They aim to provide a unique and authentic experience at every hotel. 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. Some of the principal disadvantages of hotels include: While the nightly tenancy model enables hotels to raise prices when demand is high, it also makes them uniquely vulnerable to economic downturns. The majority of chain hotels are approved for tourism. More space for original design, product creativity and a unique identity. Carlbck (2017) posited that affiliation is necessary when a business is focused on growth and development. Want more coverage of the Hotel Data Conference? He said that investors should be ready to manage more employees, and be ready to understand that payroll is a big component of a hotel, and that you will have to be involved in operations to make it successful.. Hoteliers on the Pros and cons of independence panel at this years Hotel Data Conference in Nashville took a specific side and talked about why they liked their specific affiliation of choice, whether it be independent, branded or soft branded. Kwortnik, R. J. Overall, the authors concluded that the performance of franchised hotels was not superior to that of independent properties. Another downside is, with the decision of belonging to a Chain, you decide against uniqueness. Most days, you will spend your day walking, running errands for your business, and performing a multitude of tasks. We also use third-party cookies that help us analyze and understand how you use this website. Soft brands of international hotel companies are taking over. Some sources also speculated that the loyalty programs, which have long been one of the primary benefits offered by the brand franchise model, are less relevant in an era where OTAs dominate. According to Freitag, this enables hotel owners to rapidly increase prices in response to enhanced demand. Worlds Best Independent Hotel PMS Provider - World Travel Tech Awards 2022, Best Property Management System - Hotel Tech Awards 2020, 2022 Best Places to Work in Hotel Tech Winner, Great Place to Work Certified - United Kingdom, Great Place to Work Certified - Czech Republic. Traditional Business, WebstaurantStore: Independent Ownership vs. Hoboken, NJ: John Wiley & Sons, 388-404. 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. The authors concluded that the value that the brand brings is not static and varies over time. It can be a very labor intensive asset class, especially towards the higher end, as you provide more services, Freitag said. Building and managing your brand. Department of Business Administration. Freitag said that another key advantage of hotels is their widespread distribution, which opens up opportunities for investors in almost any market in the country. With a franchise, it can be easier to find potential buyers since the chain's brand is well known and has a proven value. When deciding to open a restaurant, you can choose between starting your own independent restaurant or purchasing a franchise from a well-known chain. A boutique hotel is a small, upscale, luxury hotel that has a distinct personality, intimate experience, and personalized service. This is partially due to lenders viewing larger, more reputable companies as less of a financial risk, said Ting Phonsanam, founder of Momentum Hospitality Group. #1 Overcome the lack of organizational readiness. Retrieved from https://scholarship.sha.cornell.edu/chrpubs/47/, Holverson, S., & Revaz, F. (2006). Sign up to our monthly newsletter for industry insights, product news, partner updates and more. You may also be able to start an independent restaurant with less cash than you would with a franchise. 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. The staff is similar to those at boutique hotels. Part two, presented below, focuses on the long-term strengths, challenges and unique characteristics of the sector. Registration on or use of this site constitutes acceptance of our terms and conditions and privacy policy. All About G Adventures Vs Intrepid Vs Contiki. The key to getting a competitive advantage is providing a unique experience that cannot be replicated in any other structure. In some instances, the owner and the management may be the same, but its very common that the brand is a third party.. If the hotel is profitable, and growth is not part of the strategy, the hotel can afford to stay unbranded. 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. Advantages of hotel chains = disadvantages for the independent hotel. In other words, the unique features of hotel assets are myriad; but dont get overwhelmed. Click here for Desk booking system for hot desking. 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. This originality is often the deciding factor when it comes to a guest choosing to stay at a smaller, unique property. We apologize for the inconvenience. From my perspective, branded hotels have a much easier time of pushing inventory. Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. Eva has over a decade of international experience in marketing, communication, events and digital marketing. 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. Retrieved from https://www.hvs.com/article/953-a-case-for-being-independent, Skift Report (2018). The cookie is used to store the user consent for the cookies in the category "Analytics". Jared Kelso, executive managing director, C&W Capital Markets. February 12th, 2013 at 12:09 PM EST. You must register your contact information to view secure information on this listing. 5 Howick Place | London | SW1P 1WG. What is the advantage of an independent hotel? 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. The study found an early advantage in RevPAR driven by occupancy for affiliated full-service hotels that decreased as time went on. For example, Franchise Direct reports that starting a KFC location can run anywhere from $1.4 to $2.7 million in initial investment costs, while Domino's looks for a net worth of $250,000. As Barton said, Its a fun business; no day is ever the same., Kelso concurred. Hotel as Chain or Independent The Advantages and Disadvantages of Hotels Affiliating with a Brand Dev, Chekitan S., James R. Brown, and Zheng Zhou Kevin. 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. 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. But hotels dont offer any similar safeguards. 