Boston Hospitality Review Summer 2015 Vol. 3 No. 2

www.bu.edu/bhr Contents Spring 2015

History

Boston, the Booth Brothers, and the Parker House Susan Wilson 6

Development

Airport Hotels: Laying the Foundation for a Synergistic Relationship 10 Allison Fogarty

Research

The Pricing Effects of Heritage at an Iconic Hotel 18 Bradford Hudson

Interview

The Customer is Always Right, Right? A Look at How Yelp Has Taken 30 Hold of the Boston Restaurant Industry Rachel DeSimone

Marketing

Search Engine Marketing (SEM) Financial & Competitive Advantages 39 of an Effective Hotel SEM Strategy Leora Halpern Lanz and Jovanna Fazzini

Spring 2015 | Boston Hospitality Review 3 Executive Summaries Boston, the Booth Brothers, and the The Customer is Always Right, Right? A Parker House Look at How Yelp Has Taken Boston Hospitality Review By Susan Wilson Hold of the Boston Restaurant Industry By Rachel DeSimone Volume 3 | Number 1 | Summer 2015 April 14, 2015 was the 150th anniversary of the assassination of President Abraham The Internet and mobile availability has ISSN 2326-0351 Lincoln. This is the story of how that fateful changed the restaurant review game. Local day was linked to Boston, the Booth Boston chefs and restaurant managers re- Publisher Brothers, and the Parker House. flect on the pros and cons of such outlets, Arun Upneja, Ph.D. like Yelp, on their businesses and menus. Airport Hotels: Laying the Foundation for Editor a Synergistic Relationship Search Engine Marketing (SEM) Financial Dr. Michael Oshins, Ed.D. By Allison Fogarty & Competitive Advantages of an Effective Hotel SEM Strategy Contributing Editors This article presents a general overview of By Leora Halpern Lanz and Jovanna Fazzini Zoe Ho, Ph.D. the hotel development process and some Michael Kwag, Ph.D. critical decisions that must be taken by Search Engine Marketing and Optimiza- tion (SEO, SEM) are keystones of a hotels Christopher Muller, Ph.D. airport management teams pursuing hotel marketing strategy, in fact research shows Courtney Raeisinafchi, Ph.D. developments. that 90% of travelers start their vacation Peter Szende, Dr. oec. planning with a Google search. Learn five The Pricing Effects of Heritage at an strategies that can enhance a hotels SEO Erinn Tucker, Ph.D. Iconic Hotel and SEM strategies to boost bookings. Arun Upneja, Ph.D. By Bradford Hudson Nicholas Washienko, Ph.D.

Historic hotels are a recognized product type Layout Editor in the lodging industry and may be found in Ahlea Isabella significant numbers throughout the globe. The purpose of this article is to validate the Published by notion that heritage can be an important el- School of Hospitality Administration ement of the consumer value proposition for Boston University older hotels, by demonstrating that an iconic hotel with a distinct historical identity is able to attain a price premium over newer hotels with comparable operating characteristics. This exploratory study is based on qualita- tive field research conducted by the author, and quantitative analysis of pricing data that was collected by a regional hotel industry as- sociation over a five year period. The author concludes that heritage does indeed have a positive effect on the ability to attain a price premium at historic hotels, especially for lei- sure travelers.

4 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 5 History left the city that same day.” Boston Hospitality Review The man who came to breakfast was not only a popular actor from a famous theatrical family. He was also a charming matinée idol, an unabashed ladies’ man, an ardent Confederate sympathizer—and the man destined to assassinate President Lin- coln in Washington, D.C., only eight days later. “No one could have suspected then that he was capable of such a crime and was so near achieving infamous immortality,” pondered bellhop Brogan sixty years after the fact. Back in 1865, the illustrious Booth family meant far more to the Hub than to many other American cities. London-born Junius Brutus Booth had played on Boston Left, The Omni stages many times in his career, beginning Parker House at the old Federal Street Theatre, Boston’s located on Park St., first real playhouse. Three of his Ameri- Boston can-born children—Edwin, Junius Jr., and ented Bostonian who lived full-time at the John Wilkes —took up professional acting Parker House, was America’s first great ac- as well, though only Edwin (1833-93) be- tress and who gladly donned trousers to play came a world-class tragedian. It was Edwin, male roles). By 1860, Booth and Devlin had too, who held a special affection for Boston, married. And in1862, they made a home for finding both his theatrical footing and occa- themselves and infant daughter, Edwina, on Right, John Wilkes sional homes in the welcoming Hub. Washington Street in Dorchester. Booth Edwin’s theatrical debut was at the Though younger brother John Wil- Boston Museum on Tremont Street, on Sep- kes primarily played stages in the South tember 10, 1849. Though only fifteen years while Edwin conquered the Northeast and Boston, the Booth Brothers, and the Parker House old and playing a minor part under his fa- Junius Jr. the Midwest, all three Booths peri- Susan Wilson ther’s starring role as Richard III, young Ed- odically toured the states for work, pleasure, pril 14, 2015 was the 150th anniversary “I recall as vividly as if it were yes- win was hooked. Eight years later, on April or familial obligation. John, for example, Aof the assassination of President Abra- terday,” Brogan reminisced with a Boston 20, 1857, Edwin headlined at the Boston happily joined Edwin and Mary for their ham Lincoln. This is the story of how that Globe reporter, “seeing [him] at breakfast Theater on Washington Street as Sir Giles wedding in 1860. Three years later, on Feb- fateful day was linked to Boston, the Booth with two other men in the ladies’ cafe on Overreach. That victorious performance ruary 24, 1863, John joined Edwin for a sad Brothers, and the Parker House. the School street and Chapman place corner proved the turning point of his career—pre- occasion—Mary’s burial at Mount Auburn Hotel personnel have always collect- [of the old Parker House] on the morning paring him for the prestigious New York Cemetery in Cambridge. ed wondrous tales about the visiting celebri- of Thursday, April 6, 1865... The morning City stage, and officially beginning his thir- Following Mary’s untimely death, ties they’ve observed over decades of service. sunlight [was] streaming in through an east ty-year reign as the American actor of note. the distraught Edwin left Dorchester with his Few stories, however, titillated Bostonians window onto his rather marble-like face and In 1858, Edwin met actress Mary daughter, retired briefly from performing, as much as those told by longtime Parker luxuriant black glossy hair. He was a hand- Devlin, who frequently played Juliet to his and moved his primary residence to New House bellboy Bernard J. (“Barney”) Brogan some, kindly and good natured man. It was Romeo (curiously, Devlin also played Juliet York. But the boards continued to call the in 1925. his second day in Boston at the time and he to the Romeo of Charlotte Cushman, a tal- Booths to work. In 1864, the same year all

6 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 7 promised mother I would keep out of the pistol firing in various difficult ways such as quarrel, if possible, and I am sorry that I said between his legs, over his shoulder and un- so....’ der his arms.” “All his theatrical friends speak of After the night of April 14, when [John] as a poor, crazy boy,” finished Edwin, Booth shot Lincoln at Ford’s Theatre in “and such his family think of him.” Washington, Boston could only speculate, Why John Wilkes Booth finally and mourn. As a gesture of good will, good snapped—plotting first to abduct Lincoln, public relations, and personal safety—since and finally to assassinate him—is the subject death threats would certainly be levied of numerous theories, books, and interpre- against Booth and his family for months to tations. We do know that on July 26, 1864 come—manager Henry C. Jarrett closed the he had joined representatives of the Confed- Boston Theater, and messaged Edwin of his erate Secret Service at the Parker House for action. Edwin heartily agreed, returning a a meeting meant to undermine the Lincoln note that spoke of his own “deepest sorrow administration. At the time, Booth was con- and great agitation.” After suffering a pre- Left, President sidered a promising recruit for a conspiracy cautionary police search through his belong- Abraham Lincoln, geared to kidnapping the President. Still, two ings, the actor lay low, then left Boston on a assassinated by John facts are clear: the rest of the Booth family midnight train to join his mother. Since Bos- Wilkes Booth in 1865 Right, Edwin Junius Jr. had no notion of John’s evolving plots, either ton so loved and trusted Edwin Booth, lo- Chestnut Street on Beacon Hill in his later Booth in 1864 or a year later, and were to suffer the cal papers immediately printed Jarrett’s and years. His grown daughter, Edwina, bought a consequences of his deed for decades there- Booth’s letters, and continued to run editori- flat on Beacon Street overlooking the Charles three Booth brothers collaborated in a New after. als in his defense over the ensuing weeks. River. And though the Booth family plot re- York production of Julius Caesar, John Wil- By the time John Wilkes Booth was Boston’s love of Edwin Booth was mained in Baltimore, Edwin Booth chose, in kes played the romantic hero of The Marble again seen at the Parker House in April of returned in kind. Following nine months the end, to return to the woman and place Heart at the Boston Museum. While Edwin 1865, eight days before the assassination, of seclusion in New York, he resumed his he loved. On June 9,1893, amidst a stunning came to specialize in difficult dramatic roles the War Between the States was essentially acting career, periodically returning to Bos- sunset, he was buried on Anemone Path at like Hamlet and Richelieu, John tended to- ended. When he arrived, Boston was fairly ton stages. He kept many influential friends Mount Auburn Cemetery, beside his favorite wards fluffier stuff, enamoring female fans bursting with banners, parades, fireworks in the Hub, and maintained a home on 29 wife and co-star, Mary Devlin. ■ with his dashing swordplay, daring leaps, displays, and other public celebrations over flashing eyes, and impassioned gestures. the fall of the South and the ending of slav- During the early1860s, the Booths’ ery. Probably equally irksome to John was stage careers grew as the Civil War ravaged that black abolitionist Frederick Douglass the country. Edwin believed in the Union was a featured speaker at Faneuil Hall. cause, and proudly cast his first vote ever for What John did in Boston on April 5 Abraham Lincoln in the mid-war elections and 6, 1865, is not altogether clear. Perhaps of 1863. Southern-based John Wilkes, who he went to see brother Edwin, who was play- defended both States Rights and slavery, fer- ing a successful three-week engagement at Susan Wilson is a writer and photographer living in Cambridge, Massachusetts. She is vently disagreed. “When I told him I had the 3,000-seat Boston Theater. Perhaps, as re- the House Historian of the Omni Parker House and the author of several books about voted for Lincoln’s re-election he expressed ported in the Boston Evening Transcript of Boston history, including Heaven, By Hotel Standards: The History of the Omni Parker deep regret, and declared his belief that Lin- April 15, he was practicing his aim: “[A man House (2014). The book is available at Morsels, by the School Street entrance of the coln would be made king of America,” wrote named] Borland...stated that he saw Booth Omni Parker House, and on Amazon.com. Edwin in an 1881 letter. “[T]his, I believe, after he came to Boston, and was in com- drove him beyond the limits of reason. I pany with him at Edwards’ shooting gallery asked [John] once why he did not join the [presumably Roland Edwards’ Pistol Gallery Confederate Army. To which he replied: ‘I at 4 Green Street], where Booth practiced

