disadvantages of independent hotels

There is a significant difference in the overall experience both kinds of hotels offer. 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. Permission is granted subject to the terms of the License under which the work was published. When she's not at work, she's probably surfing, dancing, or exploring the world. The hospitality sector is vast and made up of a multitude of accommodation offerings. 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. So when it comes to staffing models, when it comes to building new assets, architectural plans, you name it, there is a step-by-step playbook to follow, and we see our profitability is substantially higher at branded hotels than they are in the independent and soft-branded hotels.. This formulation comes from the identity FmPARph = w FmPARch +(1-w) FmPARih, whose proof is straightforward. Hoboken, NJ: John Wiley & Sons, 388-404. Chains often also choose the location for the hotel because of the locations attractiveness. Everything you need in one beautiful print and digital magazine. Learn aboutfive types of guests and how to appeal to them. You are not the first one. What Is The Difference Between Independent And Chain Hotels? With an independent restaurant, you might run into some hurdles if you want to sell. You will have limited resources and budget. The brand element (to brand or not to brand). Based on conversations with various industry experts, LoopNet developed the following list of distinctive elements and important considerations for investors contemplating hotel properties: The Brand Element (To Brand or Not To Brand), Jan Freitag, national director of hospitality market analytics, CoStar. We apologize, but the feature you are trying to access is currently unavailable. Some of the principal disadvantages of hotels include: Particularly susceptible to economic turbulence. Whereas an independent hotel can be original and adapt their marketing and distribution strategies as they see fit, chains must adhere to the chains overarching strategy. So taking a spontaneous or unplanned last-minute holiday may not always be. Business travelers can take advantage of the chain hotel. 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. These banks often like hotel loans because they also get all the daily deposits and theres more to their relationship than just a loan.. 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. Whats the story behind soft brands?When asked if a soft brand is really just a brand, Horodas said hes not so sure how soft brands will play out in the future as more pop up in the industry. But I do have one thing that an independent doesnt have: I still have that assurance that other properties, hopefully, if they do it right, will have some type of level of standard, that I dont have a bunch of crap out there. Disadvantages of Independent Hotels: You are alone to face all challenges and fight all battles. Consumers selecting hotels through those services tend to focus more on price and less on brand loyalty. 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. Chase said a soft brand might be the same as a brand, but theres still a lot of work that goes into sales and marketing for a soft-branded property to attract guests. Agreements : a large booking platform accompanied by agreements with agencies, tour operators and OTAs, constitutes an impressive commercial force. Generally, the independent hotel is managed as if it were a family business, with a limited and versatile team in its activities. To tell the truth, the small and medium-sized companies that operate in this sector share similar operations and characteristics that are their own (with their benefits and drawbacks). There is no one else to guide and advise you. The good news is, if you can buy today, youre buying at the trough. Franchising.com: Weighing the Pros and Cons of Franchising vs. The resources needed to create a digital presence are significant and ones that not all small, independent hotels have. Building and managing your brand. Franchise Direct: How Much Does It Cost to Open a Fast Food Franchise in the United States. On the other hand, the main advantage of independent hotels is that they are more personalized and tend to cater to a specific target audience. Small hotels dont have big-brand financial backing to aid them if they need renovations, expensive repairsor a revamp after a natural disaster, which could put them out of business. According to Butler and Braun (2014) unbranded hotels lose benefits of brand support systems (operating manuals, training, access to best practices, etc. As a hotelier, you have to follow certain rules and standards and can not react to the market demands as quick and flexible as you wish. To begin with, theres the duration of tenancy. Hotel owners might decide that being independent is just too expensive for them and that the high effort that is required for the independent operation could not be justified when help from influential brands and large distribution platforms is available (Stone, 2018). I think with a smaller hotel, you may do well with a local lender in the area, he said. Part two, presented below, focuses on the long-term strengths, challenges and unique characteristics of the sector. 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. The greatest advantage to me is the ability to be creative, he said. Its great to be creative, but we like to make money, he said. 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. Whether you are starting your first company or you are a dedicated entrepreneur diving into a new venture, Bizfluent is here to equip you with the tactics, tools and information to establish and run your ventures. In The Shifting Scene of Independent Hotels in America, a research report by STR, a systems and tech research company, various reasons were unveiled, such as independent hotels lack of funding in comparison to larger brands, such as Marriott and Hilton; the steady absorption of these independent hotels by larger brands; and smaller hotels difficulty in keeping up with the ceaselessly changing industry. On the liability side, there are insurance carriers getting out of the business, due to the pandemic, Patel said. The Top PMS Challenges for Chains, Independent, and Managed Hotels The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. Disadvantages of Hotel CRM: Important Things to Know - Metasphere As Jan Freitag, national director of hospitality market analytics at CoStar, pithily observed, a hotels lease terms are just one night.. #1 Overcome the lack of organizational readiness. According to Freitag, this enables hotel owners to rapidly increase prices in response to enhanced demand. 