Perception vs Reality (Branding as a form of business strategy)

(Author of this post)

 

Online Hotel Booking Platforms

Most times we are in transit for various reasons ranging from business trips, leisure trips, events trips and stranded trips. Thinking of where to stay can often pose challenges ranging from fully booked rooms to the price (too pricey), location or even personal safety in a new city. Thanks to WWW (World Wide Web) enhancing connectivity in all business. Online Hotel Platforms help in discovering and booking accommodations both locally and internationally; they serve as intermediaries between hotels and customers.

Innovation in the Online Booking Platforms

Innovation has become a buzzword in the 21st century, a simple definition of innovation  is the process doing something new. There has been innovation in many sectors for instance:

  • Transportation: UBER or Lyft
  • Payments: Kongapay, Simplepay, Voguepay, and PAGA
  • Online streaming platforms: Iroko TV
  •  Search: Google
  • Hospitality and travel: Wakanow, Travelbeta, Jovago, and Hotels.ng

One sector that is of interest to me is the Hospitality sector, more precisely the online hotel booking platforms. The innovation in this sector is influenced by technology, new business models, and content marketing.

Innovation in the online hotel booking platforms affects the business model, for instance in the hotel industry there are two main ways to accept hotels on a platform: through standardized policies  and non-standardized policies. Standardized policies are used mostly to maintain a particular standard across all hotels that can be found on a platform. For example, Booking.com and Expedia both have standardized requirements for listing hotels on their platform.  Some booking platforms have non-standardized requirements, which means they do not have any  particular standards when listing hotels on their platform.

Standardization creates an opportunity for two business models which is branding and non-branding of hotels. The most commonly used model is non-branding of hotels, which uses non-standardized requirements to maintain a particular standard across all the hotels listed on the platform. The experience may vary but will not fall below the standards of the online hotel booking platform.

What is branding?

“Branding is when an idea or image is marketed so that it is recognizable by more and more people, and identified with a certain service or product when there are many other companies offering the same service or product”. Brickmarketing

In the online hotel industry, by establishing certain levels of commitment to consumers, platforms can create a differentiated identity in the hospitality sector. Brands generally connect to the emotion of consumers, and many guests rely on brand names in other to eliminate the risks associated with staying at an unknown hotel. Guests also rely on brand names when they are not sure of the services to expect or the authenticity of feedbacks/comments.

The value of a brand created in the minds of customers is based on the customer’s awareness, perceptions of its quality, and brand loyalty. The importance of branding is to provide value to both the guests and hotel companies by building brand loyalty.

Case study of an online branded hotel booking platform: OYO Rooms

Oyo rooms is a budget hotel chain which is located in India; It is an online hotel booking platform which has standardized requirements for listing hotels onto her platform. Oyo rooms have brought 4500+ non-branded hotels under one brand. she has over 40,000 rooms under her platform. Whilst the various hotels still maintain their individual names, while on the platform they are  referred to as OYO rooms. Oyo  rooms use branding as a business strategy. Oyo rooms adopted this strategy because of the challenges faced in the Indian hotel industry, which include:

  • Lack of hotel visibility
  • Inadequately trained hotel staffs 
  • None usage of technology
  • Unsatisfactory customer experience
  • Lack of predictability in hotel stay
  • Lack of standardized rooms and amenities

To solve the above problems, Oyo rooms decided to focus on three key areas which are Affordability, Technology, and Standardization. In other to create a budget chain of hotels, Oyo rooms implemented standardization of all hotels to be listed on her platform. To create a branded chain of hotels, Oyo rooms brought non-branded hotels into one brand by partnering with existing hotel owner. The approach is a very efficient and lean way to expand the brand, however, day-to-day management of the hotels is run by the hotel owners/managers. Oyo rooms have a 150-point checklist, hotels must adhere to before they can join the Oyo platform.

