Methods for Successfully Conquering the Commoditization Beast

By Amy Bair Career Services Analyst, Florida International University's Chaplin School of Hospitality and Tourism Management | March 17, 2013

Can you feel the winds of change? Optimism is in the air. A recent CNBC article stated "The US hotel industry is booming" and the United States is the "poster child of optimism." However, hoteliers do have some concerns. In a HotelNewsNow article asking operators their top concerns for 2013, they felt low average daily rate, steadily increasing costs and increased commoditization were some of the challenges that could not be ignored.[8]

The last issue, commoditization, is a critical hurdle hotels want to overcome. Addressing it can also make strides toward improving low ADR and rising expenses. A concerted effort toward differentiating your product from the competition can be very beneficial for business-not that you need me to tell you this. According to the Harvard Business Review article "Wyndham International: Fostering High-Touch with High-Tech," brand erosion is a challenge. Hotel brands have been increasingly mimicking each other thus diluting their value. "If the [lodging] industry continues to see itself primarily as a provider of hotel accommodations-competing on price-the move to commoditization will be unstoppable. To avoid the threat of commoditization, firms must develop inimitable and sustainable differentiators and know their customers intimately."[6] How exactly is that done in a long term sustainable way though? Consider the concepts of Core Competency and Competitive Advantage to help you define your strategy.

Core Competency is the "unique ability that a company…develops that cannot be easily imitated." A core competency gives an organization its competitive advantage(s).[4]

Competitive Advantage is "the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment."[5]

Having a Competitive Strategy allows your hotel to stand out from the crowd. You are "deliberately choosing a different set of activities to deliver a unique mix of value."[2]

It is important to note that your hotel's core competency is not the end product/service it delivers but the unique way in which it is delivered-which, in theory, none of your competitor's can easily duplicate. A successful example of this concept is Honda who manufactures cars, lawn mowers and generators. On the periphery, those products look unrelated. However, if you understand that their core competency is "engines and power trains" [1] then we understand the method to their madness.

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.