Brands have taken a battering in not just revenues, but in values, over the period of the pandemic. But to restore those values, they may need to swiftly adapt to a changing travel landscape.
Just how much those values are down is revealed in the latest Brand Finance annual ranking of hotel, hospitality and leisure brands. The 2021 report puts Hilton in top place once more, ahead of Hyatt, Holiday Inn, Hampton and Marriott. But overall, the world’s 50 most valuable hotel brands lost an average 33% or USD22.8bn, thanks to the pandemic.
But the standout hotel brand performer of the last year was Hyatt, one of only two hotel brands to see its value increase. Hyatt jumped up to second place in the ranking, with a brand value estimated at USD4.7bn. It displaced Marriott, which fell from second to fifth as its value plummeted 60% to USD2.4bn.
“Despite the pandemic impacting its performance greatly, Hyatt’s net rooms growth has been strong, opening 72 hotels and entering 27 new markets,” noted the report commentary. “Furthermore, the brand has continued to execute new signings to maintain its pipeline, which represent over 40% growth of existing hotel rooms in the future.”
Brand Finance also includes a “strongest” ranking for brands, taking account of marketing investment, customer familiarity, staff satisfaction and corporate reputation. Indian group Taj has raced to the top of this table with a score of 89.3, displacing last year’s leader Premier Inn, which has a measure of 88.9.
The report puts the Indian group’s strong performance down to its completion of a five year plan to reduce its asset base and reliance on purely luxury hotels; and its ability to move fast during the pandemic with its RESET strategy.
Also rising in strength are Spanish groups Melia and NH, placed third and fourth in the ranking.
Ben Baigrie, Senior Consultant, Brand Finance told Hotel Analyst: “Hyatt and Conrad are among few to have positive outlooks in terms of revenue growth – meaning that their predicted revenue was greater than at the time of Brand Finance’s previous valuation. Both brands have also improved on their brand strength over the previous year, which has also contributed to their increases in brand values.”
Hyatt’s Brand Strength Index (BSI) score increasing from 74.1 out of 100 in 2020 to 75.4 out of 100 in 2021. “This exhibits its high levels of reputation, consideration, and brand imagery. Hyatt has managed to reduce a large portion of its variable costs in response to the pandemic. The remaining portion is largely management linked to its franchising business, meaning it is not responsible for a large portion of the operating costs, as the franchisee will pay these.”
“The repercussions of the covid-19 pandemic and other macro factors are the main reason for Marriot’s 60% brand value loss this year. The brand has however maintained its brand strength, meaning that it is highly capable of bouncing back post-pandemic.”
One European hotel brand that performed strongly, was Spanish group Melia. “As with the majority of hotel brands this year, Melia’s brand value suffered as it negotiates lost revenue, as a result of the pandemic. According to Brand Finance’s Global Brand Equity Monitor, which includes Spanish general public opinion on Melia, Melia does exceptionally well on familiarity, consideration and reputation. Regarding the CSR assessment, the brand also scored very highly in terms of its community rating, environmental rating, governance, and employee score. All of these scores directly feed into the brand strength assessment.”
Baigrie said attention to green issues also has a part to play: “Being perceived as a good corporate citizen has become increasingly important for all brands, particularly global players whose day-to-day operations have a big impact on the environment. If important stakeholder groups, such as potential guests, perceive a hotel to be poor in this area, it naturally weakens the brand strength and bottom line for the brand.”
The report also carries a broader leisure & tourism category, with a ranking that sees Booking.com as this year’s most valuable brand, displacing Airbnb. Trip.com is in second place, ahead of Airbnb, CITS and TUI. The report notes: “The fastest falling brand this year, Airbnb, cut a quarter of its workforce last year, and was forced to scale back on new initiatives that it had in the pipeline, including luxury resorts and flights.”
James Bland, director at BVA BDRC, said the declines in value ”tell a very clear story of fifteen months of woe for the sector that will certainly resonate and is unlikely to meet with too much disagreement.”
Bland said that value declines may be seen as down to the market in general, rather than the brand’s own behaviour: “It also possibly explains why those with the greatest exposure to the market (largest) seem to have suffered the most and you get the result, that may seem counter-intuitive to some, of the Hyatt brand being worth twice as much as the Marriott brand.”
And consultants Accenture have warned hoteliers they need to adapt quickly to a temporarily changed travel market, where the leisure traveller will need to be more of a focus. In a new report, “Business or Leisure?”, they declare: “The imperatives? To refocus the strategy around leisure travel, and for many, the particularly high value travellers. To reposition the brand and rethink customer experiences, products and services, and loyalty programmes for a leisure-dominated market.”
The paper, authored by Miguel Flecha, Europe travel lead at Accenture, suggests that business travel may not ultimately return to previous levels. If this happens, the travel market will be structurally smaller, and more skewed towards the leisure traveller. “This structural shift changes how those companies need to go about attracting, converting and retaining customers. It also means they need to think creatively about what to do with underutilized assets.”
It suggests six key areas for companies to focus on. First they need to prioritise the task of inspiring consumers to travel, with local flexibility added to global marketing. Loyalty will require a rethink, while digital marketing will need to become much more personalised. Data needs to be used across the business to inform all decisions more deeply, while brands need to deliver on the promise of seamless experiences.
“There’s no doubt the travel industry is going through a seismic shift. Revenues from traditional business models built around business travel have disappeared overnight. The leisure travel industry is the travel industry for the time being.”
HA Perspective [by Chris Bown]: What’s a brand worth? Not very much to a consumer, if they cannot enjoy its products or services – as happened to many consumers for many months during the pandemic. The brands struggled to remain relevant to locked down guests, via a number of online routes. So it’s no surprise they lost value.
As for Hyatt, we’d already noticed that the group seemed to have gathered some good momentum with signings. Those already written, ahead of the pandemic, led to a strong year of openings, while the NUG prediction for 2021 has already been upgraded, as the group continues to find willing hotel partners.
What’s the secret sauce? Well, it may just be that Hyatt’s middle route, deploying and recycling capital judiciously, has helped here in getting the wheels oiled, and deals done. Remember a few months back how Service Properties Trust, a US Reit, had a run-in, in turn, with IHG, Marriott and Hyatt – all effectively having come a similar cropper over a minimum rent/fee guarantee to the landlord. IHG and Marriott walked – while Hyatt negotiated a resolution that saw them keep most of their properties. That’s the sort of stuff which helps improve reputations.
As James Bland told us, some of these valuations could well rebound, taking account as they do of lagging or leading indicators such as share pricing. But the Accenture report points out other bumps in the road. Those groups that simply sit and wait for the return of the high spending, frequent travelling business guest may be waiting some time; they need to adapt now, in order to remain relevant.