disadvantages of independent hotels

The realistic future of independent hotel and resort brands in 2021 and They are important players in the hotel market worldwide. Please try again. In some instances, the owner and the management may be the same, but its very common that the brand is a third party.. By clicking Accept All, you consent to the use of ALL the cookies. 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. Cornell Hospitality Quarterly, 57(2), 193-201. doi: 10.1177/1938965516631014, Dev, C. S. (2015). Independent Hotels Decline Due to Mergers, Funding Problems What Are the Advantages & Disadvantages of an Independent Restaurant You must put 35% to 40% equity into any deal, Patel said. Click here. The greatest advantage to me is the ability to be creative, he said. The insurance market is very unstable, Patel said. Advantages of hotel chains = disadvantages for the independent hotel. I dont think the story has been completely told yet as it relates to soft brands, he said. BTR Shines Even as CRE Sales Plummet: Heres What to Focus on Next, What Self-Starters Should Know About Self-Storage Investment, CRE Sales Plummet in Q1 as Expected; Heres What to Focus on Next, 5 NNN Retail Properties Available For Under $4 Million, How Rising Interest Rates Are Impacting NNN Retail Properties. Hotel Franchise Disadvantages | Bizfluent International Journal of Contemporary Hospitality Management, 29(11), 2941-2961. doi: 10.1108/IJCHM-02-2016-0060. 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. 5 Howick Place | London | SW1P 1WG. They like to see the corporate or franchise model in financing these deals.. Having the ability to efficiently and cost-effectively market room nights is a goal all independent hotels should work towards. These cookies will be stored in your browser only with your consent. 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. According to Butler and Braun (2014) unbranded hotels lose benefits of brand support systems (operating manuals, training, access to best practices, etc. Both studies found that unaffiliated hotels had higher average daily rates (ADR), and affiliated hotels had higher occupancy rates. What is the advantage of an independent hotel? What are the differences between independent and chain hotels? Short-term tenancy can be both an advantage and a disadvantage for hotel assets, and well dig more deeply into that later in this article, but its also just one of the unique facets that new investors need to be aware of when entering the hotel space. typically do not own the hotels that bear their names. Hotels Magazine. (2016) compared key performance indicators of affiliated and unaffiliated hotels over a full 10-year economic cycle. This group is simply not inclined to spend money or time on application . That is to say, they strive to offer a unique and authentic experience at every hotel. Cash flow volatility. Top 10 Pros & Cons of All-in-one Hotel Software Solutions Kwortnik, R. J. This personalized touch, of simply just knowing what their guests want, gives them a competitive edge. Butler, J., & Braun, R. (2014). Kelso said that investors should be prepared for swift changes in financing options. 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. Ravi Patel, president of Hawkeye Hotels, took the branded side in the debate. Restaurant Franchising, Forbes: Why Independent Restaurants Are Closing. A hotel owner needs to assess the benefits and costs of affiliating as well as compare various affiliation alternatives against each other (Carlbck, 2017). Permission will be required if your reuse is not covered by the terms of the License. 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. Another downside is, with the decision of belonging to a Chain, you decide against uniqueness. I can be creative; I can be different; I can distinguish myself; and I can provide each and every one of my guests with a (unique) experience.. How does a Global Financial Report Help My Business? Retrieved from https://scholarship.sha.cornell.edu/chrpubs/224/, Enz, C. A., & Canina, L. (2011). 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. 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. Todays consumer is becoming more and more demanding, which has inspired a more personalized and varied offer in the hospitality sector. 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. There is no independence. I think its far more important in the hospitality sector to consider the downside scenario, because the cash flow is so much more volatile than [it is in] other asset classes, he said. To Be or Not to Be - Brand Affiliation in the Hotel Industry. This cookie is set by GDPR Cookie Consent plugin. Disadvantages include full accountability, more time needed to become profitable and resale difficulties. According to Butler and Braun (2014) unbranded hotels lose benefits of brand support systems (operating manuals, training, access to best practices, etc. I reviewed the literature on the subject, and there is no simple answer. In the modern hospitality landscape, brands rule the day. Each Autograph Collection hotel has its very own look and feel, making it improbable that most consumers can discern that any two are under the same umbrella. 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. 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.. 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. Increase revenue: more direct bookings and less commission. With the cost savings for Yield Management. 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. Eva has over a decade of international experience in marketing, communication, events and digital marketing. Their location was chosen due to the attractiveness of the place and the potential profit. Be in touch with the hottest topics around & the breaking news around the world. When she's not at work, she's probably surfing, dancing, or exploring the world. Chains, on the other hand, can be more competitive on pricing, and can provide a sense of reliability that will appeal to a wider target audience. Eric Horodas, president and CEO of Greystone Hotels, said he likes having creative freedom with independents. 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. Ashley Donohoe started writing professionally about business topics in 2010. 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. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. With an independent restaurant, you don't have to worry about coming up with a large franchise fee or prove a large net worth like many chain restaurants require for franchisees. Advertising cookies for delivering tailored and customized advertising. Another way they can compete with chains is on the level of service they provide and when it comes to a specialized target audience. Thus, affiliation with the brand could positively affect the performance of the hotel and carries value for the owner. The author analyzed the performance of hotels that changed brands and suggested that the effect of the brand itself should be separated from the hotel's fit with the brand. Subscribe to receive tips, articles and tools. This is one of the most idiosyncratic asset types in real estate, as well as (potentially) one of the most rewarding. It is essential to know the hotel owner's motivation some hotel owners want to grow the business, and some value harmonious living and stability. 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. Editors note: The moderator of the Pros and cons of independence panel asked each participant to specifically take one side: soft brand, brand or independent. The benefits of running a small hotel business 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. Smart Meetings 2023 Bright Business Media LLC. 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. Its great to be creative, but we like to make money, he said. 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.. Quality assurance, consulting support and lender comfort are provided by the Hotel Chains. 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. Chain vs Independent: What are the benefits of working in - LinkedIn Of course, high rewards rarely come to the dance unaccompanied by their less appealing chaperone, high risk. A hotel management contract is an agreement between a hotel owner and a management firm. 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. Each of these is important on its own, but even more important to work together seamlessly to provide an enjoyable, attractive, and seamless experience for potential guests.

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