The hotel industry is at a tricky point in its history, as occupancy in North America continues to hold at record levels while the power of hotels to drive rates higher each year remains constrained. At the same time, brands within this industry have to work harder than ever to stand out from an ever-crowding field of competitors in order to stick in the minds of customers, whose expectations are getting higher and whose voices are getting louder.
BTN’s 2018 Hotel Brand Survey saw some brands maintain their top spot year over year, such as Marriott’s Ritz-Carlton, Hyatt Hotels Corp.’s Hyatt Place, InterContinental Hotels Group’s Candlewood Suites and Best Western Hotels & Resort brands Best Western and Best Western Plus. Others overtook last year’s victors to claim the No. 1 slots in their segments, including Marriott’s Westin and Hyatt’s Hyatt House.
The biggest change in the survey this year, however, is the survey itself. BTN reworked the criteria of previous years to better account for how today’s travel managers and travel buyers evaluate hotel brands. As a result, brands garnered acclaim in new areas like safety and security standards, communication with travel buyers and support of traveler wellness.
Among the multibrand hotel companies, Hilton had the strongest overall performance, as five of its brands finished in the top three of their respective tiers. Marriott, Hyatt and IHG each had three brands finish in the top three and Best Western had two.
The Partnership Approach
This year already has seen the rollout of a number of initiatives like Hyatt Leverage, IHG Business Edge and Best Western Business Advantage that provide discounts to and support for small to midsize corporate travel programs. The initiatives take a partnership approach to working with travel buyers and managers because, as leaders of these initiatives have said, it’s what corporates expect in order for hotel companies to win their business.
Indeed, for five of the seven hotel tiers in which BTN ranked hotel brands, the No. 1 brand was also the brand that earned the highest marks for exhibiting a partnership approach to negotiating rate and penalties. To be fair, the partnership idea isn’t exactly new—Best Western VP of worldwide sales Wendy Ferrill emphasized its importance in this same report back in 2016—but with more brands rolling out dedicated programs with that idea at its core, there seems to be a new force driving the need to work with buyers.
It’s possible the seemingly anticorporate practices in recent years—such as 48- to 72-hour-cancellation penalties, as well as commissions cuts to meetings planners and intermediaries—have stirred up bad blood that has given hotel sales organizations reason to extend a different kind of olive branch to travel buyers.
However, Bjorn Hanson, industry consultant and adjunct professor at the New York University School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism, has a different theory. “I think what’s happening in part is driven by all of the brands’ approaches to revenue management,” Hanson said. Revenue management philosophy goes that hotels should build a strong base of demand or occupied rooms because doing so makes it easier to drive a higher rate in the remaining rooms. With hotel occupancy the highest it’s been since 1981, Hanson said, these new programs could be a way for hotels to try to attract business travel as a base and then drive rate on leisure and non-negotiated rates, a shift from the practices of, say, a decade ago.
Those familiar with the revenue management philosophy of the airline industry will recognize the similarity. “It’s a commoditization in a way because although it appears on the surface like corporate demand is a priority, it’s actually a declining share of occupied room nights,” Hanson said, citing his findings for a report to be released in late October.
STR forecasts for 2019 U.S. hotel demand growth, at 2.1 percent, will continue to outpace the 1.9 percent supply growth. Occupancy is expected to increase 0.2 percent year over year, and average daily rate to grow 2.4 percent, which STR still considers slow, given the continued high occupancy.
BTN’s 2018 Hotel Brand Survey Methodology: For its annual Hotel Brand Survey, Business Travel News emailed readers who are responsible for corporate hotel-buying decisions, and 328 participated in an online survey between July 18 and Sept. 6 to rate the hotels with which they have conducted business in the past year. They rated each brand on 13 attributes on an ascending scale from one to six. BTN reported results only for hotel tiers and brands with significant respondent usage. The survey bases hotel-tier divisions on price-point data provided by STR Global.