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. So taking a spontaneous or unplanned last-minute holiday may not always be. Independent hotels have higher average daily rate and rooms revenues per available room than branded hotels during the same time period, according to the results of the study. Running an independent restaurant can also help you avoid some of the personal and legal risks of running a franchise. When you're running a franchise, you get the benefit of having the chain's reputation and brand awareness, but when you're opening an independent restaurant, you have to put time, money and effort into establishing yourself in the community and marketing yourself. A comparison of the performance of independent and franchise hotels: The first two years of operation. Samantha Shankman, Skift. That is to say, they strive to offer a unique and authentic experience at every hotel. 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 also provide access to customers via their robust loyalty programs. 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. However, you may visit "Cookie Settings" to provide a controlled consent. This leaves little room for creativity for each individual property. Such challenges notwithstanding, all of the experts LoopNet spoke with believe this is a particularly compelling moment for investors to consider hotel assets. Advantages. Register to receive personalised research and resources by email. Kelso neatly summed up the investment profile of hotels in a single sentence: Its a high-risk, high-reward asset class.. 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. The brand companies franchise their brands to the hotel owners. This group is simply not inclined to spend money or time on application . If you've ever spent a . Comparing chains versus independent hote . 2. 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. 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. Were seeing a large increase in insurance premiums, on the general liability side and on the property side. He estimated that general liability premiums had increased by approximately 18% to 20%, while property insurance had increased by 10% to 16%, year over year. Subscribe to receive tips, articles and tools. The username or password you entered is incorrect. Independent hotels are different from chains in that they are not built with the idea of having a standard offer, but with the idea that they are unique. In some cases, the value of affiliation could be negative when the costs associated with the association are higher than the revenues received (Carlbck, 2015). Generally, the independent hotel is managed as if it were a family business, with a limited and versatile team in its activities. What are the differences between independent and chain hotels? As today's travelers gravitate toward unique lodging accommodations, the boutique hotel scene is thriving. The good news is, if you can buy today, youre buying at the trough. Make your property remarkable with an ecosystem of hospitality solutions that maximize revenue and enhance the guest experience, The control centre for front office and back office staff with smart automation, A connected guest experience thats memorable as well as modern, Make every payment fast, secure and automatic, Tools for better understanding your business, Hospitalitys biggest marketplace of apps and integrations, The power to easily connect your tech to Mews, One size does not fit all. Some other places featuring her business writing include JobHero, LoveToKnow, PocketSense, Chron and Study.com. The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". As Freitag noted, Theyve been there and done that, right? Does paying higher franchise fees command higher RevPAR?. Consider both the advantages and disadvantages of hotel ownership as a franchisee to decide if it's right for you. Dont Expect Hotel Companies to Stop Launching New Soft Brands Anytime Soon. 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. Please try again. It may be because of the architecture of the place but also because of the services designed for a niche clientele: there is no comparison with a single offer, therefore there is less competition and an economy due to specialization (it reduces costs by not having an extensive offer that pleases everyone ). 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. al. Independent hotels are more open to change. Smart Meetings 2023 Bright Business Media LLC. For more information please visit our Permissions help page. A group of hotels run by a company is called a chain hotel. The decision-making process is longer. The most obvious advantage of a suite hotel is extra space. A comparison of the performance of brand-affiliated and unaffiliated hotel properties. Are independent hotels capable of competing with chain hotels. Independent hotels are more agile and better prepared to adapt to the local market shifts ("Skift Report", 2018), and have the flexibility and opportunity to create unique experiences for the guests (Stone, 2018). International hotel companies can help independent hotels create higher revenue streams and give owners access to a global network of resources to help sustain their business. The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Bright Business Media LLC. Agreements : a large booking platform accompanied by agreements with agencies, tour operators and OTAs, constitutes an impressive commercial force. One of the ways different hotels can be sure that they are offering a one-of-a-kind service is by carrying out a competitive analysis. The disadvantages of an independent hotel include: no broad advertising exposure, no management and consulting insight from an affiliated property, and it is unable to take advantage of thevolume of purchasing power of a chain hotel. In the modern hospitality landscape, brands rule the day. The brand would place their flag on the property, subject to many, many requirements on the owner in terms of the design, the quality and the level of service they provide., Lest you think that the brand is doing the majority of the work for you, its important to understand that hotel brands typically do not manage the properties under their umbrella either. 70.32.113.124 Eric Horodas, president and CEO of Greystone Hotels, said he likes having creative freedom with independents. The biggest disadvantage however is the lack of independence. 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! All hotels under the ensign of a hotel group are referred to as a chain hotel. Weve seen all of the major hotel companies get into the soft-brand arena, and theyre trying to scale up. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. Should hotel owners partner with hotel brands or keep their properties independent (unbranded)?