Wednesday, 21 August 2013 00:00
Branding and the power of building equity for a company away from its P&L are interesting arguments that is are topical globally. In Sri Lankaâ€™s leisure industry, we have seen how a property has changed brands, from Ramada to Trans Asia and then to Cinnamon Lakeside without any deep structural changes, but with the whole imagery of the brand changing the demand pattern, skewing it to an all-new dimension. Let me get into the details of this to throw more light on the power of branding in a typical service product.Â Â Â Â
Ramada to Trans Asia to Cinnamon Lakeside
The property switched from Ramada Renaissance to Trans Asia Hotel and now to Cinnamon Lakeside, Colombo. The latest identity that it has taken on has given the property a new aura of sensitivity and liberating spaces, making it a truly unique resort city hotel in the heart of the city of Colombo.
Developments to the property included a Rs. 350 million infusion in 2011 which followed a Rs. 464 million renovation in 2009. It is currently ranked the Best Five Star City Hotel by Sri Lanka Tourism.
The innovative products launched under the current brand include some firsts in Sri Lanka, such as â€˜8 Degrees on the Lakeâ€™ â€“ Colomboâ€™s first purpose-built floating venue and the Lakeside is the first large scale hotel in Southeast Asia to conduct trolley-less cleaning in all its rooms, setting a new trend in the hospitality industry. It just indicates how innovation with purpose linked with the overall branding strategy can drive demand.
Brand value 600 million plus
As at 2012, Cinnamon Lakeside was the highest valued hospitality brand in Sri Lanka valued at Rs. 559 million with a brand rating of AA, with a growth of 188% as against the year before, which indicates the power of branding in my mind.
Incidentally, it is the only hotel in Sri Lanka to be re-certified by Green Globe, the premier international brand for independent certification of sustainable travel, tourism and related green businesses, which brings in sustainability to the property, something that was not seen during its days as Ramada and Trans Asia.
Game change via branding
If one analyses the brand value, way back in 2010, it was valued at Rs. 218 million but the rank increased from 60 to 57, given the change that was initiated through the investment made in 2009 which shows the power of impact, even with a small change in branding that includes service delivery in the new model.
From the data available, the marketing investment was around Rs. 12 million. However in 2011, the brand value dropped by 11% to Rs. 194 million due to the economic recession globally and the renovations that were ongoing in the property. Maybe a more in-depth analysis can throw more light on the reasons for this drop.
The overall leisure property ranking underwent changes, with hotels, including Taj Samudra, dropping in brand rankings, from 63 to 71, while Cinnamon Lakeside dropped from 57 to 67.
But with the drive by Cinnamon Lakeside with innovative products and a strong service delivery mechanism, the overall brand ranking improved in 2012 from 67 to 51, whereas brands like Taj Samudra improved marginally from 71 to 67.
The Cinnamon Lakesideâ€™s brand value increased from Rs. 194 million to Rs. 559 million, an 188% compared to previous year, whilst brands like Taj Samudra increased from Rs. 127 million to Rs. 240 million, an increase of 89%, which once again explains the power of branding and strategic focus.
If one analyses the investment in advertising, the investment increased by 34% in 2011 which would have made a significant improvement to the overall brand value in 2012 as mentioned above.
A point to note on the 2010-2011 performance is that when the world economic recession was at its peak, the high-end hotel industry faced many challenges, from three and four star properties as well as motels, lodges, small range restaurants, but when branding is focused, such as brands like Cinnamon Lakeside, using innovative programs and investing in advertising, we can see how the impact of such actions shows in the years to come, like what happened to this property where the brand value increased byÂ 100% in 2012.
As per reported data in 2012, the brand achieved a Rs. 2 billion turnover with an increase of 21% over the previous year whilst we can see that by 2012, the operating profit had also been corrected, with a growth of 42%. This is a classic case in point where a company used the route of branding to drive the bottom line rather than the other way round.
Maybe the debate that deserves a â€˜strategy discussionâ€™ is the one over the maximum occupancy rate for the last few years being 62%. In 2012, the number had gone down to 55% post-expansion in 2011 which means that there is 45% of opportunity lost. If this gap can be reduced to 30%, targeting occupancy of 85% with a strong focused campaign globally, positioning hotels as resorts in the city can be an idea worth pursuing.
The selected hotel for this yearâ€™s CHOGM can be the starting point of this campaign. Maybe itâ€™s worth analysing the country-wise breakdown of visitors versus online booking and check if there is a trend that can lead to a focused promotional drive. A point to note is that the overall marketing budget in dollar value is marginal, given the overall numbers that the hotel attracts.
(The thoughts are strictly the authorâ€™s views and do not reflect the organisations he serves in Sri Lanka or internationally. He is the Head of National Portfolio Development for United Nations Operations (UNOPS) for Sri Lanka and Maldives and is also an honorary board member on many industrial and export development boards of the Government of Sri Lanka.)