disadvantages of independent hotels disadvantages of independent hotels

The main pro of a hotel chain is reliability, meaning that wherever a guest goes they can know what to expect, which is generally a high level of service. What are the benefits of using a data collection application? Permission will be required if your reuse is not covered by the terms of the License. Samantha Shankman, Skift. Brand Value Attributable to Affiliation (BVAA) - a Method for Measurement in a Consortium Context. What Are the Essential Requirements for Gastric Sleeve Surgery? Smart Meetings 2023 Bright Business Media LLC. What is a chain hotel give examples of the chain hotels? In this two-part series, LoopNet provides an overview of the lodging/hospitality/hotel terms that will be applied interchangeably throughout this series sector. International Journal of Hospitality Management, 30(3), 515521. (2016) reported that these two advantages offset each other as there were no significant differences in revenue per available room (RevPAR). I think with a smaller hotel, you may do well with a local lender in the area, he said. However, you may visit "Cookie Settings" to provide a controlled consent. Part one, which centered around the current and anticipated near-term state of the market, as well as current investment opportunities, can be found here. Kelso described it saying, The middle market space [i.e., hotels valued at less than $15 million] is overwhelmingly a franchise model, whereby an owner would enter into a franchise agreement with Hilton, or Hyatt or Intercontinental. A hotel management contract is an agreement between a hotel owner and a management firm. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. As Freitag noted, Theyve been there and done that, right? Comparing chains versus independent hote . 2. Another key difference is in the marketing and distribution strategies. He has worked in the commercial real estate industry for more than 15 years, serving in a variety of marketing, content and communications roles for companies that include Newmark Knight Frank and Cushman & Wakefield. Whereas chains are built with the idea of having a standard offer, including standardized design and quality standards no matter where a guest stays in the world, independent hotels pride themselves on their uniqueness. Some of the principal disadvantages of hotels include: Particularly susceptible to economic turbulence. Running an independent restaurant has its perks: You can change your menu at any time, use whatever slogans and logos you want and avoid some of the costs and risks of franchise ownership. When you run a franchise, the franchisor is the one who tells you what food you can serve, what your location must look like and what procedures you must follow in your daily operations. You also have the option to opt-out of these cookies. What are the rates of the hotel rooms? Butler, J., & Braun, R. (2014). The brand element (to brand or not to brand). We are aware of this issue and our team is working hard to resolve the matter. School of Business, Economics, and Law at the University of Gothenburg. Even multifamily properties, which have more frequent turnover than their commercial counterparts, typically offer one- to two-year leases. The good news is, if you can buy today, youre buying at the trough. According to Sachin Patel, managing principal of Shiv Properties, which is a stakeholder in 11 hotel properties, banks in the last four to six years have been reluctant to finance independent properties. 70.32.113.124 Business travelers can take advantage of the chain hotel. Volume: hotel chains, due to their standard and extensive offer, benefit from economies of scale due to the expansion of their business and the reduction of costs for bulk purchases and management. Measuring changes in the relative competitiveness of package tour destinations, Global strategies in the international hotel industry, Structural breaks, international tourism development and economic growth. Independent hotel chains are not to be confused with general hotel chains. Lets look more in detail about the difference between these two different kinds of hotels, as well as discover whether these two types of structures can compete. This can have a positive impact on energy levels and your overall health. By clicking "Log In," I agree to LoopNet's. Patel said that, if everything goes according to plan, investors can expect annual returns approaching 20%, which is certainly impressive when considered in comparison to other real estate assets. Holverson and Revaz ( 2 for their tourism growth. Smart Meetings is the leading meetings industry publisher and voice of inspiration for meeting professionals. By closing this message, you are consenting to our use of cookies. ), do not possess dedicated reservation and marketing systems and it is hard for them to compete with brands that have larger marketing budgets. We inspire our audience of meeting and event professionals to dream bigand create brilliant experiences that delight attendees, achieve desired results and elevate the impact of the meetings industry. NASHVILLE, TennesseeSome hoteliers prefer absolute creative freedom, others want some wiggle room in terms of creativity and others want guidelines completely laid out for them from a brand. Here is what we found to be the biggest challenges with PMS