Spain s Rising Class of Tech-Savvy Hotel Chains

Phocuswright s Spain s Rising Class of Tech-Savvy Hotel Chains EXECUTIVE SUMMARY Written and Researched by Luke Bujarski and Fabian Gonzalez

Phocuswright Inc. 116 West 32nd Street, 14th Floor New York, NY 10001 PO Box 760 Sherman, CT 06784 +1 860 350-4084 +1 860 354-3112 fax www.phocuswright.com Spain s Rising Class of Tech-Savvy Hotel Chains EXECUTIVE SUMMARY Written and Researched by Luke Bujarski and Fabian Gonzalez Phocuswright s Spain s Rising Class of Tech-Savvy Hotel Chains Executive Summary is published by Phocuswright Inc. The information contained herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsistencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions. All Phocuswright Inc. publications are protected by copyright. It is illegal under U.S. federal law (USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the license or outside of your organization without explicit permission.

About Phocuswright Phocuswright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, Phocuswright fosters smart strategic planning, tactical decision-making and organizational effectiveness. Phocuswright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use Phocuswright research for competitive advantage. To complement its primary research in North and Latin America, Europe and Asia, Phocuswright produces several high-profile conferences in the United States and Europe, and partners with conferences in China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever-evolving reality of travel commerce. The company is headquartered in the United States with Asia Pacific operations based in India and local analysts on five continents. Phocuswright is a wholly owned subsidiary of Northstar Travel Media, LLC. Page iii

Spain s Rising Class of Tech-Savvy Hotel Chains Executive Summary Introduction Hotels now have an extensive palette of innovative digital platforms and channels at their disposal. However, established best practices and partnerships in distribution, marketing, and back-office technologies can sometimes stifle innovation and experimentation, despite the availability of these new online tools. Enter Spain s digital natives. This Phocuswright Executive Summary presents trends in distribution, marketing and the use of technology among a rising class of young and digitally-oriented hotel chains. These digital native hospitality companies consist of smaller hotel chains no more than 10 years old, and include brands like Casual, Hospes, Room Mate Hotels and Vincci. Focused primarily on business and upper-income travelers, these brands are trendsetters when it comes to digital hotel sales and distribution in Spain. Background This Executive Summary presents highlights from the forthcoming Phocuswright Spotlight, Spain s Rising Class of Tech-Savvy Hotel Chains, which examines the many innovations now taking place in the country s accommodations segment. Research director Luke Bujarski and independent analyst Fabian Gonzalez engaged this particular segment of Spain s hospitality market to help hoteliers around the globe benchmark their own progress with respect to their use of a variety of digital distribution channels and toolsets. Additional findings from the Spotlight will be presented in Madrid at FITURTECH 2015. Methodology Findings are based primarily on data collected from a comprehensive survey administered to 15 hotel brands, representing over 130 hotel properties located throughout Spain s urban population centers. To qualify, organizations had to be privately-owned brands no more than 10 years old. Respondents were asked about the current composition of their distribution mix, marketing strategy, and utilization of technology both software and hardware and how these various aspects of their businesses will change in 2015. All results are in aggregate and, unless otherwise permitted, information on individual hotel brands is held in the strictest confidence. Page 1

Direct and Digitally- Oriented Spain s digital native hotel chains command a larger share of online bookings than the national or European average. Across all survey respondents, 59% of reservations were processed through digital channels (see Figure 1). Hotel websites and OTAs alone captured 49% of bookings. In contrast, average online penetration for the European hotel segment in 2013 was approximately 31%. 1 Among survey respondents, direct web distribution was the quickest growing distribution channel in 2014, and will also be the channel that receives the most investment in 2015 (see Figure 2). Figure 1: Average Share of Reservations 41% 59% Offline Channels Online Channels Source: Spain s Rising Class of Tech-Savvy Hotel Chains, Phocuswright (February 2015). Figure 2: Priorities in Distribution Which channel grew the most in 2014? In which channel will you invest in 2015? Direct Web 1st 1st OTA 2nd 3rd Telephone/email 3rd 2nd Travel agents/tour operators 4th 5th CRS, GDS, IDS 5th 6th Mobile app 6th 4th Source: Spain s Rising Class of Tech-Savvy Hotel Chains, Phocuswright (February 2015). Innovation in Accommodations A prime example of this new hotel breed is Room Mate Hotels. The company had a strong year in 2014 and aims to double the number of properties in its portfolio by 2016. In December 2014, the chain was awarded the gold medal in tourism innovation by the Spanish Council of Ministers. Room Mate has experimented with a unique accommodations model by launching bemate.com a hybrid approach to peer-to-peer apartment rentals that incorporates hotel services such as concierge, luggage storage, 24-hour key pick-up and drop-off and more, via partnerships with hotels in close proximity to the apartment. Be Mate now offers apartment rentals in key global destinations including New York, Madrid, Mexico City and Amsterdam. 1) European Online Travel Overview Tenth Edition, Phocuswright (December 2014). Page 2

