While hotels affiliated to the major chains can rely on far-reaching brand distribution networks and loyalty schemes to reach potential customers, small independent hotels often don't have the resources to market themselves effectively.
In fact, many such properties may not be attractive to the chains, due to size and location.
Indeed, the major chains tend to focus on urban and prime resort locations to the exclusion of the rest. In any case, hotels need to be of a certain minimum size (typically about 50 rooms) in order to be able to cover the cost of a typical affiliation.
ZUZUHOTELS targets independents
In response to the challenges facing small independent hotels, Dan Lynn, former vice president for Asia Pacific at HomeAway (a unit of Expedia) and Vikram Malhi, former managing director for Asia at Expedia, created ZUZUHOTELS, which provides a virtual hotel management system to small hotels.
Each affiliated hotel is attributed a personal account manager, who offers support for distribution, revenue management and reputation building.
ZUZU's 'software and a service' package is designed to provide small, independent hoteliers with the kind of assistance they would have only been able to access previously as part of a chain.
Small mom & pop operations to benefit
Though the company has only been in operation since January 2016, ZUZU has already signed up 80 hotels across India, Indonesia, and Taiwan.
But, according to Dan Lynn, the group has the goal of attracting a good chunk of the 60’000 2-star hotels of 100 rooms or less across the Asia Pacific region.
Almost all (95%) of these hotels are independent and most are far from being able to even consider hiring a full time staff member for sales and marketing, as many are only one- or two-person operations.
This is the type of hotel that could stand to benefit from ZUZUHOTELS's no-frills, simple, 'plug-in-and-go' hotel management system.
Dan states that affiliated hotels should be able to boost their revenue by as much as 40%. Unless the system is adding revenue, the revenue share figure payable to ZUZUHOTELS is waived.
He explains that the decision to adopt a revenue-sharing model was due to an awareness that small independent hotels are obliged to be very cost –conscious and are therefore unlikely to invest in a system that does not produce immediate results.
How does it work?
With two ex-Expedia employees as co-founders, it comes as no surprise that ZUZUHOTELS won't be jumping on the direct booking bandwagon any time soon.
A large part of what the company does is to manage distribution and appearance on a range of OTAs (online travel agents).
For example, ZUZU performs real-time pricing analysis, factoring in: seasonal events; historical occupancy levels; current occupancy levels; competitor actions; and marketplace dynamics.
In order to acquire an understanding of marketplace dynamics for their properties, hoteliers are encouraged to define a competitive set of hotels (i.e. hotels in the local marketplace that compete directly with their hotels).
The competitive set’s pricing combined with revenue management techniques can help a property to maximise revenue.
Based on this approach, ZUZU recommends revenue management changes, while the hotelier retains ultimate control of the business.
While OTAs are frequently criticised by hotel industry players, they can serve as an effective initial advertising platform and can generate valuable incremental revenue for a property.
For the hotels ZUZU seeks to serve, they're often the only online exposure the properties get.
"Our hotels are so nascent in their online presence that most of them don't even have their own websites yet," explains Dan, adding that, "In the future, our intention is to be able to build mini-direct websites for each hotel we work with. But that isn't a profitable strategy for these hotels at the moment."
Any hotel, big or small, needs to be wary of relying too heavily on any one OTA, however.
It’s never safe to place all your eggs in one basket - especially when that basket is liable to change its ranking algorithm at any time.
This is the important message that ZUZUHOTELS repeats to its new affiliates, who they recommend should avoid giving any one OTA more than 30% of their distribution.
So where's the branding?
Although ZUZUHOTELS calls itself as a brand, only around 20% of their affiliated hotels are visibly co-branded - with the other 80% receiving the group's white-label solution.
Co-branding is reserved, Dan explains, for hotels which are already consistently providing a "great traveller experience".
For instance, hotels seeking to join the new Best Western's new soft brand, SureStay brand need to have a minimum TripAdvisor score of 3.5 (out of 5).
ZUZU is positioning itself as a 'virtual brand', since they provide hotels with the support they would get from being part of a chain, without requiring that they adhere to some strict brand standards.
The Indian affiliation group, Treebo, provides a similar solution for small hotels, but they don't offer a white-label option.