8 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 9 Update offered near most airports. Several major many airport management teams have lim- Boston Hospitality Review international hotel brands were founded or ited experience in developing hotels. Other have been owned by airlines, including In- airport management teams benefit from (or terContinental (Pan Am), Hilton Interna- conversely struggle with) decisions taken by tional (TWA) and Westin (UAL). predecessors. To help avoid some pitfalls we The number and type of hotels that have observed in the past, we present gen- can be supported around airports varies eral guidance concerning critical decisions widely by market, and while airline passen- that must be taken by airport management ger movement is an important consider- teams during the hotel development process. ation, it is not the only hotel demand driver. Local and regional transportation patterns Feasibility: Does the project make also influence the need for accommodations. economic sense? Passengers with early morning flights fre- quently seek accommodation near the air- Determining whether the airport and the port to avoid traffic delays in congested -ur surrounding area generate enough lodging ban areas or in rural areas where long drives demand to support additional hotel devel- to the airport are common. In addition, ma- opment should be one of the first steps in jor airports frequently serve as central meet- the development process. Prior to commis- ing destinations for various groups. And of sioning engineering or design studies, a pre- course, airlines contract for rooms for their liminary market demand study should be crew and passengers stranded due to over- commissioned. Hotel consultants examine booking or mechanical delays. Unexpect- airport and area growth patterns, existing ed winter weather issues frequently benefit supply and demand patterns and the rates airport-area hotels, particularly in the north achieved by existing hotels in the area. Ulti- - notably, on average approximately 25 per- mately, the consultants present an overview Right, Construction of cent of airlines’ annual cancellations occur of critical hotel performance metrics in the the Westin Hotel at the in January and February, sometimes leaving area and projections of growth. Critical hotel Denver International passengers scrambling for accommodations metrics include annual occupancy (the per- Airport near the airport. centage of existing hotel rooms in the mar- While an airport may support many ket that were actually sold), Average Daily hotels, those located closest to the terminals Rate “ADR” (the average rate actually paid Airports Hotels: Laying the Foundation for a Synergistic Relationship and with the easiest access have a clear lo- for each room sold, calculated by dividing Allison Fogarty cational advantage over their competitors in room revenue by total rooms sold for a giv- otels have always been located near distance transportation; fares declined and most markets. Thus many hotel developers en period) and Rooms revenue Per Available Htransportation hubs. Centuries ago, long trips to exotic destinations were sud- seek to develop hotels on the airport premis- Room “RevPAR” (total guest room revenue travelers sought accommodation and re- denly within reach of the masses. In 1960, es, and prefer if possible to actually be linked divided by the total number of rooms avail- freshment in inns strategically located 62.3 million people boarded flights within to airport terminals. Airport management able). If the market appears strong enough, along the road network to provide a place the United States; 53 years later, 826 million teams have the responsibility of determining the consultant can provide an estimate of for man and beast to recharge and refresh. people took off. With the growing number of whether to allow the development of hotels the number of additional rooms that may As carriages and stagecoaches gave way to travelers, hotels sprang up around most air- on the airport grounds, where these hotels be supported or the performance and profit- railroads, and sail yielded to steam, hostel- ports, and airport hotels emerged as an im- should be located, how they should be linked ability of a hotel of a particular size. ries sprang up around rail depots and the portant sub-segment in the lodging industry, to the terminals and the business structure of Although occupancy levels in airport docks. originally needed to provide accommoda- the hotel development. Because land around locations are frequently above the industry In the middle of the 20th centu- tion for airline crews and passengers and many airports is in short supply, and most average, the ADR in airport locations is fre- ry, flying became the favored mode of long later becoming an important convenience airports were developed many years ago, quently somewhat lower than downtown

10 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 11 Occupany Comparison Average Daily Rate Comparison Location end of the lease term, the land and improve- 80.0% $180.00 ments revert to the airport. The advantage to

70.0% $160.00 Well-maintained hotels that are physical- airports of a ground lease structure are that

$140.00 ly connected to airport terminals generally the lessee bears the risk of development cost 60.0% achieve higher occupancies and ADRs than overruns and operating shortfalls; however $120.00 50.0% their off-site competitors. This performance the development team requires a substan- $100.00 40.0% premium makes intuitive sense; if guests tial reward for the assumption of this risk. $80.00 must board a shuttle bus to reach their hotel, In addition, the airport must relinquish con- 30.0% $60.00 an extra minute or two on a shuttle will be trol of the property for a lengthy period, and 20.0% $40.00 balanced against other issues such as brand financing sources require robust non-dis- 10.0% $20.00 preferences, loyalty program affiliations and turbance agreements. Hotel investors are

0.0% $- internet reviews. Thus, if the airport is seek- concerned with ensuring that they can make 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ing to provide the most convenient travel an adequate return on their investment and Airport Hotels Urban US Hotels experience possible, or maximize hotel rev- ensuring the marketability of the property so enues, a convenient, direct terminal con- that they will ultimately be able to sell the locations or overall industry averages, as il- such as Four Seasons hotels, to upscale nection is clearly preferable. But potential property to another investor. Potential hotel lustrated in the adjacent charts, which com- properties such as Marriott or Hilton hotels hotel operating premiums must be weighed buyers and their financing sources always pares the occupancy and ADR performance to mid-market properties such as Holiday against possible future airport expansion – consider the remaining term of ground lease of all US hotels, airport hotels and urban ho- Inns. In recent years a hybrid product has and the likelihood that a hotel site will be properties, thus lengthy initial terms fol- tels over time. Data was provided by Smith emerged; many of the major lodging brands the best location for new terminal gates, lowed by several renewal terms are typical in Travel Research (STR), which compiles hotel now offer a “select-service” offering that pro- runways or other priorities. Several air- ground lease structures. Typically, a term of industry performance data; STR’s database vides a comfortable room, smaller and fewer ports proceeding with terminal or runway at least 50 years (which may consist of initial includes approximately 2,300 hotels located meeting rooms and a limited restaurant fa- expansion projects have been forced to re- and renewal terms) ranging to 99 years is re- at or near airports. cility that may not provide three meals on a acquire hotel properties in the path of these quired. Renewal options tend to be negotiat- Hotels may be classified in a num- daily basis. Examples of select service brands improvements (frequently at a premium), ed and exercised well in advance; the lease- ber of ways, most commonly based upon include Hyatt Place, Courtyard by Marriott through eminent domain or buyout negotia- holder requires certainty to maintain the services offered, room rates and location. and Hilton Garden Inns. tions; a process that is easier to contemplate marketability of their asset. In several cases, Full-service hotels include restaurant, lounge Hotel construction costs vary wide- on a forty- or fifty-year-old structure than additional capital improvements to the hotel and meeting facilities and have traditional- ly depending upon location, type of hotel, on one that is still relatively new. have been negotiated as part of the renewal ly included bell service and room service. size and services offered. Excluding land Structure negotiations. Limited-service hotels traditionally provide and working capital, the average cost of per Hotel developments can be struc- Hotel ground leases have been struc- only a room and bath for a night, and do unit of developing a full-service hotel in the tured in a number of different ways from an tured in a number of different ways. Rent not provide food and beverage facilities, al- United States was approximately $236,900 ownership perspective; with ground leases structures vary very widely, frequently some though in recent years many limited-service in 2014. Based on 2013 figures, after all op- and management contracts being the most form of base and percentage rent is negotiat- properties have adopted the practice of pro- erating expenses were paid, hotels in airport common. Each structure has both financial ed. Developers often require substantial rent viding a free breakfast to patrons. Examples locations had 32.5 percent of revenue avail- and operational advantages and disadvan- concessions, particularly in the initial years of limited service brands include Days Inn, able to pay property taxes, insurance, ground tages. of operation to facilitate payment of debt SpringHill Suites by Marriott, Hampton Inn rental, mortgage interest, amortization, cap- service and provide some return on invest- and Comfort Inns. Full-service hotels are ital expenditures and a return on the own- Ground Leases ment as the hotel gains traction. Based on more complicated and expensive to operate er’s investment. Hotel developers focus on current market conditions, it is difficult for a than limited service facilities; traditionally performance metrics including profitability Many hotel sites are leased by airports to private developer to pay substantial ground the rooms department of a hotel is far more of nearby properties and growth projections developers who build, operate and maintain rents and provide an acceptable return to profitable than the food and beverage and to determine if the project is likely to meet the hotels; the airports continue to own the equity. Relatively few full-service hotels have other departments. Traditional full-service their return on investment objectives. land and collect a ground rent, while the been developed in recent years; the return hotel brands range from luxury brands developer owns the improvements. At the on most full-service hotel investments is 12 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 13 Right, The Grand Hyatt Hotel at the Left, The completed Dallas-Fort Worth Westin Hotel at the Hotel is integrated into Denver International Terminal D Airport simply not commercially acceptable. Inves- agement agreement terms and potentially provals, senior management appointments as hotel performance improves the manage- tors generally require a return to equity of higher returns. If the hotel site is needed for and financial statement review. ment company’s fees increase, and if a ho- between 12 to 20 percent; new development redevelopment, it will be far easier to rede- Recent examples of airport-owned tel performs poorly, operator compensation hotel projects are considered risky, and thus velop an airport-owned property without a hotels include Denver, which is constructing declines. Airports that finance through reve- would require returns in the mid to higher third-party hotel owner holding out for an a 519-unit Westin hotel as part of an expan- nue bonds are precluded from using the ho- end of the range. advantageous lease termination payment. sion project which includes a public pla- tel industry’s traditional structure and gen- Other issues that need to be consid- Airports that own hotels generally contract za and train station connecting the airport erally negotiate a flat fee structure varying by ered are how the airport management wants with a hotel operator to manage the day-to- to downtown Denver. Dallas-Fort Worth year based upon pre-construction pro-for- to constrain the operator or developer. A ho- day operation of the hotel; the hotel brand opened the 298-room Grand Hyatt, which is ma estimates; as a result operator compensa- tel lease should include definitions of accept- may come with the management agree- integrated into International Terminal D in tion is not tied to actual hotel performance. able standards of operation including brand, ment or may be contracted separately via 2005 and the 404-unit Westin Detroit Air- Of course the cash flow to the airport from a facilities, services and maintenance/capital a franchise agreement. Hotel management port opened in 2002. These projects were all hotel project is dependent on myriad factors. improvement requirements – particularly in and franchise agreements can generally be financed by the airports through revenue Aside from overall market forces and man- properties that are connected to terminals negotiated for shorter terms than ground bonds, which require changes to traditional agement, returns will be influenced by con- and thus reflect more directly on the airport. leases. Dealing with hotel operators can be hotel management agreements. Hotel op- struction costs and how it is financed. The challenging for airport management; few erators are usually compensated based on advantage of using airport revenue bonds is Airport Owned Hotels airports have the internal capability of eval- revenue performance, usually in the range that debt service on the property will gener- uating, and if necessary, challenging operat- of two to five percent of gross hotel reve- ally be lower, which enhances the feasibility A number of airports own terminal hotel ing budgets, capital improvement plans and nues, and compensation may also be par- of the project. properties, particularly properties that are marketing strategies. In general, we recom- tially contingent on the delivery of targeted attached to the terminal facilities. Some ad- mend that airports retain third party asset operating profits. The traditional manage- Procurement Process vantages of airport ownership include long- managers to oversee the operation and make ment fee structure emerged as an attempt term control over the asset, shorter man- recommendations with respect to budget ap- to align ownership and operator objectives; Once the desired structure is determined,

