BY: Stephen Medel, Director of Acquisitions & Development
Yeah, yeah, we know! We’ve all heard that putting a national franchise flag on your hotel is a surefire way to secure an attractive loan; and the huge associated fees are a necessary evil in order to leverage the brand to have access to their reservations system and rewards program. While this may be true in SOME cases, at broughtonHOTELS, we stare down the barrel of this paradox everyday. With well-operated independent boutique and lifestyle hotels outperforming their branded counterparts, it’s time to take back the reins, enjoy more freedom and greater returns on your investment.
Here are 5 reasons why you should give your brand the boot…today:
1. They lack FLEXIBILITY!
By definition, national brands provide standardization and conformity so that even the lowest common denominator (poor hotel operators and under capitalized projects) meet some basic standards, and guests’ expectations. These tightly held standards limit freedom for the nimble, creative and savvy types who often crave some autonomy so they can quickly respond to changing market conditions, new competitors, and shifting demographics and psychographics of today’s travelers.
Freedom from the franchise allows savvy operators (who are closest to the needs of the hotel) to make needed changes to operations and sales & marketing initiatives long before the powers-that-be at Brand HQ are aware there is a problem at the property level. Professional operators live and breathe the hotel and its market conditions, and should be afforded the freedom to turn on a dime.
2. Independents offer BETTER RETURNS!
Rate and RevPAR surveys show that properly positioned, professionally operated, independent boutique and lifestyle hotels have no perceived rate ceiling among potential guests. That increase in ADR flows right to the bottom line…sounds nice, doesn’t it? Do we really need a brand dictating how much we are able to charge per night?
Experienced, sophisticated hotel operators with strong relationships in the GDS and reservation booking system arena offer reach and exposure at a fraction of the price of brand-delivered reservations. You may have heard that brands offer inexpensive per reservation transaction fees when booked on the brand site versus other electronic sources, however, the pass-through and transaction fees can easily approach $30 per reservation if you are not careful.
Consider the alternative, pay your franchisor 8-10% of gross revenue, or let those dollars flow through the business, right into your pocket. Cash is king, right? Wouldn’t your investment partners or family give you a huge pat on the back and fund more deals with you in the near future if you provided them substantially better returns by not paying franchise fees?
3. NO PIP’s!
Every franchisee dreads the day their PIP inspection roles around every 4 to 5 years. Imagine never having to worry about another multi-million dollar PIP coming through to pay for someone else’s idea on why your F&B operation needs to be renovated. Why not secure an FF&E reserve with your lender, and maintain control of where your dollars are spent. This gives you an opportunity to reinvent your hotel and revitalize YOUR brand rather than conforming to the aforementioned standardized look and feel.
Reinventing your hotel is exciting, but not a job for the inexperienced owner. Work with a well known design firm who understands the hospitality space, understands the importance of working on a budget and gets the DNA of your hotel and guest. Your hotel design needs to be practical and thoughtful. Remember, at the end of the day, it should be about your guests needs, not your ego.
4. BIG BRANDS ARE FRACTURED
Franchisors are in the business of selling franchise agreements, period. And when they have sold every brand in every city, and have blanketed the market with areas of protection, then what? A new brand is developed which perpetuates this concept of fractured brands, at times to their detriment. Before they know it, a brand could have 10, 12 or 15 different brands under its umbrella and attempt to have rate integrity within each market segment.
Best Western Hotels (although not a traditional brand) are a prime example of this. Best Western for years has been known to put at least two hotels within a single market. With the advent of Best Western Plus and Premier, most cities now have multiple BW properties, which further confuse the guest who doesn’t understand the difference between BW’s 3 classes of properties and views them all as equals. This confusion leads to unmet guest expectations, negative online reviews, and deters brand loyalty.
5. Disposition = MORE OPTIONS
Hotels that are sold unencumbered by a brand are viewed as more attractive acquisitions than their branded counterparts. Of course, not all hotels are created equal — a road side motel in Bakersfield is not the same as the Georgian Hotel in Santa Monica. But sophisticated buyers are looking for upside and need options. A branded hotel on the open market with 15 years left on an agreement will limit those options. An independent hotel, however will open the doors for a variety of buyers and help increase the perceived value and upside to a project.
With that said, certainly branded hotels have their place and more often than not, justified. Just take a look, over 95% of the total inventory in the US is made up of branded hotels. We applaud lifestyle brands like Autograph, Indigo and TRYP because they allow owners the freedom to design a unique product, without the same level of standardization omnipresent as is the case with other branded counterparts. We challenge you to remove your brand blinders and consider the upside of going independent.
WARNING: Don’t boot your brand if you expect to operate the hotel by yourself, but lack the experience of operating an independent hotel. There are simply too many moving parts to the operations and sales & marketing programs that need seasoned oversight. Experienced operators possess the experience, savvy and SOPs to maximize property potential; and have developed the national pricing programs for services, supplies and amenities that keep operating expenses competitive with their branded brethren.
If increased freedom; improvement in market penetration, RevPAR, and Gross Operating Profits sounds appealing, consider enlisting the ally of a professional independent hotel management company and boot your brand today.