Benefits of Oyo rooms Business model to customers:

  • It creates an atmosphere of trust
  • Quality/standard is guaranteed; it’s a safe haven knowing the customer will get the same benefits and treatment across all the hotels on the platform.

Oyo rooms have received funding of about $125.65million so far, from 2 different companies.

Do we need branded budget hotels in Nigeria?:

Yes and No

The reasons given for the Yes/No answer will be explored respectively below.

YES

  1. The Nigerian hotel industry has not witnessed any form of innovation so this will be good strategy to bring innovation in terms of technology usage across all hotel
  2. The Nigerian hotel industry still has infrastructural challenges
  3. The demand for quality is increasing
  4. Increase in the middle class
  5. The Price does not equate the service/quality.
  6. No standardized policies
  7. No Marketing Plan
  8. Adamant attitude of hotel owners and staffs reduces customer satisfaction
  9. In cases of impromptu visits or sleep-overs in a new city, there is hardly any recognized brand hotel across all states except the luxury brands in Nigeria.

Asides power supply which is a general problem, I believe the above challenges are very pertinent in the Nigerian hotel industry. 

The Nigerian hotel industry for a long time has been dominated by big player’s mostly international companies who have built surviving brands abroad, For instance, Transcorp, Sheraton, Protea and much more. The big players are built on a brand which provides services to a particular customer segment (Luxury).

However, there is still a big gap in the Nigerian hotel industry for branded budget friendly hotel chains. 

The need for branding cannot be overly emphasized as it comes with various benefits listed below:

  • It will increase Nigeria’s GDP
  • It will create a long-term strategy for the company
  • It will increase awareness and market value
  • It will build an atmosphere of trust for customers
  • It will influence competition
  • Branded hotels tend to capture a larger market than unbranded hotels.
  • It will create employment opportunity e.g. Freelance photographers.
  • It will better guarantee the level of customer satisfaction since the level of service offered is the same.
  • It will drive other sectors e.g Tourism and Travel
  • From an international standpoint, it will be a good look for Nigeria

However the downside of this strategy is that there has to be consistency, it is definitely extra work and also does not individually promote the hotel names.

NO

Let me strongly emphasize that branding is a niche business strategy. One of the downsides to the strategy is that there has to be consistency. It definitely takes more work to implement, and it also does not promote individual hotel names. Before a business begins the brand is built on the mission, values, and services. Branding budget hotels in Nigeria comes with its own challenges especially with the cost of maintaining hotels and undisclosed expenses.

Challenges with establishing a branded hotel

  1. Cost: Adopting a branded hotel in Nigeria will definitely cost a lot of money in terms of services offered. Firstly, Oyo rooms business strategy on technology is a good one which probably earned them the huge funding they got. However, in a country like Nigeria where the power supply is not guaranteed or internet connectivity (good network and cost of data) is still a huge problem, it would cost a lot of money to get all the hotels to the same standard. Also, Oyo has received lot of funding which has enabled her to run the business this far. Online hotel platforms in Nigeria have not received anything near that amount of money. to find out how much funding Hotels.ng has received so far, click here: Hotels.ngs money tree.
  2. Scalability: How scalable an idea is, is a common dialogue held by start-up founders and their investors. Amongst other things, because of the high cost of implementing this model, it is in doubt how scalable this model actually is. (*but never say never)
  3. Sustainability: For reasons already stated above, only time will tell how sustainable this business strategy is, as it relies heavily on finance, compliance officers. 

Regarding the Nigerian hotel market, how willing hotel owners feel to have their names on the back burner and be known online as _____ rooms? If the price is right, maybe they might not mind. Also, training hotel staff members might not be an issue, however the fact that many businesses do not know how to retain their staff means that staff training has to be done regularly. This is not cost effective. 

On a final Note, I am a huge fan of branded hotels, however, as highlighted above, there are difficulties and challenges to its implementation. A strong strategy could be the implementation of standardization in terms of quality requirements by the various players in the online hotel booking space in Nigeria.

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