Distribution challenges for the hotel industry include the rising cost of customer acquisition, the ownership of customer data, the lack of loyalty from customers, and the growing popularity of Airbnb. The hotel industry is already struggling to attract, convert, and retain customers. Without major investment in marketing, convincing customers to switch from paid channels to the hotels’ own channels is simply a mission impossible.
Yet, some interesting players have taken a different approach by going after niche markets.
For example, nhow Hotels (part of the NH Hotel Group) offer state-of-the-art music studios with professional equipment and narrators to produce professional audio, speech, or vocal recordings. Customers at nhow Hotels can order a drink and a guitar as room service. These facilities and amenities appeal to both professional and amateur musicians.
Daniel Füglister, the General Manager of Intercontinental Davos, believes that “going after niche markets is not only a trend, it is the future itself.” Füglister encourages hoteliers to be on the lookout constantly for fast-changing patterns and to differentiate trends from fads. “Determining a niche market strategy will be fundamental for the success for any profit-oriented company”, he said.
Mathew Nixon, who handles business and operations transformation at Dorchester Collection, told the panel session about the hotel group’s approach to ‘lean’ niche markets.
We categorize niche markets in the sense they could be royalty, they could be fashion, art, entertainment. They could be anyone of those items and we’ve actually been operating our business based on that for a long time.
For instance, 45 Park Lane, a boutique London hotel, had “put a stake in (the ground) and said we’re going to be the hotel that’s going to be all around art. And when you walk into that hotel it’s almost like an art gallery. So it’s very boutique, very specialized and really targeting (niche markets) in saying we have sophisticated tastes, if you’re a traveler who wants to come here, we will show what sophistication looks like.” The hotel changes the art work on a quarterly basis “to keep it fresh and engaging,” and is currently showcasing young, emerging talent from London.
“We think that’s a perfect example of a niche market that we’ve gone after. Our challenge is to defend that because if we talk about competition today and about the speed of change, we’ve got to be leading. Guests come to us because they want to validate their status or place in the world and so they come through our doors expecting to be taken somewhere. And we’ve got to be very focused and very committed on where we do that.”
He gave the example of the Dorchester Collection’s Plaza Athénée in Paris which is ‘all about haute couture’. “You get that feeling when you walk through the door – the way you’re greeted by a lovely lady in a fabulous red dress on avenue Montaigne which is the best shopping in Paris. They’ve put a stake in the ground that says we’re about this, this is a niche business - fashion - but we’re going to be for a certain crowd which appreciates fashion.”
Can a niche market ever enjoy the business volume of a mass market?
Disneyland Resort Hotels, together with Disneyland Parks, aim to provide magical experiences for Disney fans, their target market. Yves Wencker, Director of Lodging at Disneyland Paris, stated that in the past 23 years, his theme park has attracted some 320 million visitors – hardly a ‘niche’ as such – especially as the park has seven hotels with 6,000 bedrooms.
You’re choosing the destination first. It’s all about the storytelling. You want to have either a very premium location so you would decide to stay in a five star property or you want to enjoy the richness of a different franchise … This is the DNA of Disney. We are into storytelling, we’re into the magic.
Disneyland Paris then serves as an example of how you can target a specific market but actually achieve mass market volumes. Certainly, this success is due in large part to the huge numbers of Disney fans around the world, with only seven Disneyland Parks around the world serving this fan base.
Furthermore, not only is Disney celebrating Mickey Mouse’s 90th birthday this year (“everybody has been touched by that magic”), but Disney is also growing several other movie-related franchises such as Pixar, Star Wars, and Marvel.
“All these franchises allow us to pursue new niches, new market segmentations where you will be able to experience what you’re looking for, regardless of your age, throughout the year. And I think that’s where the future lies. What will be your storytelling? Regardless of the hotel brand, it’s about defining the segment, the storytelling, and the experience.”
Can an independent hotel create its own niche market?
Georgian House Hotel offers seven wizard chambers, with the majority of its guests travelling from nearby Victoria Coach Station to go on the Warner Bros. studio tour – the Making of Harry Potter.
Georgian House Hotel serves ‘wizard breakfasts’ for guests staying in the wizard chambers, and offers wizard cocktail-making experiences. Nor is Georgian House Hotel limiting itself to wizard fans, as it is also attempting to reach other niche markets through F&B experiences such as a ‘pop-up’ cheese afternoon tea, upcycled meal experiences, etc.
Christopher Cox, the Regional Director for Central & Eastern Europe at Preferred Hotels & Resorts, highlighted the hotel owner’s perspective in terms of niche markets. Guests can search for different travel ‘experiences’, he said, whether it skiing, beach holidays, family vacations, or heritage hotels, and each of these experiences can represent a niche market. Preferred Hotels & Resorts has four ‘collections’: Legend, Lux, Lifestyle, and Connect. Individual properties within those collections, Cox said, reflect the right experience and help hoteliers reach the right niche markets.
We are a soft brand and we would never position ourselves as a niche company. However if you look at our hotels, obviously we have a lot of niche properties and destinations. And owners (choose) Preferred because they … want to keep independent and keep control of their hotels.
Fans. An untapped opportunity?
Legions of Disney fans are the main target market of its seven theme parks. Georgian House Hotel attracts wizard fans. Dorchester Collection connects with lovers of art, fashion, and entertainment. Similarly, nhow Hotels targets professional and amateur musicians. Established hotel brands such as Intercontinental and Preferred Hotels & Resorts offer an array of properties aimed at different niche markets.
By targeting a niche market, hotels can adapt their services and products to better serve customers and maybe face less competition, while achieving greater profitability.
How can a hotel start tapping niche markets?A recent example is Airbnb staging a competition to win a night’s stay at Lego House. By working with the toy company, Airbnb has been able to reach Lego’s fan base. Hoteliers can start by hosting hobby fans, whether it be fans of Lego, sports, food, movies, or music. Over time, the hotel will identify specific groups of fans most aligned to its DNA and, in time, turn them into its own fans.