14 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 15 airports generally issue Requests For Pro- it is important for the airport to consider clauses or rights of first refusal could im- perience to question operating budgets, an- posals (RFPs) incorporating the airport’s the effect of changes to the deal structure on pede future development plans and should nual marketing plans and operating results. standard terms and requirements, along yield to the airport and perform sensitivity be carefully considered. Some airports have In addition, hotels require substantial main- with a brief description of the project. Some analyses so that the implications to both par- tied renewal terms to capital expenditures, tenance and periodic upgrading; generally RFPs provide the developers with very little ties are fully understood if the hotel is more recognizing that as lease terms expire, ten- minor renovations will be required between information regarding the proposed project or less successful than anticipated. Airport ants have little incentive to maintain the fa- the fourth and fifth years and more exten- and site and minimal guidance in structur- representatives need to be very wary of over- cility and are inclined to “run the property sive renovations will be require between the ing their proposals, and thus result in sub- ly optimistic projections, and avoid using into the ground.” And the interpretation of ninth and 12th years of operation. An asset missions that are difficult to compare and optimistic figures as the basis for downside “market rate” in lease contracts is often con- manager can help to ensure that these funds evaluate. Although usual procurement pro- sensitivity projections. Rather, sensitivity tested. are spent most effectively on items that will cedures must be maintained, a Hotel RFP is analyses should use realistic figures (gener- maintain the hotels physical condition and somewhat different from many of the oth- ated internally or by independent consul- Oversight market position rather than items that may er projects completed by airports, and the tants retained by the airport) to realistically be nice but not necessary. RFP should be carefully developed to ensure assess both upside and downside risk and Once the hotel is up and operating the air- Hotel facilities are an important that all developers understand the project return scenarios. port is responsible for the oversight of the amenity around most major airports and and the airport’s requirements thoroughly project. Obviously if the property is leased, for those airports with on premise hotels, and that all bidders are asked to provide the Contract negotiation the airport is not responsible for direct over- overseeing their development and effective same information. The airport must provide sight, but it is important to ensure that all operation can be a major challenge. Ensur- clear definition with respect to the site, in- Airports should recognize that the hotel lease provisions, particularly with respect ing that the right team is in place to assist frastructure, terminal linkages, height re- industry is relatively volatile, and hotel as- to maintenance and operating standards with market analysis, project development strictions, required facilities, parking and sets are frequently sold; thus the parties to are enforced. Hotel profits can be inflated and finance, legal advice and asset oversight any site-specific challenges. Background in- the deal are likely to change over time. In in the short term by reducing maintenance is a key issue to the short-term success of a formation with respect to the city and air- addition airports themselves are constantly and capital expenditures, but over time such project; however it is important to also con- port should be provided and an abbreviated growing and evolving. We generally recom- neglect may have a negative impact on the sider unforeseen future needs of the airport, market study (generally without operating mend that our clients seek specialist legal property’s and potentially the airport’s rep- and provide some flexibility if needs or con- projections) may be included. The preferred advice with respect to hotel contracts as such utation. Such a strategy can also inflate the ditions change. ■ operating structure should be outlined, and contracts are complicated and the implica- value of the property in a buy-out situation, all submitters should be required to submit tions and risks associated with even seem- thus the airport management should not al- a basic package of qualifications, including ingly innocuous clauses should be carefully low such a strategy to persist. If the airport prior experience, financial wherewithal, and evaluated. It is important to ensure that leas- owns the property, it is important for the project team organization and resumes. es and management contracts specifically airport to supervise the hotel management Proposals may be received that pro- address issues that may seem unlikely to be company effectively. The airport will need to vide bids for either the requested structure contentious at the outset, but our experience either hire a staff member with the necessary or a proposed alternative approach, or in indicates are likely to arise over the years, experience or engage a third party asset man- some cases both. A creative alternative ap- including maintenance and operating stan- agement firm specializing in hotels. Effective proach may provide additional flexibility, so dards, buy-out provisions if the hotel site asset managers should have the skill and ex- all proposals should be carefully evaluated is required for redevelopment, exclusivity against the evaluation criteria focusing on radiuses and interpretation of rent adjust- the ability of the bidding team to deliver the ment provisions. Either the hotel operators Allison Fogarty is the Managing Director of Pinnacle Advisory Group’s Florida and Caribbean Practice Group. Ms. desired results, the reasonableness of their or airport management may wish to devel- Fogarty has extensive experience in hotel and resort development. Her activities have included site selection, prop- projections, and any suggestions they may op additional hotel facilities nearby over the erty inspection, contract negotiation and review and due diligence. She has also been responsible for project plan- have included. Ultimately, several teams lease term; consideration must be given to ning and directing the activities of architects and project engineers. As a consultant, she has directed and com- should be selected as a short-list for further development restrictions, and weather such pleted market and financial analysis engagements for hotels, resorts and gaming companies in the eastern United clarification and ultimately negotiation of an clauses should expire prior to lease expira- States and the Caribbean, and has completed numerous consulting assignments for airports and airport hotels. She agreement. During the negotiating process, tion. Overly restrictive or lengthy exclusivity can be reached at [email protected]

