What is the ‘value add’ of a hotel brand?

9 November 2015

A key purpose of a hotel brand is to influence consumer opinion in favour of a particular hotel, especially with regards to decisions about where a potential guest may stay.

From the Hotel Guest Survey we know that two thirds of travellers say hotel branding has ‘a great deal or a fair amount’ of influence on their hotel selection decisions. While in part brands are about driving volume, they also are about generating a premium.  BVA BDRC set out put a figure on this value impact of the brand.

At the Annual Hotel Conference 2015, we revealed a unique and innovative methodology for measuring the perceived ‘value add’ of a hotel brand - something previously often regarded as an intangible concept.  We call this approach Brand Margin®, which we define as the perceived financial premium that a brand name adds to the intrinsic value of a specific product or service.

Brand Margin® was developed by BVA BDRC in the context of advertising and FMCG.  The methodology applies a ‘wisdom of crowds’ approach.  Since its inception it has received substantial peer validation.  It was covered in Marketing Week.  At the recent Mediatel Media Research Awards a paper on the impact of advertising that deployed the Brand Margin® methodology, submitted by BVA BDRC and Sky – who know a thing or two about brand value – won both best tracking research and the overall Grand Prix for best development in media related research in the last year – the equivalent of the Cruft’s Best in Show award.

Ultimately the anonymous crowd decides brand value as the ‘value add’ of a brand as it exists in the minds of consumers, not in the heads of one or two industry experts or a company CEO.

If you are in any doubt, just remember the vulnerability of the brand.  If consumers cease to attach value the brand can become worthless almost overnight – just ask Gerald Ratner: he effectively killed the largest jewellery retail chain in the UK with his injudicious words at a major business conference.

The vulnerability of the brand is even greater in the age of social media.  The VW ‘defeat device’ software has under-mined the company’s long cherished brand values and triggered a 40% plummet in its share price.  The message is clear: do not underestimate the importance of the brand’s relationship with its customers!

To read about how Brand Margin® works in detail for Hotels, download the full chart pack shown at Annual Hotels Conference in October 2015. You can also view the AHC plenary session.