Hotel chains will this year struggle to maintain the levels of growth experienced over the past five years. In BDRC’s latest British Hotel Guest Survey, total UK domestic hotel demand stabilised in 2007 to 109 million adult room nights, the same as 2006. Since 2001/02 there has been an average yearly increase of almost 4%, fuelled largely by business travel, which has been growing 7% annually since 2004, and the short break market, which has made a significant contribution to the increase in overall domestic volume.
Competition in the hotel market will continue to intensify as a result of increased supply and the introduction of new brands, with the likes of Hyatt’s first non-Hyatt brand, Andaz, the Real Hotel Company’s Purple and Yotel entering the market. Additionally, the budget sector is forecast to double by 2020. Growth in the branded room supply in the UK has increased 53% since 2000, with the budget/limited service hotel accounting for the majority of this increase, up 143% to 90,000. However, upper full-service and deluxe hotels are also up 51% since 2000.
But with the threat of recession and inflation looming on the horizon, where should hotel chains be looking to gain a competitive edge? There have been fewer domestic frequent business stayers over the past 12 months, but they have produced the greatest volume – up from 58% in 2006 to 63% in 2007 – making them more valuable customers.
Search engine optimisation (SEO) is one area hotel chains cannot afford to neglect. The internet continues to prevail as the top information source, the use of any website having grown from 16% in 2000 to 57% in 2007. Meanwhile, print media has declined as an information source, from 30% in 2000 to just over 20% in 2007. Search engines continue to lead the way by a substantial margin for both business and leisure customers, and although the use of hotel-managed sites has declined over the past 12 months, they have shown appreciable growth since 2000. Internet bookings continue to rise and this medium needs to be fully exploited to target both business and leisure travel segments.
The demand for in-hotel technology has also grown. In 2005, 11% of business customers had used a wireless hotspot (wi-fi) to connect to the internet, compared with more than 36% in 2007, but most would prefer a low price for internet use to high speed access. And the preferred place for accessing wi-fi is the bedroom.
The growing influence of a new group of business traveller classified as “Generation Y” – business people born between 1982 and 1989 – continues. It remains the smallest of the three age cohorts but one where hotel chains can capitalise on by influencing the loyalty of a growing category of hotel user. Generation Y is definitely more turned on by technology than the preceding Generation X and baby boomers.
The uptake of hotel loyalty programmes has accelerated dramatically over the past three years, reaching a new peak in 2007. For business travellers, this figure more than doubled from 2005, with about 34% claiming to have signed up. However, questions remain as to whether management is targeting members effectively. From being aware of the hotel’s loyalty programme to actually becoming a member, conversion rates for the majority of hotels has been relatively low – about 50%.
Total advertising spend in 2007 declined 9% from 2006 to £31m, according to figures from Nielsen Media Research. But how effective has that advertising been? Based on unprompted ad recall versus advertising spend, the market leaders in advertising spend appear to do quite well. Data from the survey suggests advertising can be cost-effective but the spend needs to be high and well targeted.
As the level of competition in the hotel market increases, differentiation will become a defining point. On emotional attributes, design-led brands like Malmaison and City Inn achieved a greater level of differentiation in 2007 than their more established counterparts. As a result, a number of older brands are attempting to emulate these lifestyle brands. In the budget sector, too, hotels like Jurys Inn – as a non-design led brand – are also recording a distinct image.
Whether or not they influence the customer to return, one thing hotel guests do like are the freebies, with toiletries and pens high on the list of goods removed by guests from their rooms. Towels, slippers, dressing gowns and bed linen are less popular, while the latest survey revealed the most astonishing item removed by hotel guests was the television. A small number of business travellers (1.6%) and leisure travellers (0.9%) admitted to removing the square box from their rooms.
If you can’t chain it to the wall we suggest branding it extensively in the hope that the guest will recommend your hotel to others. Of course, that wish might depend on how many TVs you’re willing to lose. If they’re a marketing expense, it probably doesn’t matter too much…
Tim Sander, BDRC research director, contributed to this week’s Insight