8 The correlation between chain penetration (in terms of rooms) and foreign arrivals is 0.3 in our data. 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. Beautiful Design. Big brands are much more likely than small, independent hotels to buy property to build new hotels, according to the study by STR, a systems and tech research company. 70.32.113.124 Evolving consumer preferences. Other disadvantages include high cost of effective distribution, increasing costs of communication, inability to obtain necessary marketing intelligence in order to compete (Holverson & Revaz, 2006), high amount of investments required for technology solutions (Ting, 2017), cost of paying high OTA commissions and advertising expenses may offset the benefit of not paying franchise fees to the brand, harder to get access to capital as lenders consider independent properties risky and prefer to finance affiliated hotels (Stone, 2018). Hotel Management Companies vs. Franchises - Study.com 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. To operate the hotel under a unique brand, hotel owners should have the necessary expertise, understanding of technology and distribution, strong marketing or social reach, and create a resonating brand story (Stone, 2018). Los Angeles: JMBM Global Hospitality Group. International Journal of Hospitality Management, 30(3), 515521. Stone (2018) posited that the operating model that will satisfy all hotel owners did not exist. These lease terms provide investors with a certain degree of security, even if markets take a downward turn. What are the benefits of using a data collection application? The majority of chain hotels are built to make money. 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. 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. Franchise Operators Agreement. Necessary cookies are absolutely essential for the website to function properly. Please try another or click, By clicking the button, you agree to LoopNet's, An Overview of This High-Risk, High-Reward Asset Class, Passwords is too common or does not have at least 8 characters. 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. Please check back in a few minutes. Fixed prices : the established price policy, being little variable, ensures a constant and clear revenue. Independent hotel brands have two major disadvantages, which of the most common is lack of capital to invest in marketing and business development, and the other is not being able to attract or retain top talents which makes marketing management a lot more inefficient compared to what international brands can do. Eva has over a decade of international experience in marketing, communication, events and digital marketing. While he acknowledged that the relationship between hotel costs and CPI has deviated slightly in the last two or three years, in general, when things get more expensive, hoteliers have always found a way to increase their rate faster than everything else [in the economy].. Another key difference is in the marketing and distribution strategies. The quality of the guest experience can be controlled by brands. Its one of those areas where you cant go halfway, you have to go all the way, and branding is certainly the easier way to go.. The remaining insurance companies are using the situation to their advantage and raising premiums. 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. Hotels Magazine. Holverson and Revaz ( 2 for their tourism growth. Weve seen all of the major hotel companies get into the soft-brand arena, and theyre trying to scale up. Not to mention, independent hotels have doubled the pace of branded ADRs since early 2014 . When the brakes come to a halt in the broader economy, they come to a halt in the hotel industry, he said. Consider both the advantages and disadvantages of hotel ownership as a franchisee to decide if it's right for you. Hotel Brand Affiliation: Pros and Cons. - Hotel Revenue Insights Hotel brand affiliation through a franchise agreement: Pros and Cons We also use third-party cookies that help us analyze and understand how you use this website. Hotel brand conversions: What works and what doesn't. Youve got hundreds of operating issues; youve got a very different debt market for hospitality assets than you do [for] other asset classes; you have to contend with the brands, you have to contend with the managers, and you have to contend with the third-party OTAs (online travel advisors) such as Expedia, TripAdvisor and Travelocity.. 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. Another downside is, with the decision of belonging to a Chain, you decide against uniqueness. For instance . Traditional Business, WebstaurantStore: Independent Ownership vs. Enz and Canina (2011) compared the financial results of 104 newly opened affiliated and unaffiliated hotels in the United Kingdom during the first two years of operation. Sign up to our monthly newsletter for industry insights, product news, partner updates and more. That being said, chains tend to have a less personal touch, focusing on their brand standards rather than what each individual guest wants. (3rd ed.). 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.. As today's travelers gravitate toward unique lodging accommodations, the boutique hotel scene is thriving. 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. Independent hotel chains are not to be confused with general hotel chains. Most days, you will spend your day walking, running errands for your business, and performing a multitude of tasks. 