Starwood gains a London hotel – and insight into hotel economics

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If you are a Starwood Preferred Guest member (the loyalty scheme for Sheraton, Westin, Aloft, W, St Regis, Le Meridien etc) you will be pleased to know that they have added a new London hotel.

The Great Northern Hotel in Kings Cross station is joining Starwood’s nascent ‘Tribute’ brand as its 2nd property.

The hotel was fully renovated as part of the redevelopment of Kings Cross and reopened two years ago with a definite 1930’s feel.  I was, by coincidence, in the Great Northern for the first time last month with John McAslan, the architect behind the Kings Cross rebuild, but that is a story for another day.

I wrote about Tribute in this article.  Rather like Marriott’s Edition and Hilton’s Curio Collection, Tribute is aimed at independent hotels which want to benefit from the advantages of being part of a chain but which do not want to be bound by the ‘operating manual’ structure of a normal franchise.

From 9th September, you will earn SPG points when you stay at the Great Northern, and it is also available for redemption.  Your SPG status benefits will be honoured.

The hotel is looking good value for SPG redemptions.  It is showing as 12,000 points per night – a bargain compared to 25,000 points per night for the Park Tower, W London or Le Meridien Piccadilly.  For a random date I picked in October, a cash room was £299 so you would be getting 2.5p per SPG point.  Be aware, though, that the entry level Couchette Rooms are reportedly very small.

The hotel itself has just 91 rooms.  To quote from the Starwood website:

“Our 91 sumptuous rooms offer complete serenity blending innovative design with bespoke furniture, period features and cutting-edge technology. Uninterrupted views across the strikingly remodelled King’s Cross and St Pancras stations add to their charm.

Discover a new favourite or rediscover a classic amid a distinctive dining ambience. Elegant and relaxed, Plum + Spilt Milk serves seasonal, British dishes with a twist. With its seductive interiors, our Belle Epoque-style GNH Bar is one of Europe’s most glamorous railway bars.”

Great Northern Hotel

The economics of hotel marketing in 2015

In an article in the Financial Times, the owner of the hotel explained why he had signed up with Tribute.  The figures are fascinating:

The hotel was spending £300,000 per year on ‘search engine optimisation’ and pay-per-click advertising.  I am stunned by this, frankly, especially for a hotel with just 91 rooms.  HFP ranks OK on Google and my entire SEO expense was £17 for a copy of ‘Search Engine Optimisation for Dummies‘ (which I recommend).

Tribute is a cheaper way for him to sell rooms than ‘generating online buzz’.  (If true, he was paying the wrong people to generate his buzz!  Head for Points occasionally features interesting hotels in London, eg here and here and here, and I would certainly have written about Great Northern if they had invited me round.  Which they didn’t.)

Online Travel Agents generate 45% of his bookings ….

…. but he is paying them 20% – 21% commission.

Starwood, on the other hand, is taking just 4% – 6% of his room revenues.

The move to Tribute is expected to see ‘cost of sales’ as a % of room revenue fall from 18% to 12.5%.

When I was in the Great Northern, I did wonder why it was not part of a chain – especially as there are a lot of tourists emerging from Eurostar just a few seconds away and looking for a reliable place to stay.  Whilst I never got further than the downstairs areas, it is an impressive looking hotel and a good addition to Tribute and to SPG.

(Want to earn more hotel points?  To see our complete list of promotions from the major chains, click here to visit our ‘Hotel Promos’ page or use the link in the menu bar at the top of the page.)

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  1. £300k per year SEO/PPC for a hotel with 91 rooms?!?!
    – That is over £9 per room, per night!

    Wonder what the occupancy figures were like. I wonder if they really were delivering him guests paying more 9 pounds per night (on a fictional 100pc occupancy) than he would get without that.

  2. Sounds like he got taken for a ride by his marketing folks.

    • The_Real_A says:

      I think obvious consulting costs… Probably to one of the Raffles readers here 🙂

  3. Perhaps there is not as much in demand for £299 rooms at a train station hotel.

    For comparable money, one can find something decent at Langham or other de la crème place.

    • erico1875 says:

      I wonder what the average occupancy level was?

    • Quite. For 299 pounds, you have such a wide range on offer that there is no reason to go for something near King’s Cross. The points price is okay – just don’t assume that you are getting 2.5p per point in value, as Rob says – unless you’d be stupid enough to actually pay that cash price!!

  4. Wowzer. I managed PPC in my last role for a few much larger hotels and we spend no where near that, love to know which agency he was using!

    Presumably pouring a lot of money into keywords like “hotels in london” which are expensive but deliver virtually no revenue. A few solid corporate deals, some well placed articles, some targeted keywords/SEO based on location and proximity to Eurostar etc and some OTA busting cheeky value adds I can’t believe it wouldn’t have been possible to build a nice business here as it is a nice hotel.

    • Erico1875 says:

      How much ppc is “hotels in London” ?

      • I would imagine well over £1.

        I did some Google ads for HFP once, using one of the those ‘free £50 trial’ codes that float around, and I was paying 29p per click for terms like ‘avios points’ which are not exactly highly sought after.

        • Probably nearer to £4 for some key words to get you towards the top of the front page on Google. In fact they suggest that £2.78 is the minimum start price for the search term “hotels in London”. With an average phrase search of 167,000 (world wide ) per month it is certainly in the highly competitive search bracket.

          My guess is that they pay about £3 per click net net after fees bringing 100,000 visitors to their page. The return on investment differs from sector to sector but if they want to fill rooms its money well spent I guess.

          I work in that field and am never surprised how much companies are prepared to invest to drum up business. Conversely I did some work for a local company in June who called me yesterday and asked me to pull their adverts off google asap as they dont have enough time to answer the inquiries. They invested just 500 euro over 4 months and made their money back after 9 days.

          • Given the rates this place charges, you’d need to be mad to bid against ‘hotels in London’ given that only a tiny fraction of the audience would be willing to pay £200-£300 per night. But they probably were.

            On the other hand, if you Google ‘langham hotel london review’ you will usually see the article I wrote about them on the first page (on a desktop). Most companies would pay a fortune to get a ‘soft’ article promoting their business on page 1 of Google – indeed, Langham was so pleased that they later gave me a room for a competition prize.

            ‘Crowne Plaza Kensington review’ finds me top of page 2. ‘Corinthia hotel london review’ finds me bottom of page 1. This is for searches done using in-private browsing so they are not distorted by my search history.

            Feel free to let me know what I should be charging for this sort of thing!

            PS. I am delighted to see that if you search ‘amigo hotel brussels review’ my slating comes up half way down the first page. I must be costing them a fortune (the headline is ‘The decline of the Hotel Amigo, Brussels reviewed’ and the slug is ‘The financial problems at Rocco Forte’s hotel group seem to be hitting standards hard’). They deserved it, of course.

  5. gnarlyoldgoatdude says:

    I currently work in the area. Although I probably won’t need a hotel room for the rest of my contract, it’ll be interesting to see if you will be able to get starwood points for dining here.
    If they do that it might lure people away from the myriad other options in the area.
    Subscribing to the St Pancras twitter feed, for example, often yields bargains and occasionally free meals.

  6. Hingeless says:

    For anyone who hasn’t been to Kings Cross recently it has changed beyond all recognition and is full of good bars and restaurants. Our office is in the area so I have seen it regenerate over the past decade. Plum and spilt milk – the restaurant in the great northern is also really nice.

    Kings cross is no longer an area to be avoided, it is a destination.

    • Agreed.
      Very surprised by the “at a train station” comment earlier.

      • Yes I second that. Plum and Spilt Milk is well regarded – the bar downstairs is always full! Kings X has has up and come!

      • Nicer than Gare du Nord but the place is still very busy a train station, with a crowd of people and traffic noise.

  7. Erico1875 says:

    As I have nothing better to do this morning, I thought I would run a couple of searches via Trivago and Hotelscombined.
    searched Kings Cross, applied filters 5 star and sorted Distance, price and rating
    Great Northern came out TOP via Hotelscombined although only 2 hotels showed up with t.hose filters
    However wiith Trivago it ranked DISTANCE 3rd page, no 55 out of 103 . for “PRICE it does a little better, 2nd page no 40, RATING 3rd page no 59, POPULARITY 2nd page no 45
    I would be seriously worried about the info being inputed into Trivago as if I had £250 a night to spend, coming off the train at Kings Cross , Trivago are not pushing me to The Great Northern!

