

3. Signing a marketing affiliation – partly to combat the risks of relying on expensive third-parties or individual tour operators, we see brands seeking representation and marketing muscle by signing one or more of their hotels to become a part of marketing affiliations (or “representation company”). However, the cost-benefit of these affiliations varies considerably by property and location, resulting in hotels tending to “churn” through the different affiliations over time. While General Managers favour the increased exposure and sales network, which affiliations bring to their hotel, this does not necessarily benefit the brand itself (with legal ownership of the guests’ data often being lost to the marketing company).

4. Signing a soft brand franchise – to accelerate market penetration as well as acquire more guests into their loyalty programmes, big brands offer franchises for independent brands who wish to “soft brand” individual hotels within their portfolio. However, this is a more rigid form of agreement, bringing much higher costs and promoting the soft brand over the actual brand of the hotel, resulting in the guest relationship (and legal ownership) shifting to the big brand entirely, further undermining the brand’s marketing efforts, CRM campaigns and brand awareness.

Most four and five-star independent brands usually decide between going it alone and outsourcing their distribution (with upwards of 30% of their room nights through OTAs). Occasionally, there is a choice to sign a marketing affiliation for some of their hotels – often with mixed results.

But there is also a fifth option: joining Global Hotel Alliance and becoming a part of a multi-brand loyalty programme, DISCOVERY. Utilizing our unique technology platform, DISCOVERY is an owner-friendly loyalty solution, and not a typical “free nights” programme.

Built on the simple premise of independent brands working together through a collaborative marketing alliance, GHA helps small and medium-sized hotel groups pool their resources and customer bases. GHA adds value by marketing all 570 hotels in the alliance to a shared database of guests enrolled as DISCOVERY members, boosting their repeat guest rate (by offering an attractive, global loyalty programme), and encouraging guests from hotel brand A to book at brand B, and vice-versa. The concept has proven so successful that the alliance will soon exceed 40 member brands – with all of their hotels participating in DISCOVERY as a brand-wide solution.

Important for independent brands — and unlike the marketing affiliations and soft brands — DISCOVERY is marketed to guests as the brand’s own loyalty programme (for example, Kempinski DISCOVERY, or Pan Pacific DISCOVERY), building guest loyalty to the member brand first and foremost, rather than to a third-party loyalty programme. Furthermore, the brands in the alliance legally own the data for the guests that they enrol. GHA simply has the license to market to these guests (noting that GHA does not favour one member brand over another, and also one brand cannot tap into DISCOVERY to market their brand to another brand’s guests).

Because GHA member brands own the data for guests they enrol, they are incentivised to enrol their guests into DISCOVERY – meaning they capture much more guest information as well as better quality data for their own operational, marketing, and CRM efforts. By capturing, maintaining and sharing clean guest profiles (interfacing technology at central and PMS level), DISCOVERY enables brands to personalise and enhance their guest experience. In turn, guests are more likely to enrol and return since DISCOVERY is more attractive to them as a loyalty programme, giving guests global choice (which many independent brands simply cannot do on their own) and the same recognition and benefits when staying at any alliance member hotel worldwide.

In addition to driving incremental room revenue as a low-cost channel, and boosting the CRM efforts of our member brands, other benefits of joining GHA include giving brands exposure through global marketing campaigns (that would otherwise be cost-prohibitive), and supporting our brands’ growth efforts, with DISCOVERY in their development toolkit, when pitching against big brands for new hotels. Ultimately, GHA enables independent brands to build and capitalise on their own brand equity, creating significant brand value and intellectual property for their ownership in the process.

More benefits include:

• Superior scale

• Shared technology, and thus lower pricing

• Award-winning loyalty solution

• Low-cost commission model with no fixed fees

• Over 17 million loyalty members

• Ability to have a global rewards program while only operating hotels in limited locations or regional markets

In view of the increasingly difficult landscape the hotel industry faces in the short term, the rationale for independent brands to work together and mutually-benefit through GHA – enhancing their own guest experience, brand loyalty and global brand awareness, while retaining their individuality and authenticity – is more compelling than ever.

For more information, get in touch with the team of Global Hotel Alliance.