New York Hospitality by Vijay Dandapani

Digital media's impact on franchises

Steve Ballmer, CEO of Microsoft noted at the recently held meeting of world leaders in advertising in Cannes, France, that traditional media will not bounce back. The UK's Guardian newspaper carries a report where Ballmer says that the "global advertising economy has been permanently reset at a lower level meaning that there is no recovery to pre-recession levels".  At the same event an FT report has Google's Eric Shmidt noting what is glaringly obvious to most that they have not "needed to advertise" as they "pretty much operate from an end-user referral basis." 

Many hotel companies have already made the shift to both digital media while moving to leverage user generated conent like tripadvisor.com, which can lead to end-user referral. The former is evidenced by the rapid decline in ads in mainstream newspapers from hotels, major and minor. TV advertising, traditionally a big part of the advertising and marketing budget of the majors is being steadily replaced by online where absolute costs could be as little as 10% of that for TV ads.

While no numbers are available in the public domain, TV spending continues to be a significant part of hospitality majors. For franchisees who, in some instances, contribute as much as 35% of their franchise fees for marketing fees to cover the cost of brandwide advertising and marketing, to a franchisor, it could have a meaningful outcome were the savings passed through. Greater franchisee input on media outlays, should at a minimum, be at the forefront of franchisee concerns.

Hotels going to the dogs

Pet friendly hotels have been around for years with a growing number of sites pointing to hotels that are pet-friendly. But lush hotels designed and operated exclusively for pets seem to be a new frontier in hospitality according to a report in the Chicago Tribune.

The report features the Paradise 4 Paws resort run by Mr. Saq Nadeem noting that "with the travel industry plummeting last year, entrepreneur Saq Nadeem couldn't have picked a worse time to open a luxury pet hotel. The "resort is complete with splashing pool, indoor grassy play area, flat-screen TVs, Webcam access and private rooms with attached patios. It opened near Chicago's O'Hare Internatonal airport in May of last year just as the travel industry was descending rapidly due to the economy."

Its success has led the entrepreneur to plans for another location near Chicago's other airport, Midway with larger plans to open in 10 cities  over the next five years subject to raising funds.

Others have preceded Paradise 4 Paws and include Waghotels in California whose first quadriped hostelry opened as far back as 2006. There are plenty of others in the competitive mix including pet retailer petsmart with as many as 152 petshotel locations nationwide. What sets apart paradise 4 paws is, unsurprisingly, the three words that are dinned into every hotelier: location, location, location. By situating themselves at airport locations, paradise 4 paws seems to have melded convenience with costs as real estate prices are likely to be lower there than in the heart of cities.

Luxury on the mend?

There appears to be a hint of "greenshoots" in the luxury sector going by reports from the recent luxury summit sponsored by the Financial Times in Monte Carlo. A Bloomberg report quotes the CEO of luxury group Burberry, Angela Ahrendts, as saying "luxury demand is leveling out as the market slowdown nears its first anniversary." Ms. Ahrendts suggests that while trends are "not getting significantly better, they’re not getting any worse." Mastercard also found that " slumping demand had eased in US luxury spending"

Other indicators such as business jets also seem to validate the aforementioned thinking. ARG/US (Aviation Research Group) a company that tracks, among  other things, safety reports, aircraft operating cost and market research for aircraft manufacturers was recently quoted as saying "the gap between U.S. business aircraft flying activity this year versus last year continued to narrow last month."

A CNN report in the travel sector on the likelihood of a resumption of supersonic travel could be another encouraging indicator of a revival. The report quotes a NASA official as saying that  "the next generation of passenger air travel at speeds faster than sound may start as soon as 2015, with business jets leading the way." Experts are quoted as sayiing that "the allure of cutting some of the misery out of long-haul flights will always be worth a premium price for frequent travelers." 

Distribution channel shake up?

The Atlanta Journal Constitution reports that "the Georgia Supreme Court on Monday handed the city of Columbus an important victory in a high-stakes lawsuit against online travel companies." It is a ruling that could presage major changes in how the big-daddies of internet distribution like Expedia, Hotels. com etc. are forced to rethink their current relationship with hotel providers and could upend what has, heretofore, been a tremendously successful business model for them.

