How independent hoteliers adapt to the changing cycle
 
How independent hoteliers adapt to the changing cycle
23 AUGUST 2017 12:30 PM

Hotel owners and operators shared their best practices for independent hoteliers working their way through a changing industry cycle.

NASHVILLE, Tennessee—Being part of a larger brand in the hotel industry can help a property weather the ebbs and flows of the cycle, but owners and operators of independent hotels must navigate those challenges on their own.

Executives sitting on the “Cycle dynamics for independent hotels” session at the 2017 Hotel Data Conference talked about what they’re doing to make their way through the current industry cycle.

Consolidation
Marriott International’s acquisition of Starwood Hotels & Resorts Worldwide created the one big industry monster, said Matt Marquis, president and CEO of Pacifica Hotels, but there are other mergers to watch. Two Roads has had an interesting run, he said, and the Pritzkers have put together an interesting independent group.

“Is that going to be a trend we see, more consolidation?” Marquis asked, adding that’s something his company has considered for both acquiring properties and mergers.

Throughout the industry, people are looking for that opportunity to make their company more competitive, Marquis said.

It’s interesting to see how Marriott and Starwood affect the marketplace, said Sarah Gulla, VP of asset management at LaSalle Hotel Properties. Marriott now has 30 brands, she said, noting she’ll watch to see how the company differentiates those brands. Gulla said it’s important to look at some of the other mergers, such as InterContinental Hotels Group and Kimpton Hotels & Restaurants.

“It’s two years old, but we’re still waiting to see the end result there,” she said.

IHG didn’t really have a player in that space, she said, and Kimpton directly competes with a lot of independent boutique hotels.

Lori Kiel, chief revenue and marketing officer for Kessler Collection, said IHG’s acquisition of Kimpton left people in the industry with some questions, including what does IHG know about the independent space?

Soft brands
Kessler Collection properties had been around and independent for a long time before Marriott introduced the Autograph Collection, Kiel said. Seven years into Kessler’s relationship with Autograph, the largest benefit to Kessler has been the pipeline. Independents are still at a point where Kessler has to take numerous channels and meld them together to get mock average daily rate and revenue per available room, she said, but with a brand like Marriott, there’s one large and powerful one.

“You can be far more strategic because you’re not having to fight for the drive in as much as you’re able to yield out what you don’t want,” she said. “That’s the big power play.”

Another positive is the marketing available through the brand, Kiel said. Hoteliers in soft brands don’t have to do as much if the brand knows how to do it and does it well. It did take Autograph a while to get off the ground and find its own voice and an audience that would listen, she said, but independent hoteliers typically know their audience because they’ve defined who that is.

“We want the people in the building that get it,” she said.

Brands are a little more agnostic, Kiel said, and soft brands can sometimes find some opacity as the brand is in it for the franchise fees and dollars to be made. In the independent space, it’s looking for profitability while also being choosier to make sure the vision created for the hotel is known to those that stay, she said.

Pacifica Hotels acquires and develops a lot of hotels, Marquis said. In looking to eliminate risks, soft brands come in with trainings wheels, which lets them come in and do what they want to do with a property with a brand behind it, he said. There are three to four Pacifica properties the company is looking at as possible conversions to Autograph or Tribute collections, he added.

Many lenders are requiring having a soft brand behind developing an independent-type property, Gulla said, because they’re familiar with the brand and they know how they work.

“Does it eliminate all risk? Absolutely not,” she said. “But does it eliminate a lot of it? Sure.”

Gulla said LaSalle plays in all spaces, from independent to fully branded hotels. As the cycle evolves, there’s more flexibility being the owner of an independent hotel than the owner of a branded hotel, she said. Independent hoteliers can make changes to their in-room dining, food-and-beverage offerings and amenities in the room, but there might not be as many options in a branded environment.

Kiel said her No. 1 way to market as an independent hotel owner was through an online travel agency, which was an expensive play that required her to consider OTAs as part of her marketing team. When part of a soft-brand collection, she said, there are more boundaries, so the hotel marketing team can’t throw everything at the wall to see what sticks.

“It requires you to calm down and let the cycle go,” she said.

Kiel said she has seen a shift in ADR following that calmer approach.

Airbnb and alternative accommodations
Companies such as Airbnb are competing with every hotel in the market, Gulla said, as guests are paying someone else to stay there and not the hotels. They’re largely targeting millennials, but they’re creeping into other areas, such as business travelers.

This is a tremendous opