Insight of the Week: When Hotel Chains Rebrand, Customers Respond

It’s time for the business trip to the annual conference, yet again. But this year, you’ve decided to do some comparison shopping to find the best hotel deal and save some money on expenses. Do you choose the stalwart hotel that has served you well in the past or the newly re-named property that was formerly a different brand?

For consumers with a plethora of hotel choices, researchers wanted to know if rebranded properties (that is, hotels that have changed their names or switched to an entirely different hotel chain altogether) attracted guests at a higher rate before or after changing their identity.
This week’s insight: Hotels do see an overall increase in bookings after rebranding, but some rebranding decisions have a bigger impact than others.

Research study: “What’s in a Brand Name? Assessing the Impact of Rebranding in the Hospitality Industry” by Yi-Lin Tsai, Chekitan s. Dev, and Pradeep Chintagunta, Journal of Marketing Research, December 2015.
What they did: The research team studied data showing hotel branding decisions over a minimum of five years, looking at how rebranding affected the number of guests and the amount of revenue that each hotel reported.

What they found: Rebranding of any kind saw an average increase of more than 6% in bookings. After analyzing the relationship between branding and occupancy increases, the team concluded that 60% of that increase was due to the strength of the new brand. In fact, they found that hotels that shifted corporate brands altogether (from, for example, Hyatt to Hilton) attracted even more guests than hotels that simply rebranded within their existing structure.

The remaining 40% of the increase was due to what the team called “the interaction effect”, or the connection between the hotel property itself and the brand. In this case, hotels needed to physically match the consumer’s idea of the brand in order to capitalize on the rebranding. So simply renaming a hotel will only do so much—the hotel itself needs to match consumer expectations.

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