16 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 17 Research a socially constructed phenomenon that, al- nals such as Annals of Tourism Research and Boston Hospitality Review though relying on evidence and aspiring to Journal of Heritage Tourism. Much of the objective validity, represents a narrative in- literature concerns topics related to cultur- fluenced by the subjective interpretation of al and ethnic identity, geography, history, each historian. Postmodernists suggest there political science and international relations, are many possible ways to analyze a given set venue and visitor management, interpreta- of data and therefore multiple realities that tion and education, historic preservation, may legitimately be constructed from our and environmental sustainability. Marketing convoluted past. is a relatively minor aspect of the literature Heritage refers narrowly to some- in heritage tourism, but has received some thing inherited from a previous generation, attention. Scholarship on heritage tourism and more broadly to ideas or cultural patterns has also appeared occasionally in marketing derived from the past. History and heritage journals. are obviously related, but the latter need not A related concept is architectural be entirely accurate. David Lowenthal has tourism, which describes travel behavior argued that heritage involves memory that motivated by a desire to experience the aes- is intentionally selective and unintentionally thetic nature of buildings or neighborhoods. imperfect, as well as the interpretation and Although the phenomena may also apply reconstruction of evidence from the past to to new or recently constructed buildings, create plausible narratives that reflect or de- architectural tourism to historic buildings fine the present. As such, heritage is a sub- shares many of the characteristics of heritage jective and socially constructed phenome- tourism. non consistent with postmodernism. It also represents a more useful perspective for Brand Heritage The Pricing Effects of Heritage at an Iconic Hotel marketing by business organizations, which Bradford Hudson may have lower thresholds for the intellectu- Brand heritage is an emerging specialization istoric hotels are a recognized product ed by the author, and quantitative analysis of al validity of historical narratives or design within the marketing discipline, which sug- Htype in the lodging industry and may pricing data that was collected by a regional elements. gests that the consumer appeal of products be found in significant numbers throughout hotel industry association over a five year and services offered by older companies may the globe. Much of the academic and pop- period. Heritage Tourism be enhanced by the historical characters of ular literature about these hotels focuses on their brands. Examples of marketing related their architectural, social, or business his- HERITAGE The field of heritage tourism considers the to heritage include the citation of company tory. Less has been written about how such influence of historical culture on supply and founding dates on packaging or in advertis- history might represent a value proposition History may be defined as a record of the demand in travel consumption. Examples ing, the celebration of corporate anniversa- for consumers, or how history might affect past. As an academic pursuit, it involves the include travel to places where notable events ries, and the reprise of discontinued songs or current marketing for these properties formal and systematic investigation of events have occurred, old buildings that have in- mascots. Such marketing may also involve The purpose of this article is to val- and evolving circumstances, using historical trinsic aesthetic appeal, sites associated with references to a company in historical con- idate the notion that history can be an im- research methodology to deliver insights famous individuals, collections of historic text or to iconic artifacts in possession of the portant element of the consumer value prop- about the nature of people or institutions. artifacts, ancient landscapes that relate to company. It could even include the creation osition for older hotels, by demonstrating History is traditionally understood to be a the evolution of human civilization, or re- of updated products that incorporate visual that an iconic hotel with a distinct historical factual endeavor, based on the collection of productions of enclaves that represent life in elements from prior versions, or the design identity is able to maintain a price premium objective evidence from archival sources and prior times. of new offerings that refer to idealized or ar- over newer hotels with comparable operat- the subsequent validation of theory by com- Publications on the topic of heritage tificial memories of historical reality. ing characteristics. This exploratory study is parison against such evidence. In contrast, tourism have included textbooks, essay an- The idea that brands may have a her- based on qualitative field research conduct- the postmodern approach regards history as thologies, and numerous articles in jour- itage dimension emerged several decades 18 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 19 names, especially historic hotels that predate The pricing effects of heritage in current management arrangements. For the brand context have been discussed at some hotels, these local property names are a conceptual level in prior literature. It has widely known and constitute brands in their been suggested that positioning based on own right. Many guests choose these hotels heritage creates a point of differentiation over competing alternatives because of their that enables older brands to achieve higher historic status, and some are even motivated prices and margins than competing younger to travel for the purpose of staying at these brands. However, there have been few em- famous hotels. pirical studies to validate this phenomenon. The hospitality sector not only tends A notable exception is a study of consum- toward geographic dependence, but also to- er attitudes toward various dimensions of ward property dependence, meaning that it brand heritage in the automobile industry is constrained by a commitment to partic- by Klaus-Peter Wiedmann and colleagues. ular structures. For a historic hotel whose Based on survey research and subsequent identity is inseparable from its architecture, statistical analysis, their study determined preserving the condition of the building and that brand heritage has a significant positive managing its relationship with the surround- influence on the ability to attain a price pre- ing built environment are important tasks. mium for new vehicles. Brand heritage in the hospitality in- The pricing effects of heritage in the and protecting that heritage through stew- ago, when it was suggested that the histor- dustry has received relatively little attention hotel industry have received almost no atten- ardship and attention to continuity. Older ical approach could provide brand images in prior academic literature. The heritage tion in prior literature. There are few empir- brands have unique histories that cannot be and themes for advertising. The term “brand phenomenon has been more widely recog- ical studies that compare pricing for historic duplicated or appropriated by competitors, heritage” was also mentioned in early schol- nized in practice, as evidenced by the ex- hotels to pricing for modern alternatives, in and therefore brand heritage constitutes a arship on brand equity by David Aaker, but istence of the ‘Historic Hotels of America’ a way that allows the pricing effects of heri- point of differentiation that may contribute the topic was not explored in any depth. marketing consortium, which was created tage to be isolated. to competitive advantage. Since then, there has been a recurrent but by the National Trust for Historic Preserva- Two prior studies regarding the range steady stream of literature on topics relating tion. of factors that could influence hotel pricing to older companies and products. This in- Heritage in the Hotel Industry did find a correlation between the age of a cludes articles on the evolutionary nature of Pricing Effects of Heritage hotel building and consumer pricing, with brands and their lifecycles, the retrospective The concepts of heritage tourism and brand lower prices attained by older hotels, espe- or ‘retro’ branding phenomenon, the inter- heritage become intermingled in the hotel The pricing effects of heritage in the tour- cially in higher price segments. However, the action of brands and nostalgia, and histori- industry. Unlike the manufacturing sector, ism context have received some attention in operative factor in both instances was mate- cal references in advertising. and even some parts of the service sector, prior literature. There are numerous publi- rial condition rather than historic status. In Interest in brand heritage acceler- the hotel industry is geographically depen- cations that consider the pricing of heritage the first study, by Marta Fernández-Barcala ated after the publication of a conceptual dent. Consumers travel from many different attractions related to venue management, and colleagues, the age of each hotel was article about corporate heritage brands by locations to a centralized production facili- financial viability, or social value. There is determined by the number of years since Mats Urde, Stephen Greyser and John Balm- ty. Distribution involves an extended travel also some research regarding the pricing the last renovation. In the second study, by er. They suggested that older brands con- system and growth is often precluded by the effects of cultural attractions of all types, Wei-Ting Hung and colleagues, the age of stitute a distinct conceptual category and surrounding neighborhood or political con- which suggests that higher levels of cultural each hotel was determined by the number of require a different approach to brand man- text. meaning correlate with reduced price sen- years the hotel had been operating, but the agement than younger brands. Such market- Even hotel companies with multiple sitivity among potential visitors. However, authors attributed the price differential to ing involves uncovering aspects of heritage units and global brands that transcend spe- there are few studies that directly compare expectations on the part of consumers, who through archival and consumer research, cific regional associations have operations the price of heritage attractions to the price were disappointed by hotels that had not activating that heritage through product that are geographically specific. Many in- of comparable alternatives without substan- been renovated recently. design and marketing communications, dividual properties have their own distinct tial heritage. 20 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 21 APPROACH The first step in analyzing the data Table 1 - Competitive Set was to identify several objective attributes Property Type Size Brand Ownership Management Rating Rating Distance Constructed Age Heritage Affiliation Source #1 Source #2 Epicenter Approx. 2005 Status The purpose of this study was to determine that could be used to classify the hotels whether heritage has any effect on consumer along dimensions other than historic status, Hotel A Subject > 400 rooms Chain Not chain Chain 3 4 < 1 mile 1895 110 Historic pricing at historic hotels. The basic approach and thereby create a reliable competitive set (iconic/historic) was to compare pricing data from older ho- for purposes of comparison. These criteria Hotel B Control > 400 rooms Chain Not chain Chain 3 4 < 1 mile 1975 30 Modern tels against pricing data for newer hotels included size, brand affiliation, ownership (modern) with similar operating characteristics. and management, ratings, and location. The Hotel C Control > 400 rooms Chain Not chain Chain 3 4 < 1 mile 1975 30 Modern (modern) All of the hotels studied were located latter was defined as the distance from a rec- in the same urban region, which is located ognized epicenter of demand generators that new addition has been constructed, but the tract by the chain itself, rated three-star or somewhere in Europe or North America. included restaurants, retail shops, corporate interior decor and exterior architecture have the equivalent by rating services, and located Although the city has a multi-dimensional and government offices, and historic attrac- been carefully orchestrated to reproduce the within one mile of the epicenter of travel de- economy and a diverse architectural land- tions. appearance of the original structure. mand. Along the non-historical dimensions, scape, it is widely recognized for its histor- The age of each hotel building was In terms of the screening criteria these newer hotels are identical to the iconic ic status and features a multitude of historic selected as a surrogate for heritage status. defined above, this hotel can be classified hotel being studied. buildings. The competitive set was then divided into as large (more than 400 overnight guest Both hotels were built during the pe- The source of pricing data was a re- two subsets based on the age of each hotel. rooms), affiliated with a major chain that has riod 1970 to 1980, in the same year or imme- gional hotel industry association, which col- The result is a typology that includes one a recognized brand, with daily operations diately adjacent years. Using the midpoint of lected and organized data from its member category of ‘historic hotels’ (which includes handled under management contract by the this decade as the year of construction, both hotels and then returned performance re- the iconic hotel being studied) and another chain itself, rated three-star or the equiva- of these hotels were about 30 years old at the ports to these hotels in spreadsheet format. category of ‘modern hotels’ (which includes lent by rating services, and located within beginning of the period covered by the data More than 20 hotels participated in the data the other hotels in the competitive set). one mile of the epicenter of travel demand. set. These hotels are identified as ‘Hotel B’ sharing project, including the iconic hotel This typology allowed historical ef- The original section of this hotel was and ‘Hotel C’ in Table 1. being studied. The data set provides annu- fects to be isolated from other factors that built during the period 1890 to 1900. Using al totals during the period 2004 to 2009 for typically influence pricing in the hotel in- the midpoint of this decade as the year of FINDINGS the three most commonly used ratios related dustry. If all hotels in the competitive set construction, the hotel was about 110 years to demand and pricing in the hotel industry demonstrate pricing results that are nearly old at the beginning of the period covered by Quantitative Evidence on Pricing (rooms occupancy percentage or occupancy, identical, then it is reasonable to conclude the data set. This hotel is identified as ‘Hotel average daily rate or ADR, and revenue per that heritage had no effect. However, if the A’ in Table 1. Performance results for the competitive available room or REVPAR). historic hotel demonstrates pricing results Of more than 20 hotels in the data set are displayed in Table 2. The detailed The author was given permission to that are significantly different from the new- set, several had characteristics in common data provide further confirmation that the use the data under the conditions that publi- er hotels, it is reasonable to conclude that with the iconic property being studied. two modern hotels constitute an excellent cation be delayed for five years, and that the heritage effects were a contributing factor. However, only two other properties control group for purposes of comparison geographic region and the identities of the had characteristics identical to those of the against the historic hotel. Over the five year specific hotels are disguised. The details have The Hotels iconic hotel according to all five classifica- period, Hotel B generally performed better been revealed to the editor of this journal on tion criteria. Both of these hotels were built than Hotel C, but the differences are mini- a confidential basis. The hotel at the focal point of this project is during the late twentieth century, using an mal. In occupancy, Hotel B achieved annual Additional qualitative evidence was widely recognized for its historic status and architectural style that could be described as advantages over Hotel C ranging from 0% to collected from multiple sources using sever- has become symbolic of the cultural heri- ‘mid-century modern.’ 4% with an overall advantage of 2%. In aver- al methods. These included site visits to the tage of its geographic region. It was built and In terms of the screening criteria age daily rate, Hotel B achieved annual ad- properties, interviews with industry execu- opened during the late nineteenth century, defined above, both modern hotels can be vantages over Hotel C ranging from -8% to tives and hotel guests, historical research at using an architectural revival style with de- classified as large (more than 400 overnight 6% with an overall advantage of 0%. In reve- libraries and archives, and evidence gath- sign elements that resemble those found in guest rooms), affiliated with a major chain nue per available room, Hotel B achieved an- ered from a range of contemporary sources European palaces of prior eras. The hotel has that has a recognized brand, with daily op- nual advantages over Hotel C ranging from including travel magazines and websites. been renovated periodically and at least one erations handled under management con- -3% to 9% with an overall advantage of 3%.

22 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 23 Table 2 - Performance Results REVPAR would remain unchanged. The – confirmed the findings of the observations. Property Occupancy Average daily rate (ADR) Revenue per available room (REVPAR) overall effect would bring the occupancy Without exception, every person strongly 2005 2006 2007 2008 2009 Total 2005 2006 2007 2008 2009 Total 2005 2006 2007 2008 2009 Total levels of Hotel A into alignment with Hotels identified the iconic hotel as historic and B and C, while reducing the average daily the two other hotels in the competitive set Hotel A 62% 59% 59% 74% 68% 64% 240 243 233 253 213 236 149 143 138 187 144 152 rate achieved by Hotel A. In other words, as modern. (iconic/historic) Hotel B (modern) 72% 70% 73% 76% 69% 72% 146 143 145 165 136 147 105 101 106 126 94 106 the comparatively weak occupancy levels A review of a variety of contemporary Hotel C (modern) 70% 70% 71% 73% 65% 70% 138 139 145 170 148 148 96 98 102 124 96 103 of Hotel A do not undermine conclusions sources of travel information also confirmed about the pricing effects of heritage. Hotel A the historical status of the hotels. In every

Average competitive 68% 67% 68% 74% 67% 69% 175 175 174 196 166 177 117 114 115 145 111 121 would still achieve a 45% price premium as instance, the iconic hotel was described as set (A,B, and C) expressed by the combined REVPAR mea- either ‘historic’ or as a ‘grande dame’. This Average hotels 71% 70% 72% 75% 67% 71% 142 141 145 167 142 148 101 99 104 125 95 105 sure. contrasts with the other two hotels in the B+C only competitive set. In most instances, they were Qualitative Evidence on Heritage described as ‘modern’ or ‘contemporary.’ Oc- Advantage hotel 8 4 0 -4 -12 -1 9 3 3 2 -3 3 B versus C casionally they were described without any Advantage hotel 2% 0% 2% 3% 4% 2% 6% 3% 0% -3% -8% 0% 9% 3% 3% 1% -3% 3% The qualitative field research investi- reference to the age of the building or their B versus C gated two issues. The first was the degree to historic status. which consumers identified the iconic hotel Overall, the qualitative evidence Advantage hotel 98 102 88 85 70 89 48 44 34 62 49 47 as historic and the two other hotels in the strongly supports the methodological design A versus B+C competitive set as modern. of the study. It was universally believed that Advantage hotel -9% -11% -13% -1% 1% -7% 69% 72% 61% 51% 50% 60% 48% 44% 33% 49% 51% 45% Observation by the author deter- the iconic hotel is historic, and that the other A versus B+C mined that the architecture and interiors of two hotels in the competitive set are not.

ADR and REVPAR are reported in undisclosed currency (either American dollars, British pounds, Canadian dollars, or European Euros) the iconic hotel were unquestionably histor- In contrast, Hotel A achieved very tage in revenue per available room. ic, and that the historic status of the hotel Qualitative Evidence on Pricing significant advantages compared to the con- The ultimate goal of pricing strategy was reinforced through a variety of decora- trol group, which is represented by the aver- in the hotel industry is to achieve the highest tive elements (including antique furniture The second issue investigated during the age of Hotels B and C combined. In average REVPAR, which represents the optimal mix- and vintage photographs) and marketing qualitative research was the degree to which daily rate, Hotel A achieved annual advan- ture of rate and occupancy, rather than to communications (including signage and consumers were willing to pay a price pre- tages over the control group ranging from maximize either measure individually. Rates menus). The historic features were a mixture mium for the historic status of the iconic ho- 50% to 72% with an overall advantage of also influence competitive positioning, be- of originals, reproductions, and revival ele- tel. Interviews conducted by the author with 60%. In revenue per available room, Hotel cause they create or support consumer per- ments. overnight guests and restaurant customers at A achieved annual advantages over the con- ceptions about the level of quality and desir- Observation by the author deter- all three hotels produced mixed results. trol group ranging from 33% to 51% with an ability. Some hotel companies maintain high mined that the architecture and interiors of Most people confirmed, either overall advantage of 45%. rates during periods of low demand, even if the other two hotels in the competitive set through direct experience or opinion based It should be noted that Hotel A rare- this approach results in reduced occupancy were not historic. Most elements reflected ei- on hearsay, that the prices at the iconic ho- ly achieved an advantage in occupancy levels levels, in order preserve the integrity of their ther current styles in hotel design consistent tel were higher. A minority of guests were compared to the Hotels B and C. In occu- brand position. In this instance, interviews with recent renovations, or the ‘mid-centu- ambivalent about the price differential, es- pancy percentage, Hotel A achieved annual confirmed that the relatively high rate and ry modern’ architectural style that was in pecially business travelers whose choice of advantages over the control group ranging low occupancy of Hotel A resulted from an vogue at the time of construction. Visually accommodation was made by an assistant from -13% to 1% with an overall advantage explicit pricing strategy by its management, these two hotels were obviously modern and or travel manager within their company. of -7%. This suggests that the rates were so intended to provide a signal to the market- offered a clear contrast to the iconic hotel in Among the majority with an opinion, the re- high that they suppressed the quantity of place regarding its leadership position. terms of heritage. sponses were as follows. demand. Nonetheless, the average daily rate At a conceptual level, if the rate were Numerous interviews subsequent- Several types of consumers agreed was so disproportionately high that Hotel A reduced with precision, then occupancy ly conducted by the author with a variety with the proposition that the higher price was still able to achieve a significant advan- levels would increase proportionately, but of stakeholders – ranging from guests and of the iconic hotel was worth the expense. tourists to hotel managers and local retailers

24 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 25 produced mixed results. The vice president have one of the strongest brands and man- would be useful to have a much larger data of marketing at the corporate headquarters agement programs in the world. History is set. Ideally, this would have pricing results of the chain managing the iconic hotel was the only advantage [the iconic hotel] has. from several hundred hotels of different dismissive of any heritage effect in pricing. Without that, they would not be ahead.” types and ages, across a broad range of geo- He remarked: “There is no evidence to sug- Although the qualitative evidence graphic regions, plus expanded information gest that heritage provides a price advantage. regarding pricing was mixed, it did gen- about expenses and profitability. If research In cases where our hotels are rate leaders, erally support several conclusions. First, a about the consumer behavior effects of heri- it is the service and the complex package price premium did exist at the iconic ho- tage is conducted prior to this broader study, of our [corporate] brand and management tel. Second, a wide variety of stakeholders then the typology for identifying the com- that produce the results, not the buildings.” were aware of this price premium. Third, a petitive set could be more exacting, and the This corporate executive also asserted: “Any majority of all travelers (and a vast majority subsequent statistical analysis could be more advantage from history is balanced against of leisure travelers) believed that the experi- revealing. the disadvantage in old buildings, [namely] ence did or would justify the price premium. problems like small bathrooms and guests Fourth, among those who believed that the IMPLICATIONS worried that we will not have WiFi.” experience was or would be superior, every In contrast, the local managing di- person agreed that heritage was the focal There are two ways for consumers and in- rector of the iconic hotel disagreed quite point of this experience. Overall, the quali- dustry practitioners to look at older hotels. strongly with the headquarters executive. tative evidence validates the notion that his- Either they are old or they are historic. The He contended that the property brand was tory was an important element of the con- first viewpoint focuses on the disadvantages much stronger than the chain brand, that the sumer value proposition for the iconic hotel of the building in terms of service delivery, hotel had iconic status as an important cul- and contributed in a significant way to the property maintenance, and fashion. In this These included every leisure traveler who tural landmark, and that the historic aspects ability to attain a price premium. study, the comments of the corporate hotel had stayed at the iconic hotel and enjoyed of the hotel contributed to “unrivalled pres- executive and the opinions of a significant their visit, and many leisure travelers who ence” in its marketplace. LIMITATIONS proportion of business travelers are consis- would have preferred to stay at the iconic The asset manager for the iconic ho- tent with this viewpoint. This is also sup- hotel but were unable to afford the addition- tel, who acts as an intermediary between This study was designed to be exploratory, ported by prior research by other authors, al expense. the entity that owns the hotel and the hotel rather than conclusive. Readers should be which found a negative correlation between Several types of consumers did not chain that manages it, was even more sup- cautious about the certainty of these find- the age of hotel buildings and the ability to agree with the proposition that the higher portive of the theory that heritage has a pos- ings, especially when applying conclusions attain a price premium due to concerns that price of the iconic hotel was worth the ex- itive effect on pricing. He concluded: “Histo- in practice. Beyond this, there are several older structures had not been updated or pense. These included the majority of busi- ry is the strongest asset for the older hotels limitations in the methodology that must renovated. ness travelers at every hotel, and all of the in our portfolio. That alone is responsible for be noted, all of which present opportuni- The second viewpoint focuses on leisure travelers who had stayed at the iconic 95% of the revenue success of these heritage ties for additional research. First, the dy- the advantages of the building as an artifact hotel but did not enjoy their visit. properties.” When asked to respond to the namics of the consumer buying decision in of material culture, which induces histori- Among those with a negative opin- comments from the headquarters executive, this instance are somewhat unclear, due to cal associations in guests that are powerful ion of the iconic hotel, there were three types the asset manager was equally dismissive: multiple dimensions of heritage at the icon- enough to generate incremental demand and of reasons cited. Some guests had complaints “Of course he would say that the success of ic hotel. Second, the size of the competitive justify a price premium. The quantitative ev- about operations unrelated to heritage or the these hotels is due to brand and manage- set is quite small, with data from only three idence on pricing in this study is highly con- age of the building, some guests had com- ment rather than the buildings. He is in the hotels, all of which are located in the same sistent with such a viewpoint. Similarly, the plaints related to the age of the building business of selling branded management neighborhood. Third, this study focused on qualitative research in this study, especially (such as the size of bathrooms), and some services.” pricing and made no attempt to investigate interviews with managers and the intercepts guests simply would have preferred a more An interview with the regional rev- the expenses associated with heritage or the with leisure travelers, supports this view- modern design style. enue manager overseeing one of the two effect on profitability. point. It is also supported by a prior research Interviews subsequently conduct- modern hotels in the control group also sup- During any subsequent studies about study by other authors, which found a posi- ed by the author with hotel executives also ported the heritage thesis. He observed: “We the financial effects of heritage for hotels, it tive correlation between brand heritage and