  8. Raffles, considering that you live in London, I am a bit surprised you often mention that you value good 4- and 5-star London hotels in various chains. Why would it be the case? I also live in London and could not possibly imagine a scenario when I would like to spend Avios, points or cash for staying in London hotel when I have my own place here and I am not a tourist in the city… Yet, you seem to value this a lot. What am I missing?

    • The reason I tend to cover smart London hotels is that a lot of HFP readers are business travellers who occasionally stay in London so find the articles useful.

      It is also very easy for me, as I live here, to accept invitations to tour hotels in London. I also enjoy poking around hotels!

      I also – if there is a silly promo like the Park Plaza £29 one this year – will buy rooms to use as office space, because it makes a change from Regus and is a tax write off anyway. I also get to do a review of the place as well.

  9. Talking of hotel economucs, does anybody here have any knowledge or opinion as to whether investing in hotels rooms is a good idea? Didn’t even know it was possible until I saw investment options on the rooms at Hyatt Edinburgh in run up to is opening. Do such investments provide any other benefits such as use of rooms, discounts at chain? Saw something similar for new city centre student rooms from Glasgow University which were also to be let as holiday rentals out of term time.

    • Erico1875 says:

      U would be better putting 25% down on a few btl 60k flats in wester hailes. 700 a month rent

    • Went horribly, horribly wrong in London in the recession. The two big schemes both went bust I think. The Park Plaza Westminster Bridge was done on this basis.

      It is a terrible deal. The free nights you get each year are wiped out by maintenance charges, it is probably cheaper to pay to stay! Hotel room rates are notoriously unpredicatable and out of your control. More importantly, this investment is VERY illiquid.

      • Thanks Rob and Erico. I was just curious as I hadn’t come across such before then came across those two in quick succession. My memory was jolted by this post today.

      • Interesting. I have two colleagues who have rooms in the Westminster Bridge Park Plaza in their pension funds and they are very happy indeed with the returns they are getting.

    • Lady London says:

      Speaking of Hyatt, there is a new Hyatt Place being built out of an old office building in Hayes. Not sure when ready my guess would be around March 2016 by the looks of it.

      I like the Hyatt Place format but not sure how well it will go in such a very tall building.

  10. I stayed a few weeks ago at quite short notice and it was about £140 from memory. Small rooms but very very nice with bells and whistles. Small pantry on the floor with free snacks etc. Would definitely recommend this place

    • I stayed at this hotel last year and couldn’t possibly recommend this hotel on the basis that the staff were awful. It started with complete disinterest at check in followed by one of the most bizarre experiences I’ve ever had in a hotel. For those who haven’t stayed it’s a bit of maze. On leaving my room to go for an evening out I asked a member of staff in the corridor to point me in the direction of the exit. They told me to go down some stairs and through the bar. When I reached the bar a member of staff actually shouted at me in front of everyone for entering the bar through the ‘wrong door’. When I tried to explain that I was told to go this way she just argued back in an extremely aggressive manner. I complained to the manager on duty and again at check out. Both times it was just laughed off without even an apology. Allegedly the member of staff involved is just like that! Sure it’s a lovely hotel in a good location but customer service is key. At £300 a night there are much better options in London!

  11. barnaby100 says:

    At £299 to stay in a not great area (yes I know it has improved and close to museums but no shops and still pretty down at heel in places) I am sure that he can afford £9 per night plus 21%. We average 3 night a week in London- budget up to £250 and wouldn’t consider that location at that price.

    • I think that’s an entirely subjective view – which is fine. I would never stay nor recommend High St Ken or Knightsbridge for example. Just parts of London I don’t like. Horses for courses. I would stay in that location for that money no problem – if I didn’t already live in North London that is….

      • Knightsbridge is good for Hyde Park, Harrods, the South Ken museums, Sloane Street shopping …. all walkable. It is actually a bit underrated as a place to stay I think. I am potentially biased as my kids are at one of the schools behind Harrods.

    • If you have never explored the new quarter behind Kings Cross it is worth doing once. They are doing a fantastic job with the redevelopment with some lovely public spaces and trendy restaurants – getting Central St Martins to move there meant it had to become relevant to a few thousand fashion students.

      • Andrew (@andrewseftel) says:

        Not to mention six tube lines and Thameslink mean you’re probably staying in the best spot to get around town.

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