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IJCHM
18,5 Perceptions of European
independent hoteliers: hard and
soft branding choices
398
Sonja Holverson
Ecole hôtelière de Lausanne, Vaud, Switzerland, and
Frédéric Revaz
Sheffield Hallam University, Sheffield, UK

Abstract
Purpose – This study aims to examine the effectiveness of branding through franchising and hotel
membership affiliations in Europe, where the chain penetration rate is still relatively low, albeit
growing slowly, and where hotels are limited by historical preservation codes and building
restrictions.
Design/methodology/approach – Although branding through affiliations has been a successful
strategy in North America for decades, little is known of this strategy in Europe, where the fragmented
hospitality industry comprises small and medium-sized independent enterprises which are being
subjected to increasing competitive pressure from large global chains. This exploratory study, using a
purposive sample, examines the factors that European independent hotels consider before committing
to a third-party brand and whether they perceive their decision to have improved their overall
performance.
Findings – It is revealed that these hoteliers perceive that they had significantly improved their
overall market position situation without losing a large part of their uniqueness, independence and
management control. Notwithstanding, some of the hoteliers were not satisfied with every aspect of
their brand selection and it was concluded that the degree of success would be highly contingent on
careful selection of the appropriate kind of branding tool option for each situation.
Practical implications – The main issues have been identified for hoteliers to consider when
selecting a brand affiliation as well as the key components for the branding companies to include in
their offers. Recommendations are provided for both.
Originality/value – Decision-making criteria are provided for hoteliers in the form of a checklist to
use including benefits and risks and other considerations, as well as a checklist of key success factors
of leading hotel branding companies.
Keywords Brand image, Hotels, Small to medium-sized enterprises, Purchasing groups,
Hotel and catering industry
Paper type Research paper

Introduction
Europe is estimated to be the world’s largest region for hotel stock with approximately
6,550,000 rooms out of 18.4 million worldwide (Marvel, 2005). As tourism in Europe
approaches maturity with relatively slow growth in arrivals compared to some other
International Journal of
Contemporary Hospitality regions in the world, and experiences a turbulent industry environment, European
Management hoteliers have cause for concern. Europe’s heterogeneous hotel industry is dominated
Vol. 18 No. 5, 2006
pp. 398-413
q Emerald Group Publishing Limited
0959-6119
The authors would like to acknowledge the Swiss Hotel Association (hôtellerie suisse) and the
DOI 10.1108/09596110610673538 European Hospitality Forum for their generosity in supporting this research.
by individually owned properties or small family-owned hotel groups. Switzerland, for European
example, has only 640 hotel establishments with over 50 rooms out of 5,600 hotels independent
researched in 2002 (Marvel, 2003a). Building and renovation restrictions in historical
buildings and dense neighbourhoods further challenge European independents to hoteliers
compete with larger more standardised branded hotel companies.
As the world’s large hotel groups consolidate and benefit from economies of scale,
scope, and concentrated resources for acquiring the latest technology and expertise in 399
order to build strong brands for more sophisticated and demanding customers, there is
increasing pressure on small and medium-sized independent hotels to be able to
continue to perform well or even to survive. This is especially the case for those
European hoteliers with older properties, perhaps not particularly well-located and
without any brand affiliation, who are trying to do business in an industry where
political and economic turbulence has also contributed to low occupancies for several
years (Swig, 2003; MKG Consulting, 2003).
“Branding”, in general, is a strategy to distinguish a company’s offer and to create
and maintain customer confidence (Pass et al., 1995). In this study we refer to branding
as affiliating with an established third-party brand. Today, there is an evolution of the
nature of hotel affiliation companies and their enhanced offers which creates a great
deal of confusion regarding such terms as “consortia” and “affiliation”, as well as
“reservation companies”, “referral companies”, and “voluntary chains”, etc. Therefore,
this paper will be using the term “soft branding” companies to represent all of these
different types of hotel membership organisations (Holverson, 2005). By “hard
branding” companies, this study refers to standardised hotel chains and especially
addresses those which franchise.
Having a strong brand enables companies to not only facilitate distinguishing their
offer from the competition but to create customer confidence and loyalty in their
performance, exert greater control over promotion and distribution of the brand, as
well as commanding a premium price over the competitors; all while impacting the
valuation of the business (Pass et al., 1995).
“Because of past experiences with the product and its marketing program over the
years, consumers learn about brands. They find out which brands satisfy their needs
and which ones do not” (Keller, 2003, p. 9). Weizhong et al. (2002) cites a Cornell
University study which confirmed that consumers consider a specific hotel’s brand
name in their selection process. Business Development Research Consultants of
London found that 70 percent of international travellers and 64 percent of domestic
travellers believed that brand was an important criteria when selecting a hotel (Lewis,
2000). Trust and reassurance are also expectations of today’s travellers. Anil Thakrar,
owner of a 145-room Quality Inn in Pennsylvania believes that “customers know there
is recourse for them if something goes wrong while staying at the Quality hotel
because it is part of a franchise system” (Walsh, 2002, p. 60). Moreover, large branded
hotel companies are further segmenting the consumer market to meet each unique
customer’s requirements. “This shift from traditional hospitality marketing techniques
will evolve over several years and cost millions in telecommunications, e-commerce,
data warehousing, and one-to-one marketing investments. The independent hotel or
resort and many small branded management companies will not be able to fund this
requirement” (Cass, 2002, p. 20).
IJCHM For many years academics and practitioners have recommended using partnerships
and alliances as strategies for the improved performance of small businesses
18,5 (Morrison, 1998). Today there are opportunities for branding that are growing within
the hotel franchise chains and the hotel membership affiliations from which the smaller
hotels in Europe may benefit without losing their independence and management
control. This study focuses on identifying those opportunities, analysing responses of
400 hoteliers concerning their motivations to affiliate, their brand selection criteria, the
benefits they believed to receive, the risks perceived and their overall assessment of
their branding choice. Decision-making criteria are recommended for selecting which
of the kinds of branding options would be the most effective for different types of
independent hotels.
Studies have shown that owners of smaller independent firms highly value
management autonomy (Beaver and Prince, 2004). Therefore, this paper has not
included branded management contracts as an approach, based on the assumption that
the hoteliers which are small and medium-sized enterprises (SMEs) would like to
remain active in the management of their property.