26 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 27 the ability to attain a price premium in the line of scholarship that describes the influ- Interview automobile industry. ence of historical culture on supply and de- Boston Hospitality Review Owners and operators of older ho- mand in travel consumption. The study of tels cannot conceal the age of their proper- marketing for historic hotels as commercial ties, which is obvious to anyone entering the enterprises and travel destinations can be re- premises. Therefore two choices exist relat- garded as a hybrid between the two fields of ed to positioning strategy and promotional brand heritage and heritage tourism. tactics. Hotel managers can either engage in The purpose of this article was to attempts to obscure the age of the building validate the notion that history can be an and distract consumers by focusing on attri- important element of the consumer value butes of the facility that have been updated, proposition for older hotels, by demonstrat- or they can embrace the historic character ing that an iconic hotel with a distinct his- of the building as a point of differentiation torical identity is able to maintain a price and competitive advantage for appropriate premium over newer hotels with comparable market segments. The findings of this study operating characteristics. This exploratory suggest that the latter approach, with a pro- study was based on qualitative field research nounced strategic focus on heritage for cer- conducted by the author, and quantitative tain targeted consumers, may produce supe- analysis of pricing data that was collected by rior results in terms of pricing and revenue. a regional hotel industry association over a five year period. CONCLUSIONS The findings demonstrate that heri- tage has a significant positive effect on pric- Brand heritage is an emerging specialization ing for historic hotels, especially for leisure within the marketing discipline, which sug- travelers. This suggests that the topic of gests that the consumer appeal of products brand heritage should receive increased at- and services offered by older companies may tention from academic researchers in the be enhanced by the historical characters of disciplines of hospitality and tourism, as their brands. Heritage tourism is a parallel well as practitioners in the hotel industry. ■ The Customer is Always Right, Right? A Look at How Yelp Has Taken Hold of the Boston Restaurant Industry Rachel DeSimone ormal restaurant reviews made their de- face.” This is the fictional Tweet that started Fbut back in 1941 when Duncan Hines, a war between feisty Chef Carl Casper and known today for his boxed-cake mix, put pompous critic, Michel Ramsey, in last sum- out his first restaurant guidebook, Adven- mer’s hit movie Chef. Using the Internet to tures in Good Eating. The intention was, “to amplify ones voice is not a far-fetched con- Bradford T. Hudson, Ph.D. is Associate Professor of the Practice of Marketing in the Carroll guide travelers and protect them from eating cept for the Commonwealth. After the in- School of Management at Boston College. He is also Assistant Chairperson of the Marketing poisonous food from unsanitary places,” ac- cident at Harvard Square’s Best of Boston Department at Boston College. Previously he was a faculty member at Boston University, with cording to his biography by Louis Hatchett. restaurant, Alden & Harlow, burst into Bos- concurrent appointments as Associate Professor of the Practice of Marketing in the School of The network of reviewing is much ton’s food media this past February, the clash Hospitality Administration and Lecturer in Marketing at the Graduate School of Management. more complex today, as the Internet has between restaurant and Yelper was ripe. He holds a master’s degree in services marketing from the Cornell Hotel School and a Ph.D. in managed to become an integral part of the In response to two women who sat business history from Boston University. He is a former Fulbright Scholar. restaurant scene, as well as every second of themselves in the restaurant, sans reserva- Email [email protected] many people’s days. “@RamseyMichel you tion and commenced to exploit the staff, wouldn’t know a good meal if it sat on your Chef-Owner Michael Scelfo captured an im-

28 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 29 age of them and posted it on his Instagram when they search for a new restaurant to eat ams does feel however, that reviews “would with the hashtag “wedontnegotiatewithyelp- at is check out the Yelp page, and it is hard be more beneficial if we could actually have ers.” As the pair remained perched in their to avoid as Yelp usually comes up first or a conversation with the reviewer to get more spot, threatening to “Yelp” about the situa- second when a restaurant is searched on the detail about their experience and develop a tion, Chef Scelfo and his staff decided to kill Internet. Many times, people will put their relationship with them.” them with kindness until they left, according trust in stranger’s opinions rather than just It is important to keep in mind that to Eater’s account of the event. But what’s the taking their friend’s word. all Yelpers are not created equal. “I don't like real issue here? Is it the women? The chef? The majority of Yelp’s reviews are five being lumped in with the bad apples when a Or even the platform? and four star reviews, 42% and 25% respec- chef goes on a social media tear after being Yelp and other online review sys- tively. Since most people are inclined to write threatened with a bad review, but I hope that tems such as TripAdvisor and OpenTable positive reviews, the negative ones have a restaurants do appreciate the positive posts became popular after the new millennium tendency to stick out like sore thumbs, main- and are able to take constructive criticism with Yelp launching in 2004, TripAdvisor in taining the ability to bring down the overall when warranted,” says Emily G., a member 2000 and OpenTable in 1998. These systems, average star rating of an establishment. Sev- of Boston’s Yelp Elite Squad since 2009. all unique in their approach, shared one col- eral well-known Boston restaurants, with Yelp’s Elite Squad is a specially rec- Left, Tom Borgia, lective goal—guide the customer in the right Yelp ratings spanning from 3.5 to 4.5 stars, ognized group of their most credible and Executive Chef of direction and truthfully inform them about some of which can be found on Boston Mag- frequent Yelpers. The perks of being in this Russell House Tavern what they are getting. That being said, online azine’s 50 Best Boston Restaurants of 2014 group are that members get a special Elite reviewers are cut from many different cloths, list, have shared their sentiments on the badge on their Yelp profile along with get- each writing with different lenses and pref- matter. They are all aware of Yelp reviews to ting frequent invites to free private events. erences. varying extents, both positive and negative, Anyone can nominate themselves or their ing tools for the servers and cooks,” says Dan Although reviewers are encouraged that are written about their restaurants and friends to be a part of this, “Exclusive in-the- Raia, Chef de Cuisine of Sweet Cheeks Q. to speak candidly, the threat of using online the management teams deal with them pri- know crew,” according to Yelp’s Elite homep- “Positive reinforcement works wonders for review systems as a tool for malice does not marily, sharing them with their staff when age. the morale of the staff. Pointing out specif- align with the values of these companies. The necessary. Emily joined with the intention of ic things that a Yelper will write is great for tension, posing review site against restau- “We are very much aware of Yelp re- being able to “give some love to businesses them to see why we go the lengths we do to rant, is just not how it was meant to turn out. views,” says Tom Borgia, Executive Chef of that maybe would have gone unnoticed…I make our guests happy.” Yelp has become the forerunner in this issue, Russell House Tavern, “I have the app and like giving shout-outs to places that are do- On the opposite side of the spec- as the threat to “Yelp” has become legitimate. use it as part of my morning routine. I don't ing what they do well. I don't really find it trum, “for the negative reviews, we try to Yelp was founded with one purpose get overly excited or bummed about any of fun to talk about the bad places, they'll prob- use them to better ourselves, to better serve in mind, “to connect people to great local them. We really just look for trends; if some- ably go away on their own if my negative ex- our customers, but sometimes people have businesses by allowing folks to read and one says the tuna tartar is flavorless, we don't perience wasn't an anomaly.” unrealistic expectations. An example of a write reviews of their consumer experienc- pay much attention. But if we see that three Emily has written negative reviews directly helpful negative review would be es,” according to Damien Smith, Marketing or four times in a week we know there's a before but admits that they aren’t much fun. people complaining about our fatty brisket. Director for Yelp Boston. “We wanted to problem.” “There have been occasions when I decided In Texas, fatty brisket is king, but when we enable folks to make smart purchasing deci- The goal for most restaurants in re- to write a negative review after management first opened, we received a lot of uneasiness sions, on anything from fish tacos to a chiro- sponding to Yelp reviews is to improve the was given the opportunity to rectify the sit- with the amount of fat we left on our brisket, practor, and I think we’ve done a pretty good overall experience for guests and to give uation, either at the time of dining or with that we changed the way we butchered our j o b.” them the sentiment of wanting to return. a follow-up email, and they chose not to. meat raw, and even trimmed it after it was Yelp’s reach is growing, currently “Our General Manager actively responds to I don't think it's fair to slam a place if you cooked.” spanning across 29 countries. They report- both positive and negative feedback,” says don't give them a chance to make it right.” This seems like a pretty good sys- ed 135 million unique monthly visitors to Jody Adams, Chef-Owner of Rialto and Boston restaurants certainly do take tem—reviews are written, positive ones their site at the end of 2014 as well as 71 Trade, “we find all reviews help us to im- these opportunities to grow from Yelp re- make everyone happy and negative ones pro- million cumulative reviews on the site since prove our overall experience for the guest. views they receive. “For positive reviews, we vide opportunities to improve the relation- they began. The first thing most people do Their feedback is very important to us.” Ad- love to print them out and use them as teach- ship with the guest. However, when things

30 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 31 Right, The bar at the Russell House Tavern in Cambridge, MA