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). Being independent allows you to develop your own brand, menus and dining experience for your customers. Comparing chains versus independent hote . 2. There are disadvantages to staying independent (unbranded). 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. Performance & security by Cloudflare. Furthermore, by creating a targeted, highly-segmented offer for a niche audience, it will be easier to capture clients that are not so price sensitive, but instead are looking for that one-of-a-kind experience. If you've ever spent a . He has also previously held positions as an adjunct professor, music critic and editor-in-chief of an online arts and culture publication. These cookies ensure basic functionalities and security features of the website, anonymously. Accordingly, an independent hotel that takes the money that it would have put into a brand and reallocates it toward search engine optimization (SEO) or other digital marketing efforts to attract online interest may be well-positioned in the 2021 hotel landscape. Some other places featuring her business writing include JobHero, LoveToKnow, PocketSense, Chron and Study.com. Proximity : an unbeatable relationship with the guest that allows quality support and communication for a better guest experience (favored by social networks). Retrieved from http://ejtr.vumk.eu/index.php/forthcoming-articles/654- v2310/, Carlbck, M. (2017). Are independent hotels capable of competing with chain hotels. In addition to these benefits, brands make it easier for investors to access financing. The key to getting a competitive advantage is providing a unique experience that cannot be replicated in any other structure. 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. What is a chain hotel give examples of the chain hotels? Click here for Desk booking system for hot desking. More space for original design, product creativity and a unique identity. This leaves little room for creativity for each individual property. And just two years ago, a study by Expedia found that they had a greater average daily room rate and faster overall growth than their branded counterparts. Conclusion. To Be or Not to Be - Brand Affiliation in the Hotel Industry. 4 minute read, The Mews Blog>Pros and cons of independent hotels versus chains. 24 Pros & Cons Of Starting A Chain Hotels Business (2023) Holverson and Revaz (2006) posited that independent family-owned hotels that built loyalty through tradition and quality had repeat customers, satisfactory performance results, and took advantage of growing Internet opportunities did not need to invest in brand affiliation. 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). The action you just performed triggered the security solution. There are over a dozen separate brands in the portfolio of Hilton. Some boutique brands, such as Autograph Collectionwhich is owned by Marriott International and has more than 175 properties globallyhave the benefit of both retaining their autonomy and receiving financial backing from larger parent companies. Retrieved from https://scholarship.sha.cornell.edu/chrpubs/224/, Enz, C. A., & Canina, L. (2011). Unique experience : there is always a different offer, from the hostel to the boutique hotel. Please try again. Chain-Hotel Definition / Meaning - Xotels The main con is typically over-standardization. A hotel franchise is referred to as a referral hotel chain. There are more constituents in a hotel investment than there might be in many others, and there is no durable revenue stream, as we learned to our chagrin again in 2020. 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. You will have to operate within those limited constraints. Registered in England & Wales No. Quality assurance, consulting support and lender comfort are provided by the Hotel Chains. A hotel management contract is an agreement between a hotel owner and a management firm. The staff is similar to those at boutique hotels. 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 . al. Independent hotels are more open to change. Smart Meetings 2023 Bright Business Media LLC. 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. Learn about hotel management companies, including advantages and . When deciding to open a restaurant, you can choose between starting your own independent restaurant or purchasing a franchise from a well-known chain. You dont have to sort of wonder, How is the competition doing? Pros and cons of independent hotels versus chains, five types of guests and how to appeal to them. 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. Perhaps the single most unique (and commonplace) feature of hotels compared to other real estate assets is the presence of brands or flags, in industry parlance. A mixed-methods study, Do brands matter? It does not store any personal data. 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. Theres fixed costs and variable costs in operating a hotel. Particularly susceptible to economic turbulence. 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. International Journal of Contemporary Hospitality Management, 18(5), 398-413. doi: 10.1108/09596110610673538, Hua, N., ONeill, J., Nusair, K., Singh, D., & DeFranco, A. . 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). These things stand there for 30, 40, 50 years, but consumer tastes change, consumer preferences change. In this two-part series, LoopNet provides an overview of the lodging/hospitality/hotel terms that will be applied interchangeably throughout this series sector. How am I doing compared to the competition? You know, he said. Error occurred with your registration, please try again. Competitive advantages of chain hotels | Download Table - ResearchGate 10 Tips to Improve Your Housekeeping Operation, 22 Aug 2022 Advantages of hotel chains = disadvantages for the independent hotel. Retrieved from https://skift.com/insight/skift-insights-deck-soft-brands-weighing-the-risks- rewards-and-realities/, Stone, R. (2018).

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