Literature review
Introduction to hotels in Europe
Overall in Europe, only about 20-25 per cent of room capacity is branded by an
integrated chain which does not include the soft brands (Marvel, 2003a). The
penetration rate is increasing primarily in the urban locations and in the mid-to-upscale
range. In fact, according to Marvel, 60 per cent of the hotels in European capitals are
now chains; in major US cities it is 70 per cent. The percentage of branded hotels varies
greatly across Europe (Table I).
Characteristics of European independent hotels dictate, to a certain extent, the type
of branding strategy adopted. European independent hotels are, for the most part,
SMEs owned and managed by families and/or entrepreneurs. SMEs are not “miniature
versions” of large companies and need different strategic approaches than large
enterprises to allow for their special nature (Beaver and Prince, 2004). Heterogeneous
and complex, the major differences of SMEs noted by Beaver and Prince concern
business objectives, marketing and operational practices and the style of management,
as well as attitudes towards growth. The primary motivations of SME entrepreneurs
can vary from lifestyle and family-oriented objectives to economic objectives; either
allowing the independents to maintain control over key decision-making (Glancey and
Pettigrew, 1997). This is corroborated by Beaver and Prince (2004, p. 36) who claim
that “few owner-manager and entrepreneurs make financial gain their primary goal”.
Furthermore, Beaver and Prince report that most studies conclude that independence
and lifestyle are their principal motivations with the “enterprise as the major arena for
their expression”.

Country France Germany Ireland Italy Spain Switzerland

Per cent of hotel rooms affiliated to a chain 38 24 21 4.4 34 8


Table I.
Chain penetration in Note: Integrated hard brand chains only, i.e. not including soft brands
Europe Source: Marvel (2003a)
Definitions of SME hotels vary somewhat worldwide. According to the WTO a SME European
hotel is a property with less than 50 rooms which employs less than ten persons and it independent
is oftentimes situated in peripheral locations (Main, 2001). Independent hotels in
Europe also include some larger properties but it is the SMEs that dominate this hoteliers
entrepreneurial sector (Hubertus, 2000). Morrison (1998, p. 191) defines a small hotel as
a business which is:
. . . financed by one individual or small group, directly managed by its owner(s) in a 401
personalised manner and not through the medium of a formalised management structure.
Indeed, it is this personalisation and unique lodging experiences that are the benefits
for the tourists staying at the SME hotels (Main, 2001). A further competitive
advantage to owning and operating SME hotels, according to Main, is the flexibility
that they have compared to rigid standardised hotel brands, which allows
customisation and therefore, the ability to attract niche markets.
However, independent hotels, and especially SME hotels as a sector, suffer from
inherent weaknesses. Dominated by family businesses, there may be limited
development due to non-economic motives, limited marketing, issues of quality
assurance, pricing policies, cost control and a lack of financial resources (Morrison,
1998). Also noted by Morrison as problematic areas are: under-utilised assets, declining
profit margins and higher sensitivity to occupancy and seasonal fluctuations than
larger hotels. Buhalis and Main identified the principle disadvantages of SME hotels
as: “their lack of capital; deficient economies of scale and under-utilised economies of
scope; peripherality; insufficient management and marketing skills and expertise;
inadequate bargaining power within the distribution channel; and finally lack of
representation in the emerging electronic marketing place” (Buhalis and Main, 1997,
p. 276).

