Free to be unique


Independent hotels are holding their own despite pressure from large brands

Independent hoteliers facing competition from deep-pocketed hotel groups shouldn’t get intimidated by their rivals’ size. Instead, those hoteliers should remember they have several key advantages over hotel chains, including local flavor, a unique guest experience, and the ability to pivot quickly amid changing market dynamics.

That’s the message from industry executives who have watched many independent hotels thrive amid the post-pandemic wanderlust. In the first quarter, independent hotels charged guests an average nightly rate of $154, compared with $151 for branded properties, according to Jan D. Freitag, national director of U.S. hospitality analytics for the CoStar Group. That company owns STR, which tracks data for the hospitality industry.

High-end independents and those with “access to beaches or to the great outdoors” did especially well as vacationers continued to outnumber business travelers, Freitag said. Even as hotel groups break ground on new properties and acquire boutique hotels to build “collections,” independent hoteliers are hanging tough.

At the end of 2022, there were 25,544 independent properties among the roughly 60,000 hotels in the United States, with independents accounting for 1.51 million rooms, according to STR. Those numbers essentially are flat when compared with 2019. Still, other figures suggest independent properties are under pressure as large hotel groups consolidate and expand.

Entering the year, branded hotels had 131,000 rooms under construction, compared with 30,000 for independent hotels, according to STR. Banks see relative stability in large hotel groups and prefer to lend to them, Freitag said. Owners like the national brand recognition, while customers like the brand standards, he added.


So, with publicly traded juggernauts hunting for market share, are independent hoteliers simply outgunned? Not if they cater to the large share of travelers seeking unique guest experiences, Freitag said. The success of Airbnb proves that many travelers aren’t looking for a standardized brand experience when planning their next trip, he said.

with publicly traded juggernauts“I think there’s a cachet or a benefit to being an independent property where you’re saying, ‘We aren’t like any other hotel. We’re doing things a bit differently; we’re providing a little bit different service or level of service that you won’t get at a branded property,’” Freitag said.

Mandy Murry, a consultant who created the Hospitality Concierge training app for hoteliers, said she’d “100% want to be independent” so she could maintain “full control over my culture.” Free from brand standards covering most aspects of operations, independent hoteliers are “able to create the guest experience that they’d want themselves,” she said.

Independent hotels typically have a deeper connection to the local community than national brands and therefore can offer more interesting packages featuring local experiences, Murry said. They also can quickly change their staffing levels, food and beverage offerings, décor, or technology to suit changing guest preferences. Repurposing underused amenities such as business centers, or changing the layout of the hotel lobby, is easier when you’re the one in charge, she said.

Conversely, large hotel chains can sometimes implement changes at a slower pace. As a result, independent hoteliers who stay on top of industry trends while nurturing their connections to the local community often have a leg up, Murry said. So long as independent hotels have access to high-quality workers, marketing professionals, bankers, and insurance agents, they’re well positioned to compete with big brands, she said.

“The ideal is to always remain independent and to have a good team around you,” Murry said.

Thomas Magnuson, chief executive of Magnuson Hotels, said some hotel groups are putting the squeeze on franchisees, adding to the appeal of independent status. Royalties and associated fees for midscale, branded properties can total 20% of gross revenue, and brands may mandate frequent property improvements that really add up, he said.

In addition, brands may require franchisees to buy products and services from an approved list of national vendors, often at a considerable markup. Brands can get rebates from vendors, and franchisees are barred from shopping around for the best price, Magnuson said.

“As these hotel companies have gotten bigger and bigger, the core mode of operation has moved from value creation for the owner and for the traveler to value extraction from the owner and from the community,” Magnuson said. “We’re seeing this pressure coming down from the franchisors, and owners are saying they just can’t handle it financially anymore.”

In contrast, independent hotels have the freedom to showcase locally sourced products, and to highlight their commitment to local businesses as a marketing strategy, Magnuson said. They can partner with local wineries, restaurants, bakeries, furniture stores, and entertainers to bring local flavor to their hotel and enhance the guest experience.

“Independents can have a lower cost of operation, and they can have freedom of expression and individuality,” Magnuson said. “We’re seeing a real badge of pride among independents that are doing well. They’re saying, ‘We’re part of the fabric of this community. This is where local events happen.’ The power of localization – an independent hotel being a member of the community – has a lot of depth to it.”

free to be unique

For independents and brands alike, the prolonged labor shortage is a major challenge, and both sides have advantages when recruiting jobseekers, Murry said. Hotel chains may offer better benefits packages, and they can allow employees to transfer to different properties for lifestyle reasons or career advancement, she said.

Independent hotels, meanwhile, may be popular places to be seen within their communities, and they may have a non-corporate culture that appeals to many workers, Murry said. Independents near great recreational opportunities such as surfing, skiing, fishing, or camping can highlight that proximity, and their commitment to providing a healthy work/life balance so employees can pursue those hobbies, she said.

“You’re selling that lifestyle to staff members as well as guests because independent hotels are built around local culture and local experiences,” Murry said.

Magnuson said the pandemic erased one important recruiting advantage for hotel chains: the idea that, in a sharp economic downturn, strong balance sheets would enable them to retain more workers than independents could. That perception of job security went away when occupancy rates plunged into the single digits.

Publicly traded hotel companies simply couldn’t look out for their employees and shareholders at the same time, Magnuson said. “The major chains all laid off tens of thousands of workers, and many weren’t rehired,” he said.

National brands spend big on advertising, but there’s not a lot of evidence that those campaigns pull market share from independents, said Rami Zeidan, founder and CEO of Life House, a hotel management company and software provider. Instead, ad campaigns help brands to compete against one another for those consumers seeking a standardized guest experience, he said.

Search-engine optimization can be expensive, Zeidan said, but that approach, combined with targeted marketing on social media, “can enable independent hotels to compete with big brands.”

“Independents can do that without a huge advertising budget because you’re narrowing down your audience to the people who actually might want to stay at your hotel,” he said.

Loyalty programs are a major advantage for brands, which are using smartphone apps to encourage guests to book directly instead of using online travel agencies, Zeidan said. But franchisees bear some of the costs associated with loyalty programs, and sophisticated online shoppers rarely choose a hotel based on points alone, he added.

“U.S. travelers tend to shop around for the best place to book, and independents with a great direct-booking website have every opportunity to compete for their business,” Zeidan said.

Most OTAs offer loyalty programs, so independent hotels may benefit from those indirectly, according to Frances Kiradjian, founder and CEO of the Boutique & Lifestyle Lodging Association. However, high OTA commissions easily can offset that benefit, she said.

Kiradjian said her group is exploring ways for independent hotels to establish loyalty programs but, in the meantime, hoteliers can focus on “instant loyalty” initiatives, such as giving guests locally inspired gift baskets along with a handwritten note, she said.

“I think instant loyalty is very well received, whether it’s an upgrade or a nice amenity in the room,” Kiradjian said. “If a budget-conscious traveler has points to use, you’re not going to stop that, but I don’t think it’s a detriment to a boutique hotel. It’s probably 50/50, the number of people who care about the points and the number who really want that unique experience.”


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