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. There is no independence. You will have to do all the marketing and brand building yourself. 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. 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. A comparison of the performance of independent and franchise hotels: The first two years of operation. 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. Agreements : a large booking platform accompanied by agreements with agencies, tour operators and OTAs, constitutes an impressive commercial force. Unfold - The most innovative hospitality forum is back! Literature review and research hypothesis formulation, 6. Theres fixed costs and variable costs in operating a hotel. A hotel owner needs to assess the benefits and costs of affiliating as well as compare various affiliation alternatives against each other (Carlbck, 2017). They aim to provide a unique and authentic experience at every hotel. Proximity : an unbeatable relationship with the guest that allows quality support and communication for a better guest experience (favored by social networks). 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. 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.. This website uses cookies to improve your experience while you navigate through the website. Hotel Management Agreement Advantages and Disadvantages. 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].. 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). 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.. 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 insurance market is very unstable, Patel said. Want more coverage of the Hotel Data Conference? Such challenges notwithstanding, all of the experts LoopNet spoke with believe this is a particularly compelling moment for investors to consider hotel assets. 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. 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). Click to reveal 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. Ultimately, Patel said that it all comes down to RevPAR (revenue per available room), one of the hotel industrys key metrics. This group is simply not inclined to spend money or time on application . Your growth rates year over year are going to look really, really strong, Freitag said. The cookie is used to store the user consent for the cookies in the category "Analytics". This is particularly helpful when traveling with two or more people for an extended period of time. International Journal of Contemporary Hospitality Management, 29(11), 2941-2961. doi: 10.1108/IJCHM-02-2016-0060. A deep dive into operating and branding strategies for hotel owners. Permission is granted subject to the terms of the License under which the work was published. Please contact Customer Support at 1-800-613-1303. The hotel management agreements and franchise agreement handbook. 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. The cookie is used to store the user consent for the cookies in the category "Performance". And as large companies continue to grasp more control of the hospitality industry, smaller, independent hotels are suffering. 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. This can have a positive impact on energy levels and your overall health. (2017). In addition to these benefits, brands make it easier for investors to access financing. It is established that everything that is not related to a hotel chain is considered an independent hotel . What are the disadvantages of chain hotels? A lot of people have made mistakes [and] learned a lot, and you can participate in that learning.. But what exactly is the difference between these two types of structures? You can email the site owner to let them know you were blocked. 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. 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. Retrieved from http://www.hotellawyer.com/resource-center.html/, Carlbck, M. (2015). Running an independent restaurant can also help you avoid some of the personal and legal risks of running a franchise. With an independent restaurant, you might run into some hurdles if you want to sell. Hospitality hot takes straight to your inbox. On the flip side, they tend to be more expensive and elite. The differences in performance indicators were not consistent across market price segments and market types. You may also be able to start an independent restaurant with less cash than you would with a franchise. Franchise Direct: How Much Does It Cost to Open a Fast Food Franchise in the United States. 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 ). More space for original design, product creativity and a unique identity. Retrieved from http://ejtr.vumk.eu/index.php/forthcoming-articles/654- v2310/, Carlbck, M. (2017). The resources needed to create a digital presence are significant and ones that not all small, independent hotels have. Ways in which health insurance can help your child during an emergency? Register a free Taylor & Francis Online account today to boost your research and gain these benefits: Comparing chains versus independent hotels based on international sales: an exploratory study, a University of Bologna, Rimini, Italy;b Horwath HTL, Rome, Italy, c Universidad Internacional de La Rioja, Logroo, La Rioja, Spain, d Universitat Politcnica de Valncia, Valencia, Spain, Social media analytics: A tool for the success of online retail industry, Asymmetric information and deal selection: Evidence from the Italian venture capital market, Global-local trajectories for regional competitiveness: Tourism innovation in the western cape, Catalysts in introducing information technology in small and medium-sized hospitality organisations, A comparison of the performance of brand-affiliated and unaffiliated hotel properties, Expansion strategy of international hotel firms, Hotel chain affiliation as an environmental performance strategy for luxury hotels, Visitor attractions and events: Responding to seasonality, Modal choice in a world of alliances: Analyzing organisational forms in the international hotel sector, How firms relate to their markets: an empirical examination of contemporary marketing practices, Efficiency evaluation of hotel chains: A Spanish case study, Profitability determinants of hotel companies in selected Mediterranean countries, Determinantes en la eleccin del modo de entrada de las hoteleras espaolas en destinos forneos, The eclectic theory of international production: A case study of the international hotel industry, A comparison of the performance of independent and franchise hotels: The first two years of operation, European Hotels and Chains Report, Horwath HTL. They focus on quantity to achieve this goal and for this reason can often be more competitive in terms of pricing. 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. 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. There are over a dozen separate brands in the portfolio of Hilton. Los Angeles: JMBM Global Hospitality Group. However, you may visit "Cookie Settings" to provide a controlled consent. 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. For instance . Consider both the advantages and disadvantages of hotel ownership as a franchisee to decide if it's right for you. Here you can manage your preferences regarding cookies: Essential cookies enable core functionalities of the website such as marking your data inputs, network management and accessibility. Retrieved from https://www.hvs.com/article/953-a-case-for-being-independent, Skift Report (2018). Permission will be required if your reuse is not covered by the terms of the License. Independent hotels also dont have to contribute revenue or pay marketing fees to the chain, meaning less overhead costs. They usually create guest profiles, so they register their guests preferences and can better tailor their services, especially for repeat guests. 