Reasons for independent hotels to consider hard and soft branding


Although the overall estimated increase in chain penetration in Europe is small
(Marvel, 2003a), this is still cause for concern for independent hotels. Other industry
factors such as increasing hotel capacity worldwide, the continuing trend and impact
of hotel company consolidation, large hotel company brand proliferation and brand
extensions, as well as increasingly brand conscious customers (Weizhong et al., 2002),
mean that smaller independent European hoteliers need to reconsider their hard and
soft branding options. Many European hotels, including independents, have performed
poorly for several years in a row (MKG Consulting, 2003). Moreover, they face a rapidly
changing, increasingly competitive Internet distribution environment where online
search engines are asking for payment for display and where the customer may
become loyal to an online intermediary and not to the hotel (Starkov, 2003).
All independent hotels face these challenges, but perhaps it is even more pertinent
to the European hotel market characterised by older, oftentimes smaller properties
managed by entrepreneurs and families doing business in a more diverse market than
elsewhere. Gone are the affluent years of the 1980s when owning a small hotel created a
profitable way of leading a “comfortable lifestyle” (Glancey and Pettigrew, 1997).
Furthermore, worldwide events of the past few years have impacted European
hoteliers profoundly in terms of their key source markets (World Tourism
Organisation, 2004). Independent hoteliers need help with marketing and especially
IJCHM distribution in the new marketplace, but do not necessarily want to lose their
18,5 independence (Beaver and Prince, 2004; Morrison, 1998). Hard and soft branding
organisations may provide the expertise, existing distribution arrangements and the
brand recognition that European SME hotels require.

Branding approaches for independent hotels


402 Building one’s own independent brand is always an option for a hotel and may be very
successful. Independent, possibly family-owned unique hotels, which are sometimes
centuries old and which have built loyalty through tradition and quality, have a great
deal to offer. If these hotels have a solid repeat clientele along with satisfactory
occupancies, revenues, and profits, and engage in rapidly growing internet
opportunities, there would be little need to invest in an affiliation with either a soft
or hard brand. However, in addition to developing one’s own brand, there are also
benefits accrued from “branding” with larger hotel companies.

