Reading the industry press over the past couple of months, I could not help but notice all the upheaval and the mergers and acquisitions activity at the big hotels chains. And after Marriott acquired Starwood, the talk is now about the era of the mega hotel chains.
However, I see a big opportunity for the independent hotels in the current market. Independent hotels I track are outperforming chain hotels in results, on average.
Looking through luxury travel magazines such as Conde Nast Traveller and Travel + Leisure, independent luxury hotels tend to outshine the chain hotels. And the offers on popular lifestyle travel websites, such as Mr&Mrs Smith, Voyages Privé or Secret Escapes, are focused on authentic experiences delivered by original boutique hotels and luxury independent hotels.
Millennials, the golden market segment everyone has been raving about (and that may be the largest hotel spenders as soon as 2017), also seems to appreciate more authentic and original personalized experiences over a cookie cutter, off-the-shelf product.
So there is quite a good outlook for independent hotels, and not only in the high-end or luxury market.
In the mid-scale and budget/economy segments, independent hotels are also making inroads. Refreshing concepts with original design and personal guest service are popping up, while even in the youth hostel market the product has been improving over the past few years.
All change please
What has inspired or triggered this phenomenon? The world has changed, people have become more aware and expressive of their needs. The modern consumer is much more conscious of what he appreciates and wants. The consumer is not looking for a standardized industrialized product. He is looking for a fun time at a nice place. And the industry is catching on.
Review scores and OTAs have leveled the playing field when it comes to the distribution reach of an independent hotel, compared with a chain branded hotel. By leveraging the online travel agencies and distribution platforms, independent hotels gain a global reach.
At the same time, the stay experience of an independent hotel guest generates good review scores, giving your hotel an advantage as it embraces that global reach and exposure.
As I see it, there are a number of key advantages of independent hotels over chain properties
- More focus on what the guest wants, vs. focus on chain brand standards
- More space for original design, product creativity and a unique identity
- Less bureaucracy and more attention to original guest experience and unique initiatives
- Less overhead cost in terms of chain revenue contributions and marketing fees.
- Freedom in commercial and distribution strategies, without chain regulations holding back the individual property over the chain strategy
- Stronger and more unique local experience oriented marketing efforts
- Original concepts drive higher guest review scores, which brings more exposure.
There is a huge gap in the market left by the chains for independent hotels to capitalize on.
Chains are breaking
From managing a portfolio of 50 independent hotels, all with their own unique identity, we can clearly see that these hotels are outperforming chain properties in their market, bringing in a higher RevPAR and net operating income.
The freedom that independent hotels give owners allows for assets to be created to drive a far better return on investment than would be achievable with chain hotels. Not only can an independent hotel differentiate in its concept and service but also use guerilla techniques in terms of revenue management, distribution and marketing strategies to drive financial results.
I foresee that in the next five to 10 years we will see many more independent hotels being developed than ever before. We might even be at the beginning of the end of the hotel franchise model.
When speaking to hotel owners in Asia, I sense that many are getting fed up with rules, regulations and costs of being part of a chain, without necessarily seeing the business coming through to their individual property. Many are doing the math, and are figuring out that the cost might not be worth the returns.
The first few have even started with removing their brand flag, and the results are very encouraging.
In my book, independent hotels rule! It comes down to a great quirky or authentic concept, and a passionate team with a true hospitality DNA to deliver a unique and personal guest experience.
If your hotel is a story worth sharing, your property will flourish, and rank at the top of the review score charts.
NB: Image by DMStudio/BigStock