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 . Increase revenue: more direct bookings and less commission. Be in touch with the hottest topics around & the breaking news around the world. In this article, we took a deep dive into the top 3 disadvantages of hotel CRM and gave you tips on how to overcome these problems. The username or password you entered is incorrect. Running an independent restaurant can also help you avoid some of the personal and legal risks of running a franchise. 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. Example: staff organization that counts ten people from one day to the next. Hotel Management Agreement Advantages and Disadvantages. 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. In the modern hospitality landscape, brands rule the day. Do brand hotels perform better than independent hotels? Further details are available upon request. The key to getting a competitive advantage is providing a unique experience that cannot be replicated in any other structure. Ashley Donohoe started writing professionally about business topics in 2010. Learn aboutfive types of guests and how to appeal to them. Soft brands of international hotel companies are taking over. 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. 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! While all hotels focus on profitability, chains are more focused on getting the most revenue possible out of every hotel room. Most commercial assets, whether youre considering office, retail or industrial product, operate with long-term leases, anywhere from three- to 15-years in duration. 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. Carlbck (2017) posited that affiliation is necessary when a business is focused on growth and development. Please contact Customer Support at 1-800-613-1303. 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. 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.. 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. However, with an independent restaurant, you have the freedom to shop around for an affordable restaurant location and then compare the prices of suppliers, services and equipment to find an arrangement that fits your budget. Click here for Desk booking system for hot desking. 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. Freitag observed that underfunding the equity portion of a purchase is whats putting a lot of people into jeopardy right now their monthly mortgage payment is just so high., Further, because of the unique, daily revenue stream that hotels provide, Barton advocated for the benefits of securing financing with a smaller, local institution. Another key difference is in the marketing and distribution strategies. 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. Even multifamily properties, which have more frequent turnover than their commercial counterparts, typically offer one- to two-year leases. Why do people choose to stay in a boutique hotel over a major hotel chain? Kelso neatly summed up the investment profile of hotels in a single sentence: Its a high-risk, high-reward asset class.. Daily physical activity. Independent hotels are hotels that are owned and run by themselves. Register to receive personalised research and resources by email. 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. 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. More space for original design, product creativity and a unique identity. This is one of the most idiosyncratic asset types in real estate, as well as (potentially) one of the most rewarding. 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. 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. A comparison of the performance of independent and franchise hotels: The first two years of operation. Advertising cookies for delivering tailored and customized advertising. 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. Remember passwords are case sensitive. 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. From my perspective, branded hotels have a much easier time of pushing inventory. Independent hotels are more open to change. Not to mention, independent hotels have doubled the pace of branded ADRs since early 2014 . 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. 2. With an independent restaurant, you might run into some hurdles if you want to sell. They dont have to worry about maintaining the same quality. Business travelers can take advantage of the chain hotel. 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. O'Neill and Carlbck (2011) and Carvell, et. 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. Moreover, the authors found that affiliation with the brand positively drove occupancy and ADR. Smart Meetings is the leading meetings industry publisher and voice of inspiration for meeting professionals. There are Associations or Marketing organizations that link together small to medium-sized independent travel agencies. 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.. This potential for high returns is partially owed to the flexibility fostered by hotels unique tenancy model. Because many of the elements that make hotels a sometimes challenging real estate asset are the same features that make them a compelling opportunity. 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. 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. 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. 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. What are the rates of the hotel rooms? The resources needed to create a digital presence are significant and ones that not all small, independent hotels have. What are the differences between independent and chain hotels? Carvell et al. A comparison of branded and independent hotels performance during a full economic cycle, International hotel development: A study of potential franchisees in China, Strategic hotel development and positioning: The effect of revenue drivers on profitability, The role of brand affiliation in hotel market value, The relationship of sales and marketing expenses to hotel performance in the United States, Tourism in protected areas and the impact of servicescape on tourist satisfaction, key in sustainability, Cash regimes and the franchise system: An extension of the marginal value of cash, The internationalisation of the European hotel industry in the light of competition theories, Performance comparisons of hotels in China, Foreign market entry mode in the hotel industry: The impact of country-and firm-specific factors, The penetration of international hotel chains in Italy: Evidences from an updated census, Hotel chains: survival strategies for a dynamic future, The future of hotel chains: Branded marketplaces driven by the sharing economy, An extended COPRAS model for multi-criteria decision-making problems and its application in web-based hotel evaluation and selection, Network advantages effect on exit performance: examining venture capitals inter-organizational networks. And there is only so much you can do with a certain physical box until it becomes economically unfeasible, he said. When the brakes come to a halt in the broader economy, they come to a halt in the hotel industry, he said. Barton observed that these significant returns are partially derived through margins. These things stand there for 30, 40, 50 years, but consumer tastes change, consumer preferences change. However, that increased revenue comes with a cost. But what exactly is the difference between these two types of structures? 