Franchising/hard brands
Franchising: benefits and advantages. According to Turkel in 2003, franchising enables
“individual entrepreneurs to have a hotel with a recognizable name and in theory they
acquire the right to operate a business that has been fully debugged and tested”
(Haussman, 2003, p. 1). Lewis claims that the brand name recognition “or the fact that
customers have heard of the chain and have an image associated with it in mind is a
key advantage to the franchisee” (Lewis, 2000, p. 551). Furthermore, being branded by
a top hard branded company can permit charging a premium rate (Keller, 2003).
Although the offer fluctuates from company to company, in general, hard branded
hotel franchisors, have the resources necessary to offer sophisticated information and
communication technology (ICT) infrastructure to their franchisees (Lewis, 2000).
Through their advanced technology and economies of scale and scope, hotel
franchisors can provide their franchisees access to new global markets as well as
established key accounts such as large corporations with which they already have
contracts. General marketing support, promotional assistance and marketing research
and intelligence as well as training, are also available from many franchisors which
normally would be beyond the budget of an independent hotel (Lewis, 2000).
Franchising: disadvantages and risks. The average duration of a hard branded
franchise contract is ten years and could be up to 20 years, so return on investment is
critical (Marvel, 2003a). The franchisee will no doubt lose a certain amount of control
and management independence but according to Lewis, the amount of control over the
franchisee “varies as widely as the franchising options available” (Lewis, 2000, p. 548).
Further strict physical plant standards, i.e. building, décor, etc. oftentimes apply which
may require on-going investments (Lewis, 2000). Territorial rights are also an issue to
consider for a franchisee so that there is a guaranteed distance between their hotel and
same or similar corporate brands to avoid cannibalisation (Lewis, 2000). Country of
origin of the franchisor could be a possible risk during turbulent political times,
although this is usually short-lived (Colyer, 2005). One could also postulate that some
hard branding companies may focus their resources on their core geographical markets
and not necessarily on those of the franchisees elsewhere.
Franchising: costs. Franchisees are usually required to pay an initial fee averaging
around $35,000 depending on the size of the hotel and the notoriety of the brand as well
as annual royalty fees which range from 3.75 per cent to 6.5 per cent of rooms revenues European
(an industry average of 4.3 per cent) and marketing fees which run from 1 per cent to independent
4.5 per cent of rooms revenues (Marvel, 2003a). Reservation service fees are also
charged and are calculated on the number of rooms or as a percentage of the rooms hoteliers
revenue running from 1.5 to 2.5 per cent (Marvel, 2003a). Franchisees must keep in
mind that fees are generally calculated on either the number of rooms in the hotel or the
rooms revenue and not on the profits. In addition, there could be other miscellaneous 403
fees such as extra costs for training programs, travel agent commissions, GDS fees,
computer hardware and/or software and system maintenance fees, as well as for
loyalty programmes.
Many European hotels are simply too small or in the wrong location to be accepted
as a franchisee, therefore, hard branding may not even be an option. The rule-of-thumb
is that franchise chain hotels should have at least 50 rooms along with the other
requirements specified by the brand (Marvel, 2003a). However, these constraints
present an opportunity for soft branding companies to focus on smaller properties,
many of which exist in Europe.

Soft branding
Soft branding: benefits and advantages. In order to compete with the hard brands and
large online travel distributors today, Wolchuk (2002) reports that soft branding
companies have been focusing on optimising rate delivery and sales via the GDS and
the internet and cultivating a partnership role with hotels offering contracts of a
shorter duration than those with hard branding franchisors. Belonging to a soft
branding consortium can be an attractive branding option with immediate positioning
and credibility for many independent hotels in Europe where properties are small and
unique. In Switzerland, for example, only 8 per cent of the hotels are hard branded, but
27 per cent are affiliated to a soft brand. (Marvel, 2003b). Although perhaps not as
well-known to the general public as the hard branded chains, soft branding companies
can still enable independent hotels to augment their own brand differentiation and
reinforce their positioning and visibility with an appropriate soft brand affiliation
(Arruda, 2004).
Soft branding: disadvantages and risks. Along with the increasingly more
sophisticated offers by soft branding companies is the implementation of stricter
standards for membership to protect the soft brands’ reputation. Inspections are
becoming more frequent. For example in 2003, Relais & Chateaux disposed of 161
properties that failed to meet its new standards (Marvel, 2003b). This implies potential
capital investments that the independent may not be in a position to make.
Soft branding: costs. Soft branded companies frequently charge initial fees. The
annual fees for a soft brand are considerably lower than those of hard brands, with an
average of 1 per cent of rooms revenues; the highest being Best Western which is about
2 per cent (Marvel, 2003a). A further cost advantage from a soft brand versus a hard
brand is that the physical plant requirements are not as standardised and a soft
branded hotel is not subject to transformation costs in the same manner as hard
brands.
IJCHM Summary of benefits and risks of branding approaches for independent hotels
18,5 A summary of the key benefits and risks of hard or soft branding versus remaining
independent is provided in Table II which has been determined from the literature
review.

Methodology
404 Though it may appear predictable that Western European hoteliers would be eager to
acquire these benefits and achieve improved performance through adopting a
third-party branding strategy, the challenges that independent European hoteliers face
are unique. In order to reveal the current issues in terms of hard and soft branding
options, two overall research questions were established:
RQ1. Which factors should independent hotels consider before committing to a
hard or soft brand?
RQ2. Does hard or soft branding of smaller independent European properties
improve overall performance?
Given the difficulty of identifying SME hotels across Western Europe that were
formerly completely independent and which have now opted for either hard or soft
branding with third parties, an exploratory approach was taken for this study. Since
the choice of methods and methodologies are determined by the research questions,