solutions by hotel operation type: Independent Hotels. The LoopNet service and information provided therein, while believed to be accurate, are provided "as is". These lease terms provide investors with a certain degree of security, even if markets take a downward turn. Startup Costs and Franchise Fees Expensive startup costs and ongoing fees are some franchise disadvantages that can make it harder for you to get started as a business owner as well as to operate profitably. Apart from helping you reduce over-bookings, easily maintain rate parity, and allowing for easier reporting, choosing an all-in-one solution for your hotel will help you: Save time: many manual tasks will be automated. Dont Expect Hotel Companies to Stop Launching New Soft Brands Anytime Soon. The cookie is used to store the user consent for the cookies in the category "Performance". This cookie is set by GDPR Cookie Consent plugin. The . Overall, the authors concluded that the performance of franchised hotels was not superior to that of independent properties. Another key difference between chains and independent hotels is that the latter focus on originality across all aspects of their hotel, whereas the former focuses on uniformity. The offer has expanded to meet these changing demands, and to cater to different types of guests, which has seen the rise of different types of structures like boutique hotels, independent hotels and chain hotels. Its a great sector to play in, its certainly an exciting one to play in, and theres no question theres going to be a tremendous amount of opportunity over the next 24 months; I encourage everyone to dive in., Balancing Economic Strength and Interest Rate Hikes, Corporate Earnings Becoming More Relevant, From Auto Goods to Quick Service Restaurants, Theres an Option for Almost Every Investor, Understanding the Enduring Appeal and Shifting Prices. The biggest challenge in our business is getting and keeping the best people for the job, as we believe that there is nothing worse than . Learn aboutfive types of guests and how to appeal to them. By correctly segmenting your hotels offer for a specific target group, they can better compete with chains. From a CRE investment perspective, key advantages of hotels include: The principal advantage of hotels is, as Kelso noted, the opportunity to drive significantly higher leveraged returns.. Kelso described how this differs from other real estate asset classes. You will have to operate within those limited constraints. A group of hotels run by a company is called a chain hotel. Moreover, the authors found that affiliation with the brand positively drove occupancy and ADR. Patel said that investors should assume that at least 15% to 18% of their operating expenses will go to brand-related costs, and that percentage grows as you climb the brand ladder from economy to luxury. Other disadvantages of franchise model include loss of flexibility in pricing, promotion, and operation (Dev, 2015), risk of being de-flagged and losing franchise fees for failure to uphold brand standards, reduced ability to be entrepreneurial (Kwortnik, 2011), loss of a certain amount of control and management independence, unequal distribution Hotel Management Agreement Advantages and Disadvantages. They are mostly small capacity hotels (26 rooms on average) with family management. Key advantages of independent hotels over chain properties: More focus on what the guest wants, vs. focus on chain brand standards. Flexibility : the managers reactivity supposes an almost instantaneous decision-making power that limits monetary losses and increases profitability. 8 The correlation between chain penetration (in terms of rooms) and foreign arrivals is 0.3 in our data. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. Register to receive personalised research and resources by email. That is to say, independent hotels might use technology to create a seamless guest journey, enhancing the guest experience and being able to offer service 24/7. Since you don't have a franchisor to whom you need to answer, you only have to worry about yourself and your own employees, and this can reduce conflict from disagreements over operations. Example: staff organization that counts ten people from one day to the next. More space for original design, product creativity and a unique identity. The cookies is used to store the user consent for the cookies in the category "Necessary". We know that every hotelier defines "efficient" and "cost-effective" differently, so this is why some opt to leverage the marketing power of OTAs and others do not. Hua, ONeill, Nusair, Singh, and DeFranco (2017) in their analysis of 2,120 properties across the United States over six years (2008 - 2013), concluded that the expected benefits of affiliating with the brand exceeded expected costs. This group is simply not inclined to spend money or time on application . Share. But hotels dont offer any similar safeguards. The biggest advantage of an independent business or restaurant is that you get full reign over how you run it. Disadvantages include full accountability, more time needed to become profitable and resale difficulties. Its also a sector that has been particularly impacted by the coronavirus, which has produced both distress and opportunities. LoopNets sources also noted the uniquely enjoyable and exciting nature of the hotel industry. And once you cover the fixed costs, the margins on the variable costs become very attractive. Fixed costs include taxes, insurance and financing; variable costs are items such as food, room supplies, guest amenities and labor. By clicking Accept All, you consent to the use of ALL the cookies. CONS With fewer staff, working patterns are less flexible and main priority is to ensure that shifts are always covered. Thats what I see.. That said, it depends because each hotel is different. The cookie is used to store the user consent for the cookies in the category "Other. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. Skift Research. Retrieved from https://www.hvs.com/article/953-a-case-for-being-independent, Skift Report (2018). Beautiful Design. Everything you need in one beautiful print and digital magazine. Independents vs. brands vs. soft brandsPanel moderator Patrick Mayock, senior director of research and development at HNNs parent company STR, asked each panelist to start the debate by explaining the advantages of being an independent, brand or soft brand. Its great to be creative, but we like to make money, he said. Does the asset-light and fee-oriented strategy create value? As today's travelers gravitate toward unique lodging accommodations, the boutique hotel scene is thriving. Disadvantages include full accountability, more time needed to become profitable and resale difficulties. of observations (after data cleaning). 5 Howick Place | London | SW1P 1WG. Both parties expectations, responsibilities, and duties should be set in this document. Their ability to offer experiences different than the larger, branded hotels appealed to the younger generation, anxious to have one-of-a-kind experiences. Freitag also mentioned that abundant data, including information found in the dSTAR Report produced by STR (which, like LoopNet, is owned by CoStar Group), is an industry attribute that investors can benefit from. It is true that a franchise can come with some cost benefits, like allowing you to get group discounts for startup supplies and saving money on initial advertising and lease costs. We dont have to rely on (online travel agencies), opaque channels, other discount mechanisms as much as some of our independent and soft-branded hotels do And then when it comes to operations and development, theres a playbook, so we dont have to reinvent the wheel every single time. It is free of its capabilities and possibilities. If you decide you want to try something new, like adding outdoor dining or offering new desserts, you don't have to worry about getting approval like you would with a franchise. A comparison of branded and independent hotels performance during a full economic cycle. Eva has over a decade of international experience in marketing, communication, events and digital marketing. Please check back in a few minutes. Building and managing your brand. Perceptions of European independent hoteliers: Hard and soft branding choices. Independent hotels are hotels that are owned and run by themselves. The biggest disadvantage however is the lack of independence. Doctoral dissertation in business administration. This is perhaps why hotels have historically outperformed the consumer price index (CPI), Freitag said. Registration on or use of this site constitutes acceptance of our terms and conditions and privacy policy. 2. The aforementioned brand impact isnt the only area where hotel financing differs from other CRE asset types. The hotel management agreements and franchise agreement handbook. Thats just my feeling and my personal prediction, but I think once you have 50 or 100 or 200 Autograph or Curio, (properties) or whatever it might be, theyre going to become more homogenous; theyre going to become much more bureaucratic and standardized. Cornell Hospitality Quarterly, 57(2), 193-201. doi: 10.1177/1938965516631014, Dev, C. S. (2015). On the contrary, O'Neill and Carlbck (2011) reported that unaffiliated hotels had higher RevPAR. This is one of the biggest benefits of running an independent boutique hotel over a larger chain; the hotels tend to be smaller, and more time can be spent hiring the right people and crafting the right team. Weve seen all of the major hotel companies get into the soft-brand arena, and theyre trying to scale up. From the lobby to your room, everything is usually well-designed. Best shoes for different occasions: Work, parties and Outdoor Activities, How to Choose the Right Home Designer for Your Project, Smart ways to style your casual shirt for vacation, Guidelines to start your career in online teaching, Why Local SEO is Essential for Small Business Owners, Five Steps Women Can Take to Improve Their Health. You'll need more time to see a return on your investment than you would if you run a franchise. Retrieved from https://scholarship.sha.cornell.edu/chrpubs/47/, Holverson, S., & Revaz, F. (2006). The benefits of staying independent (unbranded) include savings on brand affiliation fees, control over management and entrepreneurship, greater flexibility, and ability to structure hotel standards to meet the market demand and the opportunity to create a niche personality (Butler & Braun, 2014; Rushmore, 2004). Weve looked at the differences between these two structure types, but you may still be wondering if there is any way for them both to compete. While having full control over your restaurant is an advantage in terms of flexibility and creativity, it also comes with the disadvantage of full responsibility. They dont have to worry about maintaining the same quality. The Shifting Scene of Independent Hotels in America, Groups360 Adds Choice Hotels to Group Instant Booking Platform, Meeting Profs Travel Report: Air Travel Chaos Looms, Japan Lifts Covid Controls, Smart Meetings Virginia Beach Experience: Lessons in the Future of F2F, Smart Moves at Lark Hotels, Noble House and More. The objective is to know very well the business that is being managed and to know how to identify (and differentiate) the pros and cons. . A competitive analysis will help indicate what other hotels in the area and with a similar offer are doing so that you can be sure to be competitive within your comp set. Being independent allows you to develop your own brand, menus and dining experience for your customers. Conclusion. When she's not at work, she's probably surfing, dancing, or exploring the world. Analytical cookies are used to understand how visitors interact with the website. If you've ever spent a . What are the disadvantages of chain hotels? Ways in which health insurance can help your child during an emergency? The hotel needs to meet certain criteria to stay in the chain. But opting out of some of these cookies may affect your browsing experience. It can be a very labor intensive asset class, especially towards the higher end, as you provide more services, Freitag said. One of the differentiating aspects of hotels that every expert LoopNet spoke with agreed upon is the amount of work they require. Particularly susceptible to economic turbulence. Ultimately, Patel said that it all comes down to RevPAR (revenue per available room), one of the hotel industrys key metrics. Because of the time and energy required to manage facilities and staff (including the management team, should you elect to outsource that function), both Barton and Patel advised that it is beneficial to be located proximate to your investment. Since they are usually just one-off hotels, this means that they can focus all their attention and resources in providing the best experience possible, constantly adapting to make service even better. However, affiliation with the brand does not guarantee an improvement in financial performance. Franchise Operators Agreement. Much of this growth is in midscale properties, which increased from 4,400 in 1990 to more than 16,000 in 2018, and upscale hotels, which grew from 2,500 properties in 1990 to 7,500 in 2018. Advantages of an independent restaurant include potentially lower startup costs, full control over operations and avoidance of franchise risks. You will have to do all the marketing and brand building yourself. Unfold - The most innovative hospitality forum is back! If you forgot your password, click to reset it. The action you just performed triggered the security solution. 1 Wider potential for innovation is the advantage of independent hotels 2 Easily focus on resources 3 Personalization is easier in independent hotels 4 Adoption of any market shift is easy 5 More detail-oriented Wider Potential for Innovation Independent hotels can adopt new processes for enhancing their performance. In addition to these benefits, brands make it easier for investors to access financing. Provisions relating to the exchange of services should be included in the term sheet. Permission is granted subject to the terms of the License under which the work was published. In some cases, you might end up selling for a much lower price than desired if you do have trouble finding someone to buy the restaurant. According to Freitag, hotels are also particularly susceptible to the whims of the consumer. According to Freitag, approximately 70% of hotels in the United States are branded. Create alignment and synergy across the board, from the top management level, strategies, employees' skillsets, and the actual business processes. He has also previously held positions as an adjunct professor, music critic and editor-in-chief of an online arts and culture publication. Assets that have long-term leases might not feel the impact to cash flow for 6, 12 or 24 months after the onset of an economic event, whereas hotels feel it on day one., As Barton observed, Typically this industrys had eight- to 10-year cycles, and in the down years, it can be a tough couple of years., Kelso echoed this view. Consider both the advantages and disadvantages of hotel ownership as a franchisee to decide if it's right for you. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. Retrieved from https://scholarship.sha.cornell.edu/chrpubs/224/, Enz, C. A., & Canina, L. (2011). Pros and cons of independent hotels versus chains, five types of guests and how to appeal to them. You must register your contact information to view secure information on this listing. Booking platforms, frequent traveler points programs, and the like are offered by them. For example, markets where guests prefer boutique properties (Kwortnik, 2011), unique destinations such as mountain resort area, urban markets with large convention business, and a significant amount of tourism (Stone, 2018). While all hotels focus on profitability, chains are more focused on getting the most revenue possible out of every hotel room. Investors will want to have the hotel in a nearby