Owners eye loyalty, income, value in distribution shift
Owners eye loyalty, income, value in distribution shift
07 OCTOBER 2019 7:35 AM

The hotel distribution landscape continues to evolve as hoteliers are required to provide more loyalty redemption options, from sports and entertainment to F&B, when brands and specific channels are employed.

LONDON—Hoteliers must keep adding innovation, attractiveness and experiences to loyalty programs if they harbor any hope of competing with third-party booking channels.

Recent shifts in the relationship between hotels and online travel agencies have resulted in more opportunities and possible value for owners, according to speakers at last week’s Hotel Distribution Event. An increasing number of hotel firms are adding food-and-beverage, sport and entertainment options as points-redemption options for loyalty members.

Loyalty will also continue to play a significant role, according to Jacob Rasin, director of business development at Swedish hotel owner and operator Pandox AB.

“When we look at a distribution platform, we do look at the power of the relevant loyalty program,” Rasin said on the “Investors and owners” panel.

Often immediacy is with loyalty rewards, panelists said. For example, airline loyalty program perks that do very well include lounge access, which is immediately available.

“A lot of hotel companies have signed up hotels that are the type for which points will be redeemed,” said Richard Clarke, senior analyst of European hotels and leisure at AB Bernstein.

That philosophy has extended to include non-hotel products and attractions as well as to partnerships such as InterContinental Hotels Group’s recent loyalty partnership with Mr & Mrs Smith, a travel club and marketing firm specializing in boutique hotels.

“Marriott and Accor have gone down the private-rental market route” to add value to loyalty, Clarke said.

Nick Chadwick, SVP of hotel asset management for Starwood Capital Group, said his company’s Principal Hotels brand did start a loyalty program, but it was difficult to gauge its success once the brand was acquired in 2018 by French real estate investment trust Foncière des Régions—now known as Covivio—and added to InterContinental Hotels Group’s management portfolio.

Redemption models vary throughout the hotel industry, Clarke said.

“Some hotels love redemption as those guests feel they are staying for free and are far more likely to take something out of the minibar, spend on F&B,” he said.

He also warned of the pitfalls of focusing on loyalty data, as it is widely believed some people will sign up merely to get free Wi-Fi.

Onus on owners
Rasin said the trend toward online travel agencies becoming closer partners with hotel chains offers more choice to owners in regards to real estate buys.

“We can choose more brands and more redemption programs. … The OTAs are not batting with hotels to the same extent, which is a benefit for owners,” he said.

Rasin said Pandox is interested in buying branded stock in city-center and airport locations, while Chadwick said his firm likes certain limited-service assets, mentioning specifically the new Yotel that opened in July. Starwood Capital bought 30% of Yotel in September 2017.

Panelists mentioned Oyo Hotels & Homes, agreeing its attributes were “light branding and massive distribution.”

“An owner said to me the other day he did not see ‘Oyo as a threat until I lose an owner.’ I guess that has not happened as of yet,” Clarke said.

Clarke added that while Oyo does have good financial backing and also deploys cash for property-improvement plans, its fee structure differs from a “blanket franchise payment, (and) that might be more destructive around owner expectations.”

More brands offer more opportunity overall for owners, Chadwick said, but he added it also requires hoteliers to become more innovative, if only because distribution remains expensive.

“You also always have to look at the exit,” he said.

Chadwick said Starwood Capital has used Airbnb as a channel for its independent assets.

“But I do not see it as a cheap option,” he said. “That sector is maturing, with Booking.com and Expedia, and others acting more like hotel firms, and hotel firms acting more like OTAs. Airbnb is moving a little in that direction, too.”

Airbnb continues to grow and has unlocked more “aspirational travel,” Clarke said.

“When Airbnb bought HotelTonight (in March), that was another change,” he said. “Airbnb is aspirational. No one brags about staying at a Fairfield Inn, but they do about (doing so at) Airbnb.”

Clarke added he realizes Airbnb is criticized for reputedly fueling overtourism and that it has regulatory barriers and hurdles in certain markets.

“Airbnb wants to be seen as a more stable entity, and that is another interesting change,” he said.

Another recent development in distribution has been Marriott International’s exclusivity deal with Expedia in regards to wholesale and promotional rates.

“Expedia is interested in controlling the entire customer journey, which for an owner is a little nerve-wracking, as they will be the ones who lose the customer,” Chadwick said. “That is the real battle: Who owns the guest?”

Clarke said the Marriott-Expedia agreement has significant implications for all industry players.

“Getting the OTA-brand relationship right will be a huge step, and this deal is part of Marriott’s deal with owners as it wants to add more leisure,” he said. “They have turned one of the robbers into one of the policemen. It is a smart move from Marriott.

“From Expedia’s view, its (business-to-customer) product is in danger of being commoditized, so they have a need to do something else. Their core product is somewhat challenged.”

It all comes down eventually to bottom-line revenue, panelists said.

Rasin said such channel shifts are one method of improving net revenue per available room.

Chadwick, meanwhile, said his company prioritizes other metrics. “We care about (earnings before interest, tax, depreciation and amortization),” he said.

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