Remaining independent Hard or soft branding

Possible benefits: More control over management and Incremental revenue


entrepreneurship Premium pricing (traditional theory)
Create a niche personality Name recognition with clear
Satisfy a select group of clients positioning
No fees and/or royalties to soft or hard Access to new global market segments
brands Access to electronic distribution and
other IT systems
Marketing and sales support
Increased customer satisfaction due to
met expectations
Loyalty programmes
Management and staff training
Possible financing opportunities
Procurement opportunities
Possible risks: Increasing difficulty to compete with Loss of management control
the resources of large companies Loss of regular guests
Large numbers of travellers may be Loss of unique identity
attracted to brand names Fees and royalties based on revenue,
High costs of effective distribution and/or number of rooms, not profits
Increasing costs of communication Costs (fees and investments) exceed
Unable to obtain necessary marketing return on investment
Table II. intelligence in order to compete Standards change requiring capital
Benefits and risks of investment
branding approaches for Possibly long contractual
small and medium-sized commitments
independent hotels Disposal
and there is a deficiency in this body of knowledge, an exploratory approach was European
deemed most appropriate (Collis and Hussey, 2003) with the intention of elaborating independent
theoretical concepts that could be further studied and validated in a large quantitative
project with justifiable generalisations. This study within the hospitality industry hoteliers
investigates perceptions of managers/owners of small and medium-sized enterprises in
a multi-disciplinary field and analyses their individual viewpoints of branding
concerns and their subjective evaluation of their hotels’ overall performance. 405
Therefore, this area of hospitality research lends itself to a qualitative approach,
justified because “it allows valuable insight into the behaviours of an occupational
grouping within the service sector” (Di Domenico and Morrison, 2003, p. 268).
This was a purposive sample that identified 29 properties located in France, the UK,
Germany, Austria, Italy, Switzerland, and Spain that satisfied the criteria for analysis:
12 of which were hard branded franchisees and 17 of which were soft branded hotels.
The self-administered questionnaire that the hotels filled out contained questions on
background information about the hotel and the respondents, and included 53
primarily closed multiple choice questions requesting information regarding their
primary motivations for branding, specific brand selection criteria, perceived benefits,
risks of branding, and overall assessment of performance and satisfaction as a result of
this hard or soft branding. In order to evaluate the indicators of possible improved
overall performance and the corresponding benefits and risks perceived, the questions
further focused on: access to global distribution, acquisition of new customer segments,
overall financial improvement, improved image and awareness, improved customer
satisfaction and loyalty, premium pricing, availability of IT systems, database usage,
improved marketing and communication campaigns, and financial leverage. In
analysing qualitative data researchers also informally use quantitative data in order to
study “such things as repetitive or patterned behaviours” (Lindlof, 1995, p. 216, as cited
in Di Domenico and Morrison, 2003, p. 254). Two sets of informal quantitative data
emerged: hoteliers using soft brands and those using hard brands. These data were
analysed using Sphinx software to find perceptual patterns. Subsequently, the results
were analysed globally to see if there was any general perceived improvement using
either of these two types of third-party branding companies over complete
independence. With such a small sample there were no statistically significant
correlations between the responses and the hotel backgrounds and choices of the type
of branding company. However, some interesting trends in both hard and soft branded
hotel responses are revealed.

Preliminary results
Motivations of independent hoteliers to invest in a brand
The primary reason for independent hotels to brand with a soft brand was acquiring
“marketing services”, followed by “global reservations systems”, “increase in sales”,
then “access to new markets”. The leading motivation for franchisees was having
access to “global reservation systems”, followed by “increase in sales” and then, of
equal importance, “access to new markets” and “marketing services”. One possible
explanation of the larger importance of “marketing services” for soft brands could be
related to their generally smaller sized properties than the franchised hotels and
therefore they would have fewer staff available for marketing functions. Furthermore,
the smaller soft branded hotels may also actively seek “marketing services” due to a
IJCHM possible insufficient managerial training and/or a lack of marketing skills on the part
18,5 of the owner-manager.
The similar responses by both the soft and hard branded properties reflect the need
to broaden distribution which is inherently lacking in SME hotels.

