Within the travel industry, brands like Ritz-Carlton and Four Seasons loom large. But according to a just-released study of brand valuation, in the real world, hospitality brand names don't carry as much weight as their high-end counterparts in other industry sectors. To address this, companies like Marriott and Hilton are focusing on establishing ironclad loyalty offerings.
Interbrand has once again released its rankings of the world’s 100 most valuable brands — and once again, travel companies are almost nowhere to be found. Apple, Google, and Amazon rank one, two, and three, according to the global branding consultancy’s Best Global Brands 2019 report. Aside from technology, brands representing not only the automotive, fashion, and consumer packaged goods industries but also retail and financial services dominate the list. The only travel-related companies to make the cut are Disney at No. 10 and Uber at No. 87.
“Today, there is no question as to whether brands have intrinsic value or not,” noted Charles Trevail, CEO of Interbrand. “Millennials and Gen Z continue to push companies to redefine what effective brand-building means — and increasingly, what it means to be a truly valuable brand in their eyes.”
“The world’s most successful brands are those that have placed customer-centricity and digital transformation at the heart of their strategy and innovation. Companies that invest in platforms to deliver this will be those that win in the future,” according to Interbrand’s Explore Beyond Travel Report, which was released in conjunction with the list. “The more a company knows about its customers; how effectively to reach them and engage with them to anticipate and deliver value; and understands how to deliver solutions in an integrated and seamless manner the more successful that company will be in fostering a deeper level of customer trust, responsiveness, and advocacy.”
In particular, luxury hotel executives would likely argue that, based on that criteria alone, they should be among the elite. After all, to a person, they start conversations about their brands by touting their customer-first approaches.
So why don’t they make the cut? Part of the reason may be due to methodology. Interbrand has a very specific formula for ranking the value of brands.
First, only global brands are considered. At least 30 percent of revenue must come from outside of the brand’s home region. The brand must have a significant presence in Asia, Europe, and North America and coverage in emerging markets. There must be sufficient publicly available data on the brand’s financial performance. Economic profit must be expected to be positive over the longer term. And the brand must have a public profile and sufficient awareness across the major economies of the world.
Building Up Loyalty = Brand Strength
A key criterion is financial forecast, which some experts say puts luxury hotel companies at a disadvantage from the start. “One of the reasons that travel brands generally and luxury travel brands in particular don’t figure in the Top 100,” according to Piers Schmidt, founder of consultancy Luxury Branding, “is that the methodology places great weight on the financial heft of these brands. In practice, travel brands are much smaller in terms of pure economic value. Just think about the market cap of Apple, Google, Microsoft, etc. They are all roughly $1 trillion companies.” On the other hand, he said, “Four Seasons is a very large, monolithic luxury brand, and yet it was purchased jointly by Cascade (Bill Gates) and Kingdom Holdings for only around $3.6 billion. That represents a vast discrepancy in scale.”
Both Marriott International and Hilton Hotels & Resorts in the past have been included on Interbrand’s list. But Schmidt said the asset-light strategy these brands are currently employing is a strike against them. Becoming asset-light, said Schmidt, “reduces balance sheet value, which in turn further exacerbates the question of brand value” as defined by Interbrand.
Those two hotel brands are opting to focus on customer loyalty to drive value. Marriott Chief Financial Officer Leeny Oberg emphasized at Skift Global Forum in September the hotel giant’s aggressive portfolio growth as a way to drive its Bonvoy loyalty program. Meanwhile, as previously reported by Skift, Hilton has been actively looking to engage more with low-tier Hilton Honors members by introducing more loyalty partnerships with third parties to maximize revenue at both ends of the spectrum.
Loyalty programs are a way to build on both role of the brand and brand strength — two main factors Interbrand takes into account in developing its list. Role of the brand measures the portion of the purchase decision attributable to the brand as opposed to other factors (for example, price, convenience, or features). Brand strength measures the ability of the brand to create loyalty and, therefore, sustainable demand. It’s based on an evaluation of 10 dimensions, including relevance, differentiation, engagement, and consistency.
Luxury Growing by Leaps and Bounds, But Travel Lags
Luxury is the list’s fastest-growing sector. There are 15 luxury brands (if you include high-end automotive companies) in the Top 100. The luxury retail sector alone has seen the highest average brand-value growth rate the past two years.
“The role of the brand is much higher in the luxury sector than in any other category,” noted Rebecca Robins, Interbrand’s global chief learning and culture officer. Successful luxury brands are those that create unique, personalized products or services and develop premium experiences while exceeding expectations. These brands, said Robins, need to “fight hard for their differentiation and capture that difference uniquely in their products.”
And right there is the other part of the rub, according to Daniel André Langer, CEO of luxury consultancy Équité. Most hotel companies, even in the luxury space, are fairly indistinguishable from each other. He noted that luxury hotel rooms are often mere commodities, unlike their counterparts in fashion and automotive. “Think about Porsche, which represents fast cars, racing history, design. Or Ferrari, which evokes engines, races, and Formula 1. Fashion brands like Chanel also have this connection to history and brand storytelling,” he said, which are largely based on emotion. “Hotel brands have traditionally been rational. They are missing brand value, which is largely based on emotional components.” That makes product differentiation a challenge.
It’s easier for luxury goods companies, said Langer, because products are tangible. “But in hospitality, the ability to create brand value is not black and white. That’s because the hotel brand experience is far more influenced by human interaction. Because so much of a hospitality brand’s equity is tied up in service, versus product, it’s hard to create consistency.”
So, Langer would argue, financials aside, most luxury hospitality brands would fall short on the Interbrand measures of brand strength. Without qualities like relevance, differentiation, and consistency, the role of the brand becomes irrelevant, with non-loyalty program members likely to choose a property based on price or location, rather than because of a sexy brand name.
Maybe hospitality brands just need to try harder. Marriott and Hilton’s ambitious strategies to maximize loyalty opportunities point to these intensive efforts. Interbrand noted that the commonality of the top-growing brands is “their determination to identify the emerging needs of their customers (and) ensured unparalleled growth and customer satisfaction, leading to impressive financial results. These brands represent insightful windows into what companies can do to leverage their brands to build their businesses, using them to shape culture.”
UPDATED: In first paragraph, added Disney at No. 10.
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Photo credit: Luxury Row, adjacent to the Ritz-Carlton Residences Waikiki Beach, is home to many of the luxury fashion brands featured on Interbrand's list. The Ritz-Carlton Residences, Waikiki Beach