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Independents Need to Leverage Their Revenue Advantages Over Branded Hotels

by Ed Watkins, Contributing Editor |

As recently as 10 years ago, it would nearly be foolish for a developer to build a hotel without a well-established brand name. Hotel guests were among the most brand-conscious consumers in the economy, so the daily battles for business typically pitted branded properties against other chain hotels. Independents were rarely in the mix.

Today, that dynamic has changed drastically. Consumers are much more willing and actually enthusiastic for independent hotel experiences, particularly those they feel are authentic and personalized for them. And thanks to a broadened distribution system it’s much easier for travelers to find and book these kinds of independent hotels.

This shift gives revenue managers at non-branded hotels opportunities and challenges that RMs at chain properties don’t have.

What gives independent hotels more pricing power than brands? Click To Tweet

LEADING THE PACK

Those owners and operators who’ve taken a chance and gone independent have been rewarded. New data from STR and Expedia show the independent sector of the hotel industry recording higher ADR and RevPAR than branded hotels during the first part of the 2017. The trend is forecast to continue into 2018.

For 2017, STR says independent hotels will show the largest increases in occupancy (up 0.9%), ADR (up 2.8%) and RevPAR (up 3.7%). Next year, the independent segment is likely to report flat occupancy but with a 2.3% rise in RevPAR. All other segments of the hotel industry are forecast to see declines in occupancy.

Revenue managers at independent hotels or companies that operate non-branded hotels have more responsibilities and pressures, since they can’t rely on the brand to generate 20%, 30% or as much as 40% of their bookings. Branded hotels, especially those part of top-tier brand companies, have the advantage of immediate consumer recognition and acceptance. It takes time, money and resources for independents to become well known and preferred by travelers.

And while it has taken time for them to catch on, it appears the brand company marketing campaigns to increase direct bookings are beginning to work. Yet, today and going forward independent hotels hold distinct advantages over branded properties.

AN INDEPENDENT STRATEGY

Logically, one of the main reasons independent hotels have been able to excel in recent years is the proliferation of alternative distribution channels available to both guests and hotels. In the nearly pure branded world of another time, guests could call a hotel directly, use brands’ 800 numbers or show up and hope to get a room. Later, direct booking through brand websites added another channel.

Today, consumers can turn to an endless stream of booking choices, which conversely give revenue managers at independent properties a vast array of distribution channels from which to employ to book business. Unrestricted by chain mandates, smart, creative and bold revenue managers can work to find the right platforms to aim at the right guests at the right rates for the right booking dates.

Shifts in the way corporate and group travel is booked has also benefitted independent properties. For a variety of reasons, many corporate travelers and meeting attendees book their hotel stays outside of their companies’ booking platforms or group blocks. While corporate programs typically feature static negotiated rates, many corporate travelers have discovered by booking through online travel agencies or directly with hotels — including independents — they can access dynamic rates while gaining extra benefits from the hotels.

Revenue managers at independent hotels typically work in organizations with shorter chains of command, giving them additional latitude to set rate and distribution strategies. But it takes an RM with a little moxy to exercise the freedom an independent environment offers.

They can promote limited-time offers whenever they need and to whatever guest groups are appropriate. Packaging is another area where independent hotels can stand out. Instead of offering standard brand-mandated packages (room and breakfast, free parking, etc.), an independent hotel RM knows the property’s guests, what interests them and is able to develop individual guest packages for the various cohorts that use that hotel. Also, independents have the flexibility to create personalized rates and packages and to test what works and to revise as necessary when needed.

Also, independent operators are able to market packages and their hotels in general through their own email lists and social media outlets to those guests who choose to follow them. In a branded setting, it’s harder to differentiate your property from another in the chain or any other branded hotel in the marketplace. It’s not just a cliché to say every suburban full-service Marriott is just like the one in the next city.

Another key reason revenue management at independent hotels is more dynamic today than it was 10 or 15 years ago is technology. An array of solutions are available for every type and size of hotel, and since everything is 100% cloud-based, the acquisition of top-notch technology is possible for even hotels with 40 rooms.

Thanks to members of Duetto Research’s Customer Success team, especially Augustin Cacot and Gayle Ehrean, for their help in creating this blog. 

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Ed Watkins, Contributing Editor

Ed Watkins, Contributing Editor

Contributing editor at Duetto
Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.
Ed Watkins, Contributing Editor

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Ed Watkins, Contributing Editor

Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.