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. Retrieved from https://research.skift.com/report/a-deep-dive-into-operating- branding-strategies-for-hotel-owners/, Ting, D. (2017). 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). As Barton said, Its a fun business; no day is ever the same., Kelso concurred. 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,. We use cookies to improve your website experience. They focus on quantity to achieve this goal and for this reason can often be more competitive in terms of pricing. 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. 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. of observations (after data cleaning). International Journal of Contemporary Hospitality Management, 18(5), 398-413. doi: 10.1108/09596110610673538, Hua, N., ONeill, J., Nusair, K., Singh, D., & DeFranco, A. Retrieved from http://ejtr.vumk.eu/index.php/forthcoming-articles/654- v2310/, Carlbck, M. (2017). A boutique hotel is a small, upscale, luxury hotel that has a distinct personality, intimate experience, and personalized service. Because of the potential for a significant reduction in revenue during economic downturns, all of the experts LoopNet spoke with said it was critical that investors plan to fund a substantial portion of the purchase with cash. The hotel management agreements and franchise agreement handbook. The cookies is used to store the user consent for the cookies in the category "Necessary". 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. Learn about the advantages and disadvantages of being an independent hotel owner or franchisee of a hotel management company. According to Freitag, hotels are also particularly susceptible to the whims of the consumer. Building and managing your brand. In other words, the unique features of hotel assets are myriad; but dont get overwhelmed. Every one of my independent hotels is different from any other hotel; every one of my independent hotels really speaks to the location its in; every one of them has a theme; every one of them creates or provides a different experience to the guest. You dont have to sort of wonder, How is the competition doing? To be clear, these brands, many of which are household names Hilton, Marriot, Choice, etc. 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. Due to the degree of independence of subsidiary hotel brands, its sometimes difficult to distinguish between a boutique property thats owned by a large company and one that is truly independentfinancially and otherwise. Hospitality hot takes straight to your inbox. doi 10.1016/j.ijhm.2010.08.003, Rushmore, S. (2004). 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. And as large companies continue to grasp more control of the hospitality industry, smaller, independent hotels are suffering. Consumers selecting hotels through those services tend to focus more on price and less on brand loyalty. Another way they can compete with chains is on the level of service they provide and when it comes to a specialized target audience. Todays consumer is becoming more and more demanding, which has inspired a more personalized and varied offer in the hospitality sector. 5 Video Games That Will Boost Your Brain Power And Reduce Stress, Nia Long Finds Success as an Instagram Influencer. A hotel franchise is referred to as a referral hotel chain. Independent hotels - independently operated properties. In this two-part series, LoopNet provides an overview of the lodging/hospitality/hotel terms that will be applied interchangeably throughout this series sector. Traditional Business, WebstaurantStore: Independent Ownership vs. Every hotel owner needs to decide whether to operate independently or lose some degree of independence to gain a possible competitive advantage by affiliating with the brand. The most obvious advantage of a suite hotel is extra space. They usually create guest profiles, so they register their guests preferences and can better tailor their services, especially for repeat guests. Cornell Hospitality Report, 11(21), 6-13. A case for being independent. The identity of Independent Hotels is unique. 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. 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. 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 ). Qualitatively, this approach leads to the same results as those reported in the paper, which are omitted to save space. If you continue to see this message, your account may be locked due to too many failed attempts. We are aware of this issue and our team is working hard to resolve the matter. Mews has a comprehensive platform designed for your specific business needs. Restaurant Franchising, Forbes: Why Independent Restaurants Are Closing. That said, it depends because each hotel is different. (2017). Patel concurred with that assessment. But hotels dont offer any similar safeguards. 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. This cookie is set by GDPR Cookie Consent plugin. School of Business, Economics, and Law at the University of Gothenburg. Cloudflare Ray ID: 7c088146c8c40cf3 We noticed you're using Internet Explorer to view our site properly, please use a more up-to-date browser like Chrome, Firefox or Edge. The good news is, if you can buy today, youre buying at the trough. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Example: an employee for 50 reservations instead of 10 is more profitable. Most days, you will spend your day walking, running errands for your business, and performing a multitude of tasks. If you've ever spent a . There are disadvantages to staying independent (unbranded). 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. Owners can change interiors or upgrade amenities when they see fit. What are the advantages of chain hotels? It's not being weak to need a shoulder to cry on because even the most seemingly strong person may have a break down at some point. ), do not possess dedicated reservation and marketing systems and it is hard for them to compete with brands that have larger marketing budgets. Eric Horodas, president and CEO of Greystone Hotels, said he likes having creative freedom with independents. 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. The main con is typically over-standardization. Independent hotel chains are not to be confused with general hotel chains. On the flip side, they tend to be more expensive and elite. 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. The action you just performed triggered the security solution. 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. These cookies allow a website to remember choices you have made in the past, like what language and currency you prefer, remember your name and email and automatically fill forms. 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). Unpublished manuscript, Gothenburg, Sweden. Explore your hospitality hub. 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 volume of passengers is not very high compared to a chain hotel, but it is similar in terms of figures per activity. 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. 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.
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