location so they can visit the hotel and keep a close eye on the investment, Barton said. Another differentiating factor is the fact that independent hotels focus on the individual guest, seeking to anticipate their needs, and going above and beyond when it comes to service. If you're inexperienced in running or managing a restaurant, having less direction can present challenges when things go wrong, whether you struggle to market yourself or have distribution issues. LoopNet disclaims any and all representations, warranties, or guarantees of any kind. The decision on whether to affiliate with the brand or not should be made on the property by property basis. When the brakes come to a halt in the broader economy, they come to a halt in the hotel industry, he said. Due to the degree of independence of subsidiary hotel brands, it's sometimes difficult to distinguish between a boutique property that's owned by a large company and one that is truly independentfinancially and otherwise. The key to getting a competitive advantage is providing a unique experience that cannot be replicated in any other structure. This website uses cookies to improve your experience while you navigate through the website. Thus, the decision to affiliate or stay independent should be hotel specific as it can benefit one property, and another hotel could perform better without affiliation. Eric Horodas, president and CEO of Greystone Hotels, said he likes having creative freedom with independents. Click here for Desk booking system for hot desking. Promotion : a marketing and communication office that is in charge of advertising the chain as a whole and the individual recognition of each structure. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Click here. He added that in order to weather downturns, you really have to ensure that your capital base is built to withstand economic turbulence.. Necessary cookies are absolutely essential for the website to function properly. doi 10.1016/j.ijhm.2010.08.003, Rushmore, S. (2004). Proximity : an unbeatable relationship with the guest that allows quality support and communication for a better guest experience (favored by social networks). On the other hand, chains, being one of many, seek to offer a standardized experience that will be the same across the brands collection of products. (2011). A hotel owner needs to assess the benefits and costs of affiliating as well as compare various affiliation alternatives against each other (Carlbck, 2017). According to Freitag, this enables hotel owners to rapidly increase prices in response to enhanced demand. A rack rate is the highest price a hotel can charge for a room, and a single hotel may offer a different rack rate for each room type on property. This originality is often the deciding factor when it comes to a guest choosing to stay at a smaller, unique property. A mixed-methods study, Do brands matter? A deep dive into operating and branding strategies for hotel owners. The analysis follows the stages of the affiliation process from the perspective of the individual hotel as elaborated in and Ivanova & Ivanov (2015): 1) evaluation of the option to join a chain. al. Barton also noted that lenders will want to see a clear management plan in place, and will even give particular consideration to investors that choose to literally sleep where they eat, often showing a preference for owner-occupied hotels. When you're running a franchise, you usually have a lot of support from the chain in terms of training, mentorship and regular guidance. Performance & security by Cloudflare. Rushmore (2004) suggested that hotels with the following attributes did not need a brand: Exclusive location, unique architecture, rare amenities, boutique hotel, or an eye-catching name. Does paying higher franchise fees command higher RevPAR?. Franchising.com: Weighing the Pros and Cons of Franchising vs. Should hotel owners partner with hotel brands or keep their properties independent (unbranded)? Gerry Chase, president and COO of Newcastle Hotels & Resorts, said he likes having creative freedom, but he also likes having the support of a brand as a soft-branded hotel. All rights reserved. Advertising cookies for delivering tailored and customized advertising. Daily physical activity. With a franchise, it can be easier to find potential buyers since the chain's brand is well known and has a proven value. The hotels that arent related to a hotel chain are considered independent. On the liability side, there are insurance carriers getting out of the business, due to the pandemic, Patel said. Businesses are able to get great deals when they hold events. Business travelers can take advantage of the chain hotel. Disadvantages of Independent Hotels: You are alone to face all challenges and fight all battles. Of course, it is less unlikely that they can compete on price, but quality and the type of offer is a great place to focus efforts. Advantages. Please contact Customer Support at 1-800-613-1303. Trying to maximize the advantages of independent hotels in small accommodation such as B & Bs, hostels, country houses and small hotels is one of the keys to differentiate yourself from the chains and to be successful! (2016) compared key performance indicators of affiliated and unaffiliated hotels over a full 10-year economic cycle. 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