Why Differentiation is More Important than Ever for Hotels

February 4, 2011

I recently heard a shocking statistic at a hotel conference that clearly explained to me why differentiation has become such a problem in the hospitality industry. A German hotel association study found that hotel companies in Germany invest 95 percent of their budget on product and a tiny fraction of anything remaining (maybe 1.5 percent) on people. The speaker mentioned that this statistic was probably true for hotels in other parts of the world as well. No wonder then that it has become almost impossible to tell one hotel room from the next, leading to very bland and generic experiences at most hotel chains.

If you’re the typical hardheaded hotel operator, you are probably wondering what the problem is. Don’t customers want best-in-class product? Doesn’t that flat screen TV and fancy coffee machine count for something? Well it does, but it does not help your brand stand out or create a special bond with guests, especially if everybody else is offering a different version of the same flat screen TV and coffee machine.

The fierce competition of the past several years has prompted most hotel companies to upgrade product to the highest level possible and as a result it has become almost impossible to differentiate one’s brand based on this—product has become cost of entry in the category.

In Mumbai, for example, we have had many international and domestic new brands enter all segments of the market in recent years. Put me in an upscale hotel room in the suburbs or a luxury one in midtown and I’ll be hard pressed to tell you what the difference is.

Heavy investment in product is making the lines very blurry between segments and brands. And this is a lost opportunity to reach out and connect with guests, whom we know from consumer data on preferences are looking for something different, something new, something memorable, and something experiential.

Take a look at the top travel trends for 2011 provided by The Leading Hotels of the World. Most of them point to the fact that you as a hotel brand must be brilliant at creating special experiences for your guests. Product is just a means and not an end in itself.

Top travel trends for 2011

  1. Multi-destination vacations
  2. Revival of group tours
  3. Contemporary cultural travel
  4. Resurgence of travel experts
  5. Not just seeing, but learning Ride the rails
  6. Experiential family travel
  7. Bucket-list experiences
  8. One-of-a-kind travel experiences
  9. The next hot spot

Source: The Leading Hotels of the World

If you’re convinced about the need to move beyond product, you have two priorities: First, define your unique guest experience (based on the DNA of your brand); and second, engage your employees to deliver that experience across all touchpoints.

The second task is easier to do and the quickest to get benefits from. Research clearly shows the link between employee behavior toward guests and exceptional guest satisfaction scores.

This can be as simple as genuine friendliness, using a guest’s name, and maintaining eye contact at all times. It can also be more nuanced, such as responding to guests in the right brand voice or creating unique experiences for guests based on personal employee initiative.

It is unfortunate that scores of hotels around the world get even the basics wrong every single day, never mind trying to engage employees to deliver unique experiences. You can change this, however. Increase overall spend on your employees and you could significantly improve guest satisfaction and therefore guest loyalty. This simple step will go a long way toward creating experience-based rather than product-based differentiation for your brand.

This blog was originally published in a slightly different form by Hotel Management Asia (–, 2011).

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