Decision-criteria in specific brand choice


406 When asked what were the main reasons for the hotel to have selected their particular
brand, the leading responses for both types of branded hotels were “reputation”,
“reservation system” and “positioning”. The strong interest in “reputation” could
correspond to the more personal than financial objectives of small business
entrepreneurs. It could also simply be good business sense to have a partner that may
be more credible. One could also postulate that reputation would be of great
importance for family-created hotels which could be proudly passed on to the
succeeding generations. Positioning appears to be slightly more important to the soft
brands than to the hard branded franchisees but perhaps this is more of an issue due to
the sometimes complex mix of property types offered by soft branded companies as
opposed to standardised franchisors. “Brand size”, “geographic origin of the brand”,
did not rate very high on the decision-making criteria for either hard or soft branded
hotels. Moreover, not one hotelier of either type of brand selected their specific brand
due to the loyalty programme offered. It was surprising to find that the fees were not a
frequent reason for selecting a specific brand by both brand types. This would seem
especially unusual for franchisees considering the financial commitment required
through long-term contracts. But it is also possible that the specific brands that they
considered for their property had similar fees.
Overall, when selecting a specific brand it appears that the hoteliers are most
interested in “fit” (reputation and positioning) and “reach” (reservations systems)
which is congruent with the competitive industry environment and the hotels’ own
limited resources.

Benefits received from the branding options


Marketing benefits. When asked if the hotels had increased their “global reach” and
received “new customer segments” due to the brand, the majority of both brand types
responded yes. “Increased awareness” was reported by the large majority of all hotels,
especially by the soft branded hotels which are usually the lesser known when
completely independent possibly due to their size or location. The majority of both soft
and hard branded hotels responded that their “image had improved”; a concern of
independent hotels. However, the benefit of receiving “immediate positioning” received
low marks for both branding types although positioning was given as an important
primary reason for specific brand choice. This may imply some disappointment in their
final branding company choice or simply a result of the current proliferation of brands
and brand extensions which cause customer confusion regarding the brand’s position.
While a large majority of the franchisees responded that targeting was accurate, only
about half of the soft brands perceived that their branding company was effectively
targeting. Reflecting this possible dissatisfaction, merely half of the soft brands
reported that their “marketing and communication campaigns” had improved while
almost all of the franchisees perceived improvement.
While both types of branded hotels perceived improvement in the “reach” and European
image, there was less satisfaction with the “fit” (immediate positioning). Paradoxically, independent
although most of the hard brands appeared satisfied with the targeting and
communication campaigns, perhaps they were not getting results as rapidly as they hoteliers
expected.
Financial benefits. In regards to perceived “overall financial performance”, when
asked to compare to when they were independent, about half of the franchisees 407
reported that they experienced an improvement or strong improvement. Of the soft
branded hotels, about two-thirds reported improvement. It is very difficult to determine
and isolate the impact of branding affiliation on financial performance in a low demand
period and they may have performed sub-optimally without the brand. Due to the high
fees and royalties based on revenues or number of rooms and not profits during a low
demand period, one could have even anticipated that the hotels would report a
deterioration in financial performance, but this was not the case. However, despite the
financial improvement, the majority of the hotels reported that they were not able to
increase their rates due to the brand. This is contrary to the branding premise of being
able to command premium prices due to the brand, but in a oftentimes fiercely
discounted industry this may not be unusual.
Despite a mediocre response to “overall financial performance”, not one hotel
responded that their financial performance had worsened due to the brand.

Primary risks considered when becoming branded through soft or hard brands
The primary risk reported by both brand types is clearly “fees and royalties are too high
for the benefits received”. Yet when it came down to making a specific choice of brand,
this was not a major factor for either type of branded hotel. Perhaps the hoteliers had
already researched the costs before narrowing down the choice of brands which may have
had comparable fees; all of which were perceived as “too high”. Considering the strict
standards imposed by some brands, especially hard branded franchisors, it was
unexpected to find that the loss of decision-making control was perceived as a relatively
low or no risk by both types of hoteliers. It would seem that the hard branded franchisees
would be more concerned about “possible investments” due to a change of standards than
a soft branded hotel. However, more soft brands perceived this as a risk than franchisees
and even considered it more threatening than loss of unique identity. This may be related
to the limited quality assurance and the lack of resources for upgrades and
transformations that are characteristics of the smaller hotels.

Overall assessment of the branding choice as perceived by the independent hoteliers


