Let us go Back to Local?

This article was first published on October 1, 2019 on hospitalitynet.org under a different title: The Return to Power of Local Hotel Brands?

With the dramatic collapse of Thomas Cook it seems that the era of the neo-colonial tourism system, in which the travel trade pulled the strings, is finally coming to an end. For one and a half centuries, since Thomas Cook started the tour operating business around 1850, international travel and hence the hotel industry depended, to a large extent, on wholesalers and retailers. Assisted by the industrial revolution and rapidly expanding transport systems, international travel exploded and travellers relied on travel agents and tour operators to book their trips. Horizontal and vertical integration resulted in travel trade managed hotels and global brands. Prior to this, of course, lodgings were always local; the town-inn being the pre-modern boutique hotel. Now we call them post-modern and I think they might be returning to power.

From Trading to Brokering

Throwback: travel and tourism in the twentieth century. It is not actually that long ago, yet hard to imagine for many, that international travel exploded at a time that consumers had no online booking platforms to compare offers or check reviews, no systems for email, messaging, chat or other fast ways to communicate and they could – literally – not afford to place international phone calls. The only way that hotels could stay in touch with their guests after they left was through snail mail; in the hope to build some loyalty. Some global hotel chains would install local call centres across the planet for loyal guests to book directly through a toll-free number, but that was the exception rather than the rule.

It was, of course, the travel trade, with their network of offices and agencies, that functioned as an inescapable link between the hospitality industry at the destinations and the (potential) guests elsewhere. They were indeed “traders”; wholesalers and retailers buying airline seats and hotel beds in bulk to resell them to consumers – packaged or not. The travel trade also took care of hotel marketing, often in a highly standardised fashion to facilitate comparability and as a firewall against legal liability claims of misleading information. Hence, the star classification systems. The character of the hotel and the identity of the destination were virtually irrelevant.

Obviously, at the end of the twentieth century the internet turned everything on its head. Suddenly the hospitality industry had direct access to consumers worldwide and money was to be made cutting out the middle-men. Now we know that the cost of distribution is still considerable either because of the cost of internal systems or the commissions on bookings through online platforms, but the marketing control is now firmly in the hands of hotels themselves. Distribution now works largely on an agency model where intermediaries take commissions on bookings, rather than ownership. This has changed and will continue to change the face of the hospitality industry, particularly for holiday resorts and global brands.

The Colonies

The travel trade in the outdated tourism system obviously resulted in tremendous commodification; particularly in the leisure travel segment. A standardised product for a mass market. Sea, sand and sun, wherever it shines, largely inconsiderate towards local customs, culture or traditions; or offering cliché simulacra thereof as night-time entertainment as part of the “guest animation programme”. The idea was that “civilised” travellers could enjoy themselves according to their own elevated customs (even if that involved excessive alcohol consumption and culinary annexation with English breakfast, hamburgers and French fries) with disregard for the local host community in the destination. Resort hotels – particularly around the Mediterranean, but also in the Caribbean or elsewhere – effectively became “Western” colonies.

Demand for such “tourist reserves” will always be there, but the dwindling role of the travel trade and the ability and demand of consumers to book online will force these players to reconsider their positioning. Unprotected by opaque distribution, they will become increasingly exposed to competition and therefore need to consider their competitive advantage. Just offering all-inclusives on a beach will not be enough. Combine that with tourists’ expanding travel experience and expectations, the increasing pressure on resorts to question their local socio-economic role in the host community, and a growing complexity of the global market for travel and tourism, it seems likely that this part of the hospitality industry will continue to change.

And Global Brands

As travelers – in the old tourism system - were in the dark, travel and tourism businesses created global brands for them to put their faith in. Global travel trade brands, airline brands, hospitality brands. All of that made complete sense as ways to build reliability, trustworthiness and consistency in an opaque market. Even attractions have become global brands (Disney, Madame Tussauds, Guggenheim, The Dungeons). All global brands dominating destination brands.

But in today’s transparent market in which the segment of experienced travellers is rapidly growing, is brand loyalty under pressure? With online search and full market access, is brand recognition still crucial? With online reviews, is predictable standardisation still relevant? If travellers from wherever, going wherever, can search for the property that best serves their requirements and they can trust the reliability of the offering based on the reviews of peers, do they still require the reassurance of a global brand or will the attractiveness of a unique local experience, as opposed to a homogenised offering, outweigh the somewhat increased unpredictability?

To Imaginative Communities

With the declining need for distribution-controlled resorts and global brands, two counter movements play into the hands of local hotel brands. First, destination management organisations, policy makers and stakeholders are increasingly asking themselves the question: “what type of destination do we want to be and what sort of travel and tourism do we want to attract”. They are looking for sense of place, purpose and distinctiveness, as a reaction to the threat of globalised homogenisation, commodification and – as a result - overexploitation. Destinations need to stand out, be in control and build a relevant and memorable reputation based on identity, originality and sustainability. I call them Imaginative Communities. Second, more and more travellers are looking for authentic local experiences. This can be gauged from the success of AirBnB, design hotels and unusual lodgings. With local host communities as well as guests looking for distinctiveness, it seems that the hospitality industry will continue to be pushed towards change.

One such development seems to be the inevitable return to power of local hotel brands. They understand the local community; can build authentic local experiences and support and enhance imaginative local reputation and marketing strategies. That doesn’t mean, of course, that these local hotels can’t be part of a larger chain. Yet, it seems that for reasons of experience enhancement, it appears to be more logical to apply a house of brands strategy than a branded house strategy. In addition, obviously, labels and collectives such as Leading Hotels of the World, Relais & Châteaux or Historic Hotels of Europe might become more important as market signals based on character as opposed to brand. Because, indeed, character, distinctiveness and authenticity will be the drivers for the future, not predictability.
Robert Govers
Photo credit: Author's own.

Ready to find out more?