Did you know that with a free Taylor & Francis Online account you can gain access to the following benefits? You dont have to sort of wonder, How is the competition doing? They aim to provide a unique and authentic experience at every hotel. 3 reasons why independent hotels are thriving - Hotel Management 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. Want more coverage of the Hotel Data Conference? 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. Hotel brand affiliation through a franchise agreement: Pros and Cons I reviewed the literature on the subject, and there is no simple answer. Kelso neatly summed up the investment profile of hotels in a single sentence: Its a high-risk, high-reward asset class.. And there is only so much you can do with a certain physical box until it becomes economically unfeasible, he said. This potential for high returns is partially owed to the flexibility fostered by hotels unique tenancy model. According to Freitag, this enables hotel owners to rapidly increase prices in response to enhanced demand. While consumers may still appreciate the presumed quality and service assurances that accompany a brand, they tend to be less brand specific, Barton said. (With) soft brands, I get the best of both worlds, he said. What are the disadvantages of chain hotels? This leaves little room for creativity, and creates a feeling that no matter where you are in the world, everything is the same. Unpublished manuscript, Gothenburg, Sweden. By clicking "Log In," I agree to LoopNet's. The cookie is used to store the user consent for the cookies in the category "Other. 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. A group of hotels run by a company is called a chain hotel. 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. What are the disadvantages of chain hotels? The username or password you entered is incorrect. 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. Performance & security by Cloudflare. While smaller, singular hotels will have a hard time competing on price, where they can stand out is by developing an offer that is unique, in an incomparable location with impeccable service. The franchise agreement is a legal license agreement between the hotel brand and the hotel owner that . Brand affiliation for the small independent hotel could help to stay competitive in the market (Carlbck, 2017); however, for hotels operating in particular markets, staying independent could be more beneficial (Kwortnik, 2011; Stone, 2018). According to Freitag, hotels are also particularly susceptible to the whims of the consumer. Does the asset-light and fee-oriented strategy create value? Advantages And Disadvantages Of Staying In A Hotel Please include what you were doing when this page came up and the Cloudflare Ray ID found at the bottom of this page. The aforementioned brand impact isnt the only area where hotel financing differs from other CRE asset types. There will always be businesses that want or need to see Marriot, Hilton, Hyatt or Intercontinental on their expense reports, Kelso said. 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. You do have more flexibility and creativity as a soft brand, but at the same time, a brand is a brand is a brand, he said. What do you understand by referral Hotel? The Pros, Cons of Independents, Brands and Soft Brands - CoStar You may also be able to start an independent restaurant with less cash than you would with a franchise. Advantages of Joining an International Hotel Chain Evolving consumer preferences. Freitag described the relationship between these entities as a triangle between the owner, the management company and the brand. Another way they can compete with chains is on the level of service they provide and when it comes to a specialized target audience. So, lets get started. Independent hotel chains are not to be confused with general hotel chains. Conclusion. According to Holverson and Revaz ( 2006 2015 1997) identified the main disadvantages of SME (independent) hotels as insufficient management and marketing skills within the distribution channel. What are the benefits of using a data collection application? 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. LoopNets sources also noted the uniquely enjoyable and exciting nature of the hotel industry. Carvell et al. You must register your contact information to view secure information on this listing. Choose a solution to find out more, Hospitality events, insights and inspiration, Everything from industry trends and hotelier interviews to product releases and events. The biggest disadvantage however is the lack of independence. 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. While all hotels focus on profitability, chains are more focused on getting the most revenue possible out of every hotel room. O'Neill and Carlbck (2011) and Carvell, et. Provisions relating to the exchange of services should be included in the term sheet. Dev (2015) concurred that two factors drove the financial results for hotels that changed brands - the strength of the brand (60%) and fit between the brand and the property (40%). Are independent hotels capable of competing with chain hotels. (2017). Eric Horodas, president and CEO of Greystone Hotels, said he likes having creative freedom with independents. Independent hotels are more open to change. According to Ford Barton, principal of Lodging Partners, a brokerage and advisory firm focused on the hospitality and lodging sector, OTAs have fostered a commoditization of hotels. This, in turn, has often resulted in less pricing power for the hotels.. There are no discounts or premiums included in the rack rate for a hotel room. Smart Meetings is the leading meetings industry publisher and voice of inspiration for meeting professionals. Some of them are scaling up faster than others, but I think, ultimately, were going to see as they scale up, and if theyre successful with scaling up, theyve got to become more standardized and more bureaucratic, and the creativity factor is going to start to diminish. 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. 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). This cookie is set by GDPR Cookie Consent plugin. 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. It is established that everything that is not related to a hotel chain is considered an independent hotel . Hoteliers on the "Pros and cons of independence" panel at this year's Hotel Data Conference in Nashville took a specific side and talked about why they liked their specific affiliation of choice,. Disadvantages include full accountability, more time needed to become profitable and resale difficulties. The authors concluded that the value that the brand brings is not static and varies over time. A comparison of the performance of independent and franchise hotels: The first two years of operation. On the flip side, they tend to be more expensive and elite. Dont Expect Hotel Companies to Stop Launching New Soft Brands Anytime Soon. Proximity : an unbeatable relationship with the guest that allows quality support and communication for a better guest experience (favored by social networks). The cookies is used to store the user consent for the cookies in the category "Necessary". What is a unique advantage of an independent hotel - Course Hero According to a 2017 study from Expedia, independent hotels had greater overall average daily rate and faster growth than their branded counterparts. 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. Conclusions and managerial implications, https://doi.org/10.1080/1331677X.2019.1710719, http://horwathhtl.com/2017/04/06/european-hotels-chains-report-2017/, https://ec.europa.eu/eurostat/statistics-explained/pdfscache/34962.pdf, http://www.hotelnewsnow.com/media/File/PDFs/Misc/BIG%20BRANDS%20REPORT%202015_compressed.pdf, https://corporate.cms-horwathhtl.com/wp-content/uploads/sites/2/2018/11/HHTL_2018-EU-CHAINS-REPORT.pdf, No. 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. Of course, high rewards rarely come to the dance unaccompanied by their less appealing chaperone, high risk. This means they may fall short in some aspects of the guest experience. The hotel management agreements and franchise agreement handbook. These cookies ensure basic functionalities and security features of the website, anonymously. The . Retrieved from https://gupea.ub.gu.se/handle/2077/53941/, Carvell, S. A., Canina, L., & Sturman, M. C. (2016). A case for being independent. 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. 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. Key advantages of independent hotels over chain properties: More focus on what the guest wants, vs. focus on chain brand standards. 4 minute read, The Mews Blog>Pros and cons of independent hotels versus chains. Moreover, the authors found that affiliation with the brand positively drove occupancy and ADR. The LoopNet service and information provided therein, while believed to be accurate, are provided "as is". Quality assurance, consulting support and lender comfort are provided by the Hotel Chains. Consumers selecting hotels through those services tend to focus more on price and less on brand loyalty. If the hotel is profitable, and growth is not part of the strategy, the hotel can afford to stay unbranded.