Despite the perceived risk of high fees, about two-thirds of both the hard branded
franchisees and the soft branded hotels reported being satisfied or strongly satisfied
with the costs versus return on investment. About a quarter of both types reported not
being satisfied with the return. The rest perceived no difference. About two-thirds of
both the hard branded franchisees and the soft branded hotels responded that their
main expectations from the brand were partially or completely met. In both brand
types there were a total of five hoteliers whose expectations were not met and the
remaining five hoteliers were indifferent. When asked if the hotel’s overall situation
has improved due to the brand in the current environment, approximately
three-quarters of both hard and soft branded hotels reported improvement or strong
IJCHM improvement with about a quarter reporting no difference. Not one hotelier said that
18,5 the hotel was “worse off” with the brand than when it was completely independent.
They may have performed even more poorly in an uncertain environment had they
remained without affiliation.
The results presented concerning the various factors were initially separated by two
different types of branding opportunities, soft or hard, and subsequently consolidated
408 for further analysis. The overall assessment of these branding options for both types
was quite similar and the majority perceived an overall improvement of performance.
The differences, nevertheless, should be brought out, in particular for hoteliers seeking
to achieve specific objectives through one of these branding strategies. The areas
where the soft branded hotels appear to be more satisfied than the hard branded
franchisees are: improved financial performance, and increased awareness. The areas
in which they were the least satisfied were targeting and marketing/communication
campaigns. The hard branded franchisees seem to be more satisfied in regards to
acquiring new segments, having more global reach and benefiting from more accurate
targeting by their franchisor. The benefit of immediate positioning did not receive high
marks from either the soft or the hard branded hotels.

Recommendations
Managerial implications and applications for independent hoteliers
As far back as 1993 the question for independent hotels was no longer “why join a
membership, reservations, or referral system?” It was: “How do you pick the right
one?” (Jesitus, 1993). The situation and the choices are far more complex today. The
major decision-making considerations for small and medium-sized hotels have been
established below. This framework has been compiled based on the literature review
and the exploratory study and contains the key issues for independent European hotels
to consider when selecting a brand affiliation, be it a hard branded hotel franchise or a
soft branded hotel membership. It could further be used by third-party hotel branding
companies to consider when adjusting or personalising their current offers to
independent hotels.
Internal issues for independent hotels to consider before selecting a hard or soft
brand are:
(1) Owner’s objectives and attitudes:
. vision, mission, values;
.
long-term goals (personal and professional); and
.
willingness to relinquish some control.
(2) Owner’s situation:
.
resources, ability to invest;
.
financial performance; and
.
direct competitive set (especially if branded).
(3) Owner’s offer to match a brand:
.
Location, size, target markets; and
.
Core competencies, condition/characteristics of the hotel.
Branding company issues for independent hotels to consider before selecting a brand are: European
(1) Brand’s corporate situation and policies: independent
.
financial health and performance in Europe; hoteliers
. global objectives and strategies; and
.
frequency of change of affiliation requirements.
(2) Brand’s corporate company portfolio: 409
.
number and types of all brands and brand extensions;
.
multi-brand clarity and degree of cannibalisation;
.
brand’s global (European) penetration and access; and
.
brand’s primary target markets.
(3) Brand’s country of origin:
.
effect on specific target markets; and
.
possible bias of targeting efforts and promotion.
(4) Brand’s strength, reputation, image:
.
clear positioning and global image, ethics.
(5) Brand’s property requirements:
.
condition, style, size of the building;
.
style of service, number of staff; and
.
location type.
(6) Brand’s quality assurance:
.
degree of rigidity and frequency of inspections; and
.
consistency within the group.
(7) Brand’s management conditions:
.
degree of control allowed.
(8) Brand’s contractual conditions:
.
duration, exit clauses, renewal of the contract; and
.
terms of payment.
(9) Brand’s costs:
.
initial fees;
.
ongoing fees (annual membership or royalties);
.
services fees (reservations, advertising, etc.); and
.
possible upgrade or re-branding investments.
(10) Brand’s technology offer:
.
CRS, GDS, PMS;
.
internet sites, hotel links, online tracking systems;
. CRM (customer relationship management); and
.
revenue management.
IJCHM (11) Brand’s marketing services:
18,5 .
brand directory and brochure support;
.
appropriate communication campaigns;
.
access to targeted databases;
.
substantial loyalty programme;
410 .
good relations with intermediaries and key accounts;
.
sales staff support; and
.
market research and marketing consulting.
(12) Brand’s other services:
.
training staff and management;
. preferred suppliers available nearby (Europe);
. financial support, reports and consulting;
.
legal consulting (Europe); and
.
architectural and engineering consulting.
Managerial implications and applications for third-party hotel branding companies
Considering that the hotel industry in Europe is dominated by independent hotels,
especially SMEs, hotel branding companies should seriously consider these
opportunities. The preliminary findings in this study could assist hotel branding
companies to improve their offers specific to independent European hoteliers’ needs
and expectations. One area of improvement would be maintaining rate integrity and
assisting with achieving premium rates. Knowing that access to new markets and
global reservations systems are a priority could enable hotel branding companies to
better integrate their technologies into small property management systems that
European hotels are using or assist them with more compatible technologies.
Understanding the importance of reputation and positioning for these independent
hotels could help branding companies emphasise their own unique selling propositions
and better define appropriate positioning. Soft branding companies in particular, do
not meet SME hotels’ expectations and needs concerning not only positioning, but also
targeting and effective marketing campaigns.
Since the perception that the fees and royalties are too high for the benefits received
by the hoteliers, the hotel branding companies could address this issue through better
communication, modified contracts and improvement in other areas of branding where
expectations might not be presently met. A ten C’s checklist of key success factors for
hard and soft brand companies which they should be able to offer is as follows:
(1) Clarity. Clear positioning of different brands in one corporation. No
cannibalisation.
(2) Communication. Ability to communicate appropriately to very specific targets
through the latest technology.
(3) Channels of distribution. Reaching new global markets through e-distribution.
(4) Consistency. Similar facilities, service delivery and pricing in order to satisfy
expectations. Not necessarily replication.
(5) Credibility. Always delivers on the promises.
(6)Customer-centricity. Constant monitoring of changing needs. European
(7)Critical mass. Synergies and resources necessary to compete. independent
(8)Cooperation. Partnerships and strategic alliances. hoteliers
(9)Control. Measuring and monitoring activities for effectiveness and customer
satisfaction.
(10) Creativity. Constant innovation and adapting to customers’ consumer behaviour 411
and desires.