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. 5 Howick Place | London | SW1P 1WG. Remember passwords are case sensitive. 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. According to Butler and Braun (2014) unbranded hotels lose benefits of brand support systems (operating manuals, training, access to best practices, etc. (2016) reported that these two advantages offset each other as there were no significant differences in revenue per available room (RevPAR). Disadvantages include full accountability, more time needed to become profitable and resale difficulties. 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. Another key difference between chains and independent hotels is that the latter focus on originality across all aspects of their hotel, whereas the former focuses on uniformity. There is a significant difference in the overall experience both kinds of hotels offer. 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. I think with a smaller hotel, you may do well with a local lender in the area, he said. They are free to be innovative. We are aware of this issue and our team is working hard to resolve the matter. typically do not own the hotels that bear their names. Should hotel owners partner with hotel brands or keep their properties independent (unbranded)? "Global Brand Expansion: How to Select a Market Entry Strategy." Cornell Hotel and Restaurant Administration Quarterly 48.1 (2007): 13,27,8. The staff is similar to those at boutique hotels. Independents need a simple-to-use solution that enables easier adoption and employee training. Even multifamily properties, which have more frequent turnover than their commercial counterparts, typically offer one- to two-year leases. 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. Advantages. 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. Businesses are able to get great deals when they hold events. Since they are usually just one-off hotels, this means that they can focus all their attention and resources in providing the best experience possible, constantly adapting to make service even better. Some other places featuring her business writing include JobHero, LoveToKnow, PocketSense, Chron and Study.com. 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. On the other hand, in attempting to be original, independent hotels must be creative in their design, what they offer, their decorational elements, gastronomic proposal and in all aspects of the hotels concept. He added that in order to weather downturns, you really have to ensure that your capital base is built to withstand economic turbulence.. What is the difference between a room rate and a rack rate? Thats what I see.. In the modern hospitality landscape, brands rule the day. The majority of chain hotels are approved for tourism. doi 10.1016/j.ijhm.2010.08.003, Rushmore, S. (2004). Their ability to offer experiences different than the larger, branded hotels appealed to the younger generation, anxious to have one-of-a-kind experiences. Generally, the independent hotel is managed as if it were a family business, with a limited and versatile team in its activities. From the lobby to your room, everything is usually well-designed. The quality of the guest experience can be controlled by brands. Franchise Operators Agreement. Doctoral dissertation in business administration. And once you cover the fixed costs, the margins on the variable costs become very attractive. Fixed costs include taxes, insurance and financing; variable costs are items such as food, room supplies, guest amenities and labor. This originality is often the deciding factor when it comes to a guest choosing to stay at a smaller, unique property. According to the STR report, from 2003 to 2007which saw more than three dozen hurricanes, in places such as the Gulf and Atlantic coastal regions of the United States1,000 independent hotel properties faced a permanent closure. Disadvantages include full accountability, more time needed to become profitable and resale difficulties. Building and managing your brand. The volume of passengers is not very high compared to a chain hotel, but it is similar in terms of figures per activity. 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. When you're running a franchise, you usually have a lot of support from the chain in terms of training, mentorship and regular guidance. Kelso neatly summed up the investment profile of hotels in a single sentence: Its a high-risk, high-reward asset class.. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. Your IP: You'll need more time to see a return on your investment than you would if you run a franchise. 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. Example: an employee for 50 reservations instead of 10 is more profitable. A hotel management contract is an agreement between a hotel owner and a management firm. Department of Business Administration. Did you know that with a free Taylor & Francis Online account you can gain access to the following benefits? 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. Being independent allows you to develop your own brand, menus and dining experience for your customers. 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. Independent hotels are more open to change. Performance & security by Cloudflare. Retrieved from https://scholarship.sha.cornell.edu/chrpubs/224/, Enz, C. A., & Canina, L. (2011). 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%). Key advantages of independent hotels over chain properties: More focus on what the guest wants, vs. focus on chain brand standards. The capital markets environment for hospitality changes much more quickly than it does for other asset classes, because it more closely mirrors whats going on in the economy, he said. Increase revenue: more direct bookings and less commission. This cookie is set by GDPR Cookie Consent plugin. Kelso said that investors should be prepared for swift changes in financing options. 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,. This leaves little room for creativity for each individual property. 8 The correlation between chain penetration (in terms of rooms) and foreign arrivals is 0.3 in our data. 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. 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. By clicking "Log In," I agree to LoopNet's. 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. These banks often like hotel loans because they also get all the daily deposits and theres more to their relationship than just a loan.. Having the ability to efficiently and cost-effectively market room nights is a goal all independent hotels should work towards. 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. Samantha Shankman, Skift. Hotel brand conversions: What works and what doesn't. With the cost savings for Yield Management. Another disadvantage is that it can take longer for your independent restaurant to gain customers and have a good profit. Click here. Independent hotel chains are not to be confused with general hotel chains. It can be a very labor intensive asset class, especially towards the higher end, as you provide more services, Freitag said. Fixed prices : the established price policy, being little variable, ensures a constant and clear revenue. 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.

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