Its implications for hotels is no less significant if the ruling sets a precedent for lawsuits by tax jurisdictions around the country including New York that now appear to be heading for a decision. This site has previously noted how the lawsuits seem to seek to redress what, at the very least, is a lack of transparency on the part of the distribution channels that ends up short changing the consumer and jurisdictions while giving an enormous degree of control over inventory to the distribution channels. Regardless of the outcome of lawsuits in other jurisdictions, the status-quo is unlikely to continue as most hotel majors have rolled out best rate guarantee programs chip away at the portals' sway over the hotels. While the lawsuits do not herald the demise of portals they arguably will result in a shake out that better reflects their role as intermediaries and a more concomitant compensation for them.

Viral marketing's success

This site wrote about viral marketing nearly three years ago, a marketing approach that is particularly relevant in today's economic climate. Today's Financial Times has a report entitled "Marketing's new vein", a word play on a vampire themed viral marketing initiative to introduce Bloodcopy, a new blog from Gawker, a network "that already includes technology, lifestyle and gossip sites such as Gizmodo, Lifehacker and Jezebel". The FT article notes that Bloodcopy has managed to get some "unusual advertising from some familiar brands: a Gillette promotion of a “True Blood special edition” of its Fusion Power razor under the slogan “Dead Sexy”; a Geico ad asking how much you could save on insurance if you were immortal". The report notes that "the search for ideas that inspire potential customers to discuss them and pass them round their online networks of friends is turning advertisers into content creators, generating campaigns around campaigns, fictional online worlds and back stories to the narrative of their core marketing message." End result of all that co-branded advertising is that  Bloodcopy has had an incredible 11 million page views since its launch.

Some hotel and resort companies are also cued in on this relatively cheaper and more effective advertising method as is the case with Jet Luxury Resorts. A newswire.com press release notes that the company's campaign, titled 'Are You Ready to Jet?' is a sexy, charming, high-end video that was produced and shot at a fraction of the usual cost. Set within one of the company's top properties, the penthouse in the Palms Place Hotel in Las Vegas, a story unfolds about just how it feels to stay in such a room."

KOTFA - Korea World Travel Fair 2009

KOTFA, South Korea's World Travel Fair, just got over in Seoul. The fair, a (very) mini ITB attracted a number of exhibitors (somewhat predictably) from the Far-East, India and the Middle East. Some European countries were there as well but only three organizations from the US, Apple Core Hotels, Microtel and a Washington DC based company. That is unfortunate as for Koreans, the US is a high priority travel destination particularly after the visa-waiver program was instituted earlier this year as reported on this site.

The potential for outbound tourists, particularly when the recession is crested can be gaged from the fact that an extraordinarily high percentage (nearly 23% or some 12 million) Koreans travel abroad. Add to that the pre-visa waiver number was less than a million but if anything is to be inferred from a similar move by Canada nearly two decades ago, that should explode to nearly 2 million in the near term. Both Korean Air and Asiana airlines have direct non-stop flights to major US metropolitan areas including New York and Los Angeles.

Hotels in the US trying to cater to Korean tourists should note that Koreans can have special needs, specially when it comes to surmounting language barriers. They also tend to have strong dietary preferences but on the flip side represent a strong market for group travel which may justify any added costs on account of the former. Given the country's nearly 90% rate of internet penetration, a good way to reach the Korean market besides the usual distribution channels of tour-operators and TAs, Korean language website with a search engine is an investment well worth considering.

Managing International Travel

The Wall Street Journal has an interesting report in its managing section on how a California based company, Teknovus, has set itself apart in terms of understanding its overseas customers. The article could be interesting for hotel practitioners for a couple of reasons. Teknovus adopted a simple formula to bridge gaps in understanding caused by diverse. The company "required new overseas hires to spend time in the U.S., and he encouraged U.S. employees to call their international counterparts often" as part of an effort to "build mutual understanding (and) learn about different customs, and the reasons for the differences."

While hotel employees and management simply cannot travel to diverse countries to gain an understanding of cultural differences, there are other ways to mimick what Teknovus did for its staff, domestic and international. That could include cultural sensitivity training that address customers preferences of overseas customers based on marketing source codes. Knowing the foreign language in question obviously is a big help particularly for some customers from the far-east with limited knowledge of English. That can help get over self-limiting measures as these in this Japan based hotel.

Another interesting aspect that can be gleaned from the article is the fact that companies such as Teknovus clearly endorse the primacy of international travel over the frequently touted alternative, video-conferencing, a medium, that has oft been touted as limiting hotel stays as this recent survey seems to suggest.