Conclusion
The primary motivations indicated by formerly independent hotels to brand, either
with soft or hard brands, were access to global reservations systems, access to new
markets, and marketing services. Increasing sales and improving image were also
significant reasons for hotels to select branded affiliations. It was found that the
criteria of reputation and image were nearly as important as access to global
reservations and more important than fees for these SME hotels when selecting specific
brands. Positioning also played a major role in selecting specific brands and there was
no interest indicated in loyalty programmes. But did the hotels actually receive what
they were looking for in a hard or soft hotel branding company?
Despite the nature of the unique and diverse European hotel industry structure and
a difficult economic environment, it was found that the majority of a small sample of
hotels surveyed indicated that their decision to brand through hard branded
franchising or soft branded hotel membership organisations has improved their overall
performance without losing a large part of their management control. Nevertheless,
these benefits were not acquired without perceived risks. The most frequently stated
risk was the concern for high fees and royalties compared to the return on investment.
But in fact, the majority of hotels expressed satisfaction with their return from their
specific hard or soft brand affiliation. Although, also perceived as a risk, the possible
loss of identity did not materialise for most of the hotels. Contrary to traditional
branding theory, the hoteliers indicated that they have not been able to charge higher
rates as a direct result of branding. This, however, is a variable that is difficult to
isolate in a discounting environment and it is conceivable that the hotels were getting
the maximum rate possible.
Branding, either through hard branded franchising or soft branded hotel membership
organisations, is an important component of an entrepreneurial marketing strategy for
some small and medium-sized independent European hotels. Through this exploratory
study it was found that an appropriate branding strategy appears to be critical for the
European hotel industry for superior performance and survival in a highly competitive
and threatened environment. However, the degree of success for the many different types
of hotels will be contingent on selecting the appropriate form of branding, including
building one’s own brand. As internet brands develop and online purchasing of
hospitality products increases, independent hoteliers may need to further consider online
branding opportunities which they may be able to pursue on their own as well as through
the increasingly available hard and soft branding choices.
IJCHM Further research
18,5 The next step will be to conduct a study with substantial quantitative data in order to
validate the significance of the independent hotels’ motivations and the selection
criteria for branding companies as well as to correlate the different types of hotels with
their degree of satisfaction with their branding choice. In-depth case studies or
interviews could reveal details on the underlying causes of satisfaction and
412 dissatisfaction of independent hoteliers and their chosen brand which would be
beneficial to hotel branding companies and independents alike. This study was
concerned with two branding options for independent European Hoteliers: hard
branded franchising and soft branded hotel membership organisations. A further
comparative study of branding options for independent hoteliers could also include
evaluating the performance of the rapidly evolving “branded” distribution companies
on the internet which may prove to have more “brand value” than the existing hard
and soft brands under consideration here. These internet aggregates may also be able
to offer independent hotels the benefits of economies of scale and scope that
independents seek as well as other benefits without the restrictions and possible higher
fees of the traditional large hotel chain franchisors and soft branding companies.

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Corresponding author
Sonja Holverson can be contacted at: sonja.holverson@ehl.ch

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