Only 30 years ago, about two-thirds of the hotels in the United States were independent, but now it’s less than 40%. Why is that, and what does it mean for those who are looking to open a hotel?
It really depends on what matters most to you as a business owner: safety or control. We will explore the details below, but essentially joining a parent brand comes with a myriad of resources, experience, and support that takes much of the gamble and guesswork out of opening a hotel. Alternatively, running an independent hotel means that you have complete control over design and management, but you are taking a risk based on your confidence in your own vision.
A hotel franchise is tied to the parent brand. This means that the name, design, marketing, hours of operation, website, and certain financial elements are decided by the parent company. Rather than starting an independent business, you are joining a massive network of hoteliers all under the same brand flag. This option is particularly tempting to a first-time hotelier.
An independent hotel is exactly that: independent. You are starting your own business which means you have total control over the name, design, marketing, finances, and all other areas. This can be especially tempting for hotelier’s with a very specific vision for the experience they want to provide.
Especially when you are first opening your franchise, being a part of a larger company is extremely helpful. The parent company will provide you with training and help with things like site selection, design, construction, financing, and the grand-opening. The brand will also attract the best, most experienced employees right off the bat, whereas you may have to spend time building a reputation before recruiting the best of the best when opening an independent hotel.
Independent hotels have more freedom to focus on the guest experience they want to provide, not guided by brand standards and requirements. This means you can make choices about the hotel based entirely on the customer. While brand standards are based on years of experience and exist to ensure a positive guest experience in every location, they can’t be sensitive to your specific locale or a more specialized target audience.
Opening a branded hotel means that you will benefit from the financial wisdom the company has collected through decades of experience and you’ll be less likely to be exposed to the more common mistakes and follies of a first-time business owner. That is a large part of why procuring a franchise loan is much easier than getting an independent business loan, which can make a big difference when you’re starting out.
Successful hospitality brands also enjoy collective buying power when it comes to furniture, fixtures, and other hotel necessities. By joining a brand, you can enjoy discounted prices and reduce your project costs.
Being a part of a larger company also provides you with a larger financial safety net. In the case of a natural disaster or economic downturn, independent hotels are often forced to close because they lack the funding to rebuild or operate on reduced revenue.
While guidance and advice can be extremely helpful, privacy is also important when it comes to financial statements and decisions. Independent hoteliers have far more control over budgeting and spending and, aside from taxes, they aren’t required to report these activities to anybody.
When it comes to opening your hotel, going the independent route means a much smaller investment and no Royalty Payments. Opening a branded hotel comes with less risk and you’ll likely begin making profit sooner, but those perks don’t come free as you have to pay an initial lump-sum to the brand as well as continued Royalty Payments. If your independent hotel does well it could wind up being more profitable.
Choosing a design for hundreds of rooms and several public spaces can be extremely overwhelming. A franchise is bound to a design scheme provided by the parent brand, which takes care of all of the creative work. The project also becomes significantly less complicated when you are provided with a list of vendors, contractors, and manufacturers to work with. You don’t have to worry about the quality of FF&E items because everything has been pre-approved by the brand.
The reason why we were able to create the HotelFurniture.com online builder is because all designs for branded hotels are prototyped, so you can use the items and vendors that are brand approved to design hotel rooms online. This is another way franchised hotels may be the better option for some owners.
Alternatively, if you are interested in design and want more creative control over the look of your hotel, franchising might not be the right fit for you. In order to create a specific and unique guest experience through alternative design, you can’t be restricted by brand standards. This is why independent hotels are often designed in a specific theme based on the local culture and scenery. While we of course believe that there are ways to customise and take pride in your design, we understand that this is extremely limiting for independent hoteliers with a specific vision in mind. Apart from design creativity, you also may run into other brand standards that you don’t like, such as breakfast buffets or hand-sanitizer stations.
Branded hotels are recognised and marketing through the brand is covered, making the enormous task of marketing less of a burden. Consumers already know and trust the experience at your hotel.
It’s great to have marketing handled for you, but franchisees usually have to pay for that service as part of their fees. This can be costly and frustrating, especially when you aren’t able to make any decisions on how your money is spent. This also prevents you from implementing marketing initiatives of your own or catering specifically to your local audience.
There is no right answer on what hotel ownership structure is right, but hopefully the information provided can help start you on your way on what works best for you.
This information is intended to provide you with context of a franchise vs independent hotel, and is not considered business advice.
If you would like to chat with us about how we can help you streamline your guest room design process, get in touch today.