The winners and losers of digital marketing Survey results indicate that Spain s tech-savvy hospitality companies have grown somewhat weary of traditional search engine optimization (SEO) and marketing (SEM) as a strategy to increase direct sales. Six brands intend to eliminate either SEO or SEM from their overall marketing strategies in 2015 (see Figure 3). Social media will be the most widely utilized direct marketing tool in 2015; ten brands made social media investments in 2014, and three additional brands plan to invest in the strategy in 2015. Display marketing was the least used strategy, as a total of eight brands made no investment in banner ads or other display marketing in either 2014 or 2015. When it comes to content marketing, those brands that invested in 2014 will continue to do so in 2015. Figure 3: Current/Future Marketing Investments Maintain in 2015 New in 2015 Reduce/eliminate in 2015 Base: 15 hotel brands representing over 130 properties Source: Spain s Rising Class of Tech-Savvy Hotel Chains, Phocuswright (February 2015). No investments in 2014 or 2015 Content Marketing 10 0 0 5 Display 4 2 1 8 Metasearch 9 2 2 2 SEM 11 1 3 0 SEO 9 1 3 2 Social Media 10 3 1 1 For smaller chains, do apps really matter? Hotels must also consider whether it makes sense to build a mobile app specific to their respective brand or brands. Survey participants expressed a general lack of interest in developing their own apps. Nearly half of participants surveyed stated that they have no intention of investing in a branded app, while a fourth indicated that they would think about it in 2015 (see Figure 4). Just over a quarter already have an app in place but overall, mobile accounts for just 1% of total reservations on average. For one particular brand, mobile represents 7% of total reservations, but this rate was very much the exception among participants. Figure 4: Do you have a mobile app? Will you invest in 2015? 4 4 7 Yes, I have an app No intention of investing No, perhaps in 2015 Base: 15 hotel brands representing over 130 properties Source: Spain s Rising Class of Tech-Savvy Hotel Chains, Phocuswright (February 2015). Page 3

Direct marketing efforts will increase direct sales, but at what cost? Telephone and email reservations still account for a significant portion of bookings 25% on average. Among the top five brands most dependent on direct distribution, the share of these bookings jumps considerably to 39% (see Figure 5). In addition, hotel brands that have a more robust digital marketing strategy capture a larger share of bookings directly, either digitally or via phone. Nevertheless, direct marketing efforts have increased the volume of telephone and email bookings, which may or may not have increased direct costs for these brands. Figure 5: Two Models, Two Distribution Footprints Source: Spain s Rising Class of Tech-Savvy Hotel Chains, Phocuswright (February 2015). Conclusion As with other industries, the digital revolution now occurring within the hotel space is being led by a fresh breed of competitors, unencumbered by the old way of doing things. Spain s nimble hotel brands born in the age of the Internet particularly those focused on self-marketing and sales are embracing the various digital platforms currently available in the market. But even in this digital era, phone and email still account for a large portion of reservations. Until this trend changes, hoteliers must be prepared to engage customers on multiple fronts, not only digital. Furthermore, these hotels recognize that today s web is multi-dimensional not only in providing information to customers, but also in conveying information to hoteliers about their customers experiences. That is why more brands are applying social CRM software and other reputation management techniques. Perhaps most importantly, these hotels are well aware that Internet search and usage is quickly shifting toward the mobile device. Hence, crafting an optimal hotel sales and distribution strategy rests on more variables than ever before. As hoteliers continue on their quest to lower their distribution costs, direct channels may not always be the most cost-effective strategy. Page 4

Dig deeper into the Spanish hotel market with Phocuswright s Spain s Rising Class of Tech-Savvy Hotel Chains. This research explores distribution trends, marketing and the use of technology practiced by a rising class of young and digitally oriented segment of hotel chains. Special Offer for Fitur Attendees Save 20% off the regular price of Spain s Rising Class of Tech-Savvy Hotel Chains (US$350). Place your order at phocuswright.com/spain and use VIP Code Fitur-2015 during checkout. (Offer expires April 30, 2015) Page 5

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