Left, Oleana get out of hand is when concern might arise. dition when I read bad reviews, I take them features on open The question must be asked, are with a grain of salt. I know people are more kitchen where guests Boston restaurants and Yelpers on the same likely to complain than praise on online fo- can watch their meal team? Or are they on completely different rums.” being made teams? The glue that holds the two togeth- In the hospitality industry the age- er—“Mutual curiosity,” says Smith. “Yelp- old motto, “The customer is always right,” nity to make complete fools of themselves.” match who we are, there can be a problem. If ers want to discover new and buzz-worthy has been echoed repeatedly. With online He followed up with an example of a recent they view this kind of experience as a failure restaurants, and restaurant owners are cu- platforms in the mix, the customer may al- Yelper who complained about missing in- on our part and they rate us on Yelp, we suf- rious to hear about their customers’ experi- ways have a public voice, but the accuracy of gredients in a dish they were recently served fe r.” ences. That said, Yelp is a platform for can- them always being right yearns to be exam- at the restaurant. As it turns out, the ingredi- “The customer is usually right unless did reviews, and while almost 80% of them ined. ents in question were not even a part of the they are rude or mean,” Says Ana Sortun, are three, four and five stars, the constructive “The customer is not always right, dish originally. Chef-Owner of Oleana and Sarma. “I think criticisms can draw an emotional response. but the business is not always right either… “That sentiment has always meant that people who use Yelp as a resource to At the end of the day, Yelp exists to shine a what matters is that you take care of each that no matter what, we will always do as measure a restaurant’s quality of experience light on Boston’s best businesses.” situation and get the job done,” says Sara much as we can do to make the customer need to remember that the credentials are Some Yelpers even write with a con- Fetbroth, General Manager of Oleana. “It is happy, to an extent. It drives me crazy to read random…you have to search more within to scious effort to balance negative reviews very difficult to handle this notion in our in- something that just isn’t true,” says Raia. He be able to filter the constructive criticism or with positive ones. “I'm very open with what dustry, and I imagine it is the same for any refers to times when someone has blatantly compliments.” I write,” says Nick Barber, IDG New Service’s industry that centers around people…we try written a review about the wrong restaurant. Yelp has been working hard to main- Boston-based multimedia correspondent to make people feel happy and taken care “The customer is not always right,” tain reliability in their reviewers, making a and casual Yelper. “After spending $25-100 a of.” Fetbroth finds the review sites at fault, says Adams, “but we listen to make sure we concerted effort to check reviewer creden- person I feel like you have the credentials to “I think some online sites are looking to cre- are catering to the guests’ needs before all tials. “We have some of the brightest minds write an honest opinion of service, food and ate drama by trying to make it about being else. We work to find a solution for whatev- working tirelessly to ensure the recommen- atmosphere. I also try to be even-handed in right or wrong. But it is not just the sites, a er they are looking for; 99% of the time the dation software is effective so our site stays my reviews. If I write a bad one I make sure lot of people do. The sites just give them a guest is open and we are successful. Every useful and reliable as possible,” says Smith. to write a good one of another restaurant at platform to do so.” person who walks through our doors has As well, Yelp actually provides a two-way some point. I wrote a one-star review just “The customer is not always right, their own personal expectation of what kind communication system through their Yelp last fall. I did it with the expectation of re- at least not outwardly,” says Borgia. “Online of experience they are looking for and who Business Page (biz.yelp.com), giving us- ceiving nothing in return. I wanted to help review platforms give people who firmly they think we are. When their expectation ers access to a suite of free tools, which is fellow diners avoid a bad experience. In ad- believe in this notion an amazing opportu- of who they think we are does not remotely something that most are not familiar with.

32 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 33 customer loyalty,” says Malmgren. She be- feedback and individual preferences,” says lieves in the power of the positive online re- Fetbroth. view and that in a city where there is extreme These days so many aspects of every competition it is imperative for restaurants, day life are digital. Technology has even en- “to manage their online reviews, as too many croached on what the hospitality industry negative reviews can actually ruin a restau- has prided itself most on—face-to-face in- rant’s reputation for a very, very long time.” teractions and communication. “As a front- These tools can be put in place, but of-house professional, I take pride in our it is hard to avoid those reviewers that just talent of communicating with people,” says want to vent, and sometimes even take it too Fetbroth. “But when we are not able to use far. It is not just about maintaining business that talent what do we do?” but also keeping morale at an establishment Social media has played a significant up. “Some of my partners and staff had fol- role in digital interaction taking command, lowed Yelp in the past, taking the feedback and with more and more apps and technolo- pretty seriously,” says Sortun. She has seen gy being developed, this trend does not seem “a lot of devastation and creative interrup- to be going anywhere any time soon. “I think tion,” come from some of the more scathing social media has changed restaurants more reviews. “It’s hard to have filters for the feed- than review platforms, but maybe restau- back and not try to be everything for every- rants are more customer feedback friendly on e .” now,” says Raia. “I think some people are Above, Two featured “Business owners can respond privately or ferrals and as of most recently, positive on- It is important for these seasoned proud that people don’t like them on Yelp, menu items from publicly to reviews, upload photos of their line reviews.” chefs to maintain a tough skin as they con- and that they stick to their guns on certain the Greek-inspired business, flip on check-in offers, ensure sea- “A very recent poll that was featured stantly face scrutiny. “As artists and crafts- menu items or policies. Others feel threat- restaurant, Oleana sonal hours are correct, and other goodies, on Good Morning America established that men we put ourselves out there to be criti- ened and feel the need to change to make including a completely free reservation sys- 86% of consumers make their decision by cized every day,” says Borgia. “It’s the nature every customer happy. I think there has to tem.” reading online reviews,” Malmgren shares. of what we do and you can't have thin skin.” be a middle ground where you realize you Another solution to improve custom- “Our solution is to manage, measure and It is also imperative to keep things in per- need to bend sometimes, but overall sticking er-restaurant relationships that have been set improve your online reviews with our satis- spective as a restaurant staff member. “At the to what you believe your restaurant should askew by online reviews comes in the form faction survey that typically has four to five end of the day these reviews are opinions. b e .” ■ of an online survey tool created by Strategic simple questions, which are based on how You have to look at them in a broader con- Business Communications (SBC). SBC is a the customer feels.” The survey only sets cus- text and try your best to sort through useful San Diego Based company that strategically tomers back about 60 seconds and makes a helps organizations obtain their own visions big impact. “Should a customer have a prob- through meeting and event planning, train- lem with the food or service for example, ing and consulting, and consumer, employ- the complaint goes directly to the appoint- ee and market research. They have brought ed manager of that business establishment Ooze it to the market, which stands for: Op- so that it can be addressed immediately and timizing every opportunity with zealous en- discretely, instead of being posted on Yelp thusiasm. This tool essentially removes the and other review pages.” Negative reviews need for online review platforms at all. “This are addressed immediately with personal- unique survey tool focuses on consumer, ized contact, closing the gap for a disgrun- employee and/or market research,” says Lisa tled guest to be left stewing. Rachel DeSimone, a native New Yorker, is passionate about unique food and it fuels her writing. She is currently Malmgren, one of SBC’s Regional Account “Customers become promoters and Editor-in-Chief of Spoon University, an online food resource for college students made up of over 1,800 contribu- Managers. “The biggest factor in growing promoters are the best advertising platforms tors at more than 50 campuses. Rachel is a senior at Boston University in the School of Hospitality Administration any business is actual customer loyalty, re- for your business which ultimately breed and minoring in journalism. After graduation, she hopes to participate in the BU Gastronomy Masters program.

34 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 35 SEARCH ENGINE & HOTEL BOOKINGS Boston Hospitality Review Marketing ly occurs through a search engine such as Google, and takes place on what is essential- 79% of guests that book on hotel websites specifically ly an auction market. The hotel bids on the searched for the Hotel on a Search Engine Pay-Per-Click (PPC) cost which it is willing to incur for the specific key words consum- 96% of travelers start planning a trip with a Google ers use to conduct a web search. Google has Search made available specific SEM opportunities for hotels with its Hotel Ads program. 63% of travelers say Search Engines are the “Go To” The financial benefits of paid search source of travel information are significant. According to a study con- ducted by Prognosis Digital, a hospitali- 45% of potential guests see brand listings and ads on ty-focused digital marketing firm based in the front page of a Google search and then proceed for a India, global hotel brands with the objective Statistics Provided by Prognosis Digital of increasing the number of online book- guests were paying, and where every reser- ings and targeting international tourists and vation came from.” business travelers invested in a PPC cam- Although paid search is an advan- paign and saw results within 10 months. tageous strategy, nearly every hotel has this The PPC campaign increased web traffic, in- opportunity. The ability to bid for the ideal creased conversion rates, and counteracted ‘key word’ and pay for a ‘click’ is largely de- tough competition from local players who pendent on the size of a hotel’s marketing had established strong presence for relat- Search Engine Marketing (SEM): Financial & Competitive Advantages budget. The Cost-Per-Click (CPC) can be ed key words. On average, these hotels in- of an Effective Hotel SEM Strategy as expensive as $6 per-click if not more – creased the number of bookings by over 300 Leora Lanz and Jovanna Fazzini costs which quickly accumulate particularly bookings per hotel, and decreased the cost for smaller, independent hotels. Bidding for nefficient algorithms drove various search evolving strategy used by myriad industries per click incurred by 250%. large numbers and varying combinations engines throughout the 1990’s. Search re- worldwide. The hospitality industry, and ho- Paid search is effective, results are I of words can bring the average CPC down sults were at times unrelated to the proposed tels particularly, must adapt brand websites, immediately visible, and efforts are easily to manageable levels, however, hotels using query, and were cluttered with spam. Google promotional positioning tactics, and online measured. Paid search extends to banner solely paid search are incurring unnecessar- soon devised a more organized and system- distribution channel strategies to meet and space on other websites including online ily high online marketing costs. atic search result listing, and the relevance of exceed ever-evolving consumer demands travel agency (OTA) websites. It can be shut Other aspects of paid search to be search results improved exponentially. The and expectations. It is imperative to remodel on and off whenever deemed necessary. For wary of include prospective guests’ emotive plethora of data distributed on the web also SEM tactics, and implement new strategies example, Marje Bennetts, General Manager responses to the word ‘sponsored’. Guests inspired the emergence of an online indus- to remain competitive on a truly dynamic of the Beach House Hotel Hermosa Beach, seeking to book hotels online could be skep- try to sell and exchange goods and services playing field that is the hospitality industry. California, a luxury 96-suite boutique hotel, tic and less trusting of the advertisements between web users. In todays ‘internet economy’, online depicted the importance of paid search for paid for by hotels and other businesses. By 2000, with Google implement- purchases of hotel rooms and hospitality smaller independent hotel promotions. The second addend in the SEM equa- ing its advertising models, pay per click services increasingly dominate the market. “Our hotel ran promotional packag- tion is Search Engine Optimization (SEO), emerged, and companies began to imple- SEM is now a necessary element of the hotel es in January and February (2015) including which is completely organic, and essential- ment SEM strategies. SEM, including paid- marketing mix. a discount package and a romance package ly free. Hotels and brands do not pay fees to search advertising and search engine opti- for Valentines Day…and the paid placement Google or any other search engine. The only mization, revolutionized online marketing. Paid Search and Search Engine on trip advisor led the program to fill,” says fee is to the agency, which manages SEO ac- Optimization Bennetts. “We were able to immediately shut tivity. The Essentials off the paid-search promotion as soon as this SEO requires continuous changes to The first component of successful SEM im- occurred,” and Bennetts received “feedback source code in the hotel website, and link- Search Engine Marketing (SEM) is a rapidly plementation is paid search, which typical- on how each reservation was booked, what

36 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 37 accounts for most booking revenue for your hotel? Are you using an integrative market- ing strategy, or relying on one or few chan- nels? What is your current online conver- sion rate? It is imperative to pinpoint exactly what your hotel’s marketing goal is. If the goal were a short-term one, for example a package to be promoted in the coming month, paid search would be most effective. When utilizing paid search, SE, or both, it is necessary to monitor progress and determine when it is appropriate to divest Above, Google’s ing it with others websites. The challenge from paid search. Once search results organ- HotelAds provides inherent in SEO is that’s its efforts may take ically appear with SEO, incurring high PPC marketing quite a while – perhaps as long as six to nine costs can be avoided. Left, Marketers can opportunities months – before resulting in significant on- choose to save costs within Google line presence. Conduct External Research by investing in SEM Maps According to Sachin Suri, managing and less in Online partner of Prognosis Digital, “Consumer External research involves investigating SEM Travel Agency’s behavior tells us that users have more con- strategies used by industry leaders. Compare smartphone screens: hand, make more purchases online, and even fidence in organic links, which removes the and contrast brand websites and approaches • 68% of travelers recall ads viewed on those choosing to call the hotel have likely skepticism some search engine users may of other hotels within your competitive set their smartphones and 59% who viewed on conducted online research beforehand. experience upon seeing the word ‘sponsored’ and beyond. Today, according to Suri, “90% desktop (eMarketers) A newer SEM technique, Gmail above the search result.” of the hospitality world uses SEM, but most • 71% of travelers who saw ads on a smart- Sponsored Promotions (GSPs), targets on- “SEO is also advantageous because are using it inefficiently.” phone took action and 63% on desktop line users via email advertisements rather as optimization causes online presence to be Marketing directors should be atten- (eMarketers) than web searches. This is not to be confused more profound, the hotel does not need to tive to budget allocations for paid search. An with direct email marketing. Rather, GSP is a invest as much of its marketing budget into independent hotel is unlikely to have the re- Hotel websites failing to adapt to the paid search technique by which online email paid search,” Suri adds. “The key to success- sources to compete with a larger hotel cor- needs of shoppers using smartphones are account providers place advertisements ful SEM is finding the balance between paid poration for a key word. On average “hotels ignoring the opportunity to fully capture within the email account itself. According to search and SEO, which proportion of each spend 25-35% of their digital budget on paid the attention of this market. Budgets should Suri, “GSP is cheaper than other paid search yields the highest ROI, and converts the search” (Milestone Internet). Although it is allocate and account for responsive website tactics because it is very new and business- most ‘lookers to bookers’.” nearly impossible for a small independent design. es are either unaware of it or using it inef- Hotels now have the ability to utilize hotel to compete with a large chain hotel ficiently.” Bidding with other companies for SEM strategies- to position and differentiate in an auction for the highest position on a Identify the SEM Strategy that Reaches key words may place your brand’s website on their products and services in a continuous- Google search, it is possible to gain and sus- Your Target Guest the first page of search results, yet GSP places ly expanding online marketplace. tain a competitive advantage through SEO. your banner and/or link directly into a target Position the site exactly where the target consumers email account. Segmenting and Effective SEM Strategies Ensure Websites Adapt to the Newer guest seeks the service. Gather market intel- differentiating opportunities are endless. Technological Demands ligence regarding behavioral characteristics Evaluate Internal Strategy & Marketing and booking tendencies of this target mar- Monitor SEM Strategies to Determine the Goals Regarding responsive website design, the ket. Some segments tend to book reserva- Channels Yielding the Highest ROIs hotel brand website must be visually appeal- tions by calling the hotel directly or through Which online distribution channel currently ing and easily navigable on all tablet and the hotel website. Millennials, on the other The effectiveness of SEM lies in its flexibility

38 Boston Hospitality Review | Spring 2015 Spring 2015 | Boston Hospitality Review 39 and measurability. It is easy to pinpoint SEM managers and marketing departments can ROI. SEM places control of the budget in the choose to invest less in OTAs and more in Information for Readers hands of the company, as the budget can be SEM, thereby reducing OTA commissions Approach itors from the creators or owners of the images, from the in- ventories of stock image companies, or from historical sources revised at any time. If in one week the deci- and costs. Boston Hospitality Review is an interdisciplinary journal devoted to scholarship and reflection about the theory and that are exempt from copyright. Readers should assume that sion is made to budget $100 on key words, While hotels of various sizes and tar- all images in this publication are protected by copyright. Cred- this budget can be implemented; the key get markets use SEM, there is currently no practice of hospitality as a business activity and cultural phe- nomenon. It is published for the benefit of academics, indus- its for this issue are as follows. words can later be relinquished when the distinct method determining the appropri- try practitioners, and the interested public by the School of Front Cover: Hyatt Hotels Corp. IPO, Bloomberg, Getty short-term marketing goal is reached. ate percentages of paid search and SEO to Hospitality Administration at Boston University. Images. Oleana Patio, Kristen Teig. Architectural Columns, When managing different marketing be used in digital marketing strategy. The Corbis Images. John Wilkes Booth, provided by author. Olea- Authors channels and measuring the profitability of objective is to find the balance between paid na Plate, Kristen Teig. Inside Cover: Spring tree, Chris Muller. Boston, the Booth Brothers, and the Parker House: All pho- each, paid search and SEO have proven ef- search, SEO, and other digital marketing Prospective contributors should review the author guide- lines on our website prior to submitting manuscripts. tos provided by author. Airport Hotels: Constructing DIA’s intermediaries. Once obtained, this will al- fective in yielding high ROI’s, particularly Hotel and Transit Center, Brent Lewis, Getty Images. Wall of Notices as these offset a hotel’s dependency on third low a hotel of any size to gain and sustain Glass by Pool at Hilton Hotel Heathrow, Corbis Images. Hy- party intermediaries (TPI). a competitive advantage through its online Opinions expressed in Boston Hospitality Review are att Hotels IPO, Bloomberg, Getty Images. Upgrades to DIA, Previously, TPIs were the primary presence. ■ solely those of the authors. Boston University and the editors Joe Amon, Getty Images. The Pricing Effects of Heritage at an channels assisting hotels in increasing sales do not necessarily agree with, nor do they endorse, these opin- Iconic Hotel: Architectural Columns, Corbis Images. Classic and occupancies, but now they are becom- ions. Boston University and the editors do not endorse com- White Balustrade, Corbis Images. Heraldic lion with crown, panies or products that may be mentioned in articles. The in- Florence, Italy, Corbis Images. The Customer is Always Right, ing more costly. Online travel agency (OTA) clusion of such firms is solely at the discretion of the authors. Right? Yelp Review on iPad, Kristen Teig. Chef Borgia, Kris- commissions can be as high as 35%. Hotel Authors may have ownership interests, consulting arrange- ten Teig. Russell House Tavern bar, provided with permissions ments, or other business relationships with these companies. from Russell House Tavern. Oleana Open Kitchen, Kristen Copyright and Servicemark Teig. Cutting board with food at Oleana, Kristen Teig. Search Engine Marketing (SEM): Woman Using Her iPhone, Corbis © Copyright 2015 by Boston University. The name “Bos- Images. Search, Egor Culcea, The Noun Project. Accommo- ton Hospitality Review” and the multicolored logo are service- dation, Alex Kwa, The Noun Project. Compass, Ed Harrison, marks of Boston Hospitality Review and Boston University. The Noun Project. Search Engine, Wilson Joseph, The Noun Reproduction Project. Google HotelAds laptop and tablet, google.com/hote- lads. Expedia to purchase competitor Orbitz, Corbis Images. Readers are welcome to share articles within their profes- sional and personal networks. This means that individuals and organizations may reproduce and distribute unabridged arti- cles, without permission or royalty fee, provided that the ma- Offices Jovanna Fazzini is a student at Boston University’s School of Hospitality Administration terials are distributed without charge. This permission extends Boston Hospitality Review (SHA). Her studies and areas of interest include finance, accounting, and revenue manage- to text excerpts, provided that attribution is given to the jour- School of Hospitality Administration ment for the hospitality industry. Jovanna is currently working with LHL Communications and nal and the authors. However, this permission does not extend Boston University as a Pricing and Competition Analyst at Road Scholar, an educational travel provider head- to visual excerpts of any type, such as photographs, which may 928 Commonwealth Avenue never be reproduced separately from the articles in which they quartered in Boston. Beyond her studies at SHA, she also is minoring in Business Administra- Boston, MA 02215 are embedded. For situations in which articles or excerpts are tion at BU’s Questrom School of Business, and Dance at BU’s College of Fine Arts. USA resold for a charge, permission is required and a royalty fee 617-353-3261 may be imposed. These regulations apply to all forms of re- [email protected] Leora Halpern Lanz is the president of LHL Communications, a hospitality content marketing, production, distribution or transmission, in any form or by branding, and media relations advisory firm. LHL clients include hotels, hospitality investment any means, electronic or mechanical, including photocopy, Website conferences, leisure products, hotel management companies as well as other industry related recording, digital representation, or any information storage www.bu.edu/bhr or retrieval system. services. Prior to founding LHL, Leora served for 15 years as global director of marketing and ISSN 2326-0351 head of the marketing practice for hospitality consulting giant HVS. Previously, she served Image Credits for 10 years as director of public relations and advertising for Sheraton Hotels of New York Exhibits (tables, charts, and diagrams) are usually created and for 5 years as director of public relations for the Greater Boston Convention & Visitors by the authors and revised by the editors. Photographs and Bureau. She is currently also an adjunct professor at Boston University’s School of Hospitality artwork may be suggested by the authors, but are selected by Administration. the editors. Photographs and artwork are obtained by the ed-

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42 Boston Hospitality Review | Spring 2015