Why Is Market Research for Hotels Essential to Create a Successful Marketing Strategy?

Independent hotels, in hardly any case, do market research. Meanwhile, international chains and hotel brands do it quite commonly.

  • Pre-opening
  • Rebranding
  • In case of seriously bad performance

Why is market research important for hotels and resorts?

As the business environment changes, hotel brands need to adapt to remain relevant and attractive to potential guests. Failing to adapt to market trends and customer expectations carries the risk of starting a downward spiral, where the hotel needs to reduce rates to maintain occupancy.

Long-term business success, brand popularity, and marketing effectiveness ultimately depend on how relevant a hotel can remain to travelers visiting the destination. Regular market research is the only way to acquire adequate information to evolve a hotel product and maintain optimal marketing and brand communication.

Why do most independent hotel brands not engage in regular market research?

  • Lack of budget allocated for business intelligence
  • Lack of market research skills and expertise within the hotel team
  • Lack of awareness of how important market research is
  • The management sees it as a cost rather than an investment

In most cases, independent hotel management teams are too focused on monthly goals and maintaining a month-to-month ROI. Investing even in relatively inexpensive $5,000 market research would disrupt their regular marketing spend. Market research does not generate a quick return on investment (ROI), which makes it an unattractive investment for owners and stakeholders.

What insights can hotels get from market research? How can it improve the overall business?

For existing hotels, market research enables to find attributes that make the brand successful, identify risks with products, and expose holes in competitor’s product offerings. A throughout market research can provide fresh and focused information about consumer demands, expectations, and most importantly how your potential guests see your hotel brand at the time of the research. These are the key insights market research can get for products already on the market.

For hotels and resorts in the pre-opening stage, market research is typically carried out to:

  • Study the industry as it exists in the present, and identify the direction where it is headed
  • Identify any dynamics that may affect your business, especially those beyond direct competitors and the industry. Study market shifts and disruptions that may impact your business.
  • Identify the questions that need to be asked or the issues that need to be monitored. Identify opportunities and potential threats.
  • Create a baseline for future strategy. 

How to use market research insights to develop a successful brand and marketing strategy? 

Hotel management teams typically rely on freely available secondary research and internal data when conducting market research. Collecting information on an informal basis about the marketplace and their competitors is common and are often done in an unstructured way by someone who does not know much about market research methodologies. 

Such low-quality business intelligence fails when it comes to assessing the opportunities and risks of a new, or a changing market. This can be catastrophic to your business.

Asking the right questions

The industry-standard way to use market research starts by asking relevant questions, identifying known and unknown business risks, and finding focused answers. 

Quite often, professionals without skills identify problems incorrectly, which leads to solutions that do not solve any underlying issues.

To demonstrate the importance of asking the right questions, I will share a short story.

One particular example is a cruise line company we used to work with. Their sales started to drop dramatically in 2018, right after they launched large-scale digital marketing campaigns, allocating the majority of their marketing and advertising budget online. 

They did a number of customer-insight surveys to assess what their customers like or dislike about their cruising experience and made sure that all the key positive points will be highlighted in their campaigns.

Their campaigns did turn out well, so they contacted us to investigate the problem. Initially, they blamed the marketing agency and suspected that the sharing economy might be the reason for their issues.

A simple internal research highlighted that the majority (over 60%) of the customer base of this luxury cruise line company was aged 70 years old above, and their brand was relatively unknown for younger generations.

Their customer base was not using social media, either YouTube, so their previous demographics were no longer reached efficiently. 

The new segments they were targeting did not react well to their marketing campaign, as the aspects 70+ old people liked about a cruise line experience were not the same as young travelers would expect. 

Identifying information sources for secondary research

The majority of (un)professional hotel marketing consulting companies base their market research on secondary information. There are plenty of market and industry reports available at relatively affordable prices. These cover travel trends, consumer insights, and practically everything that can help to get information about what’s happening on the market.

For professional market research companies, secondary research is only a starting point. The available information helps to frame the scope of the primary research and to identify questions that will answer business problems.

In the hospitality industry, market research typically ends by reading a few blog posts on PhocusWire and hotel blogs or purchasing a $20 market report from a few years back.

The problem is that travel and tourism are both fast-paced industries and data loses its relevance quickly. For secondary research, always use the latest available information from credible sources. 

Remember, secondary research is only to give a basic understanding of the market, your findings and plans need to be validated by primary market research.

Conducting a primary research

Let’s address the elephant in the room. Most independent hotels hesitate to invest in primary market research because it is costly and will not generate an ROI. Instead, they will develop marketing strategies based on secondary research and “expert opinions”, which equals assumptions. 

Doing primary research for a market research project does not need to be expensive. Collecting a few thousand relevant answers from each target segment can be sufficient to validate ideas and concepts – or prove those wrong.

Proving strategic concepts wrong is probably not an outcome one would expect from market research. However, accepting that the initial concepts would not have worked out well is a sure way to avoid business failure.

Conclusion

Market research, even at a small scale can help significantly to develop better marketing strategies. 

Given that most hotel marketing professionals do not have sufficient research skills, and the management teams have the tendency to base strategies on assumptions, market research is a great investment for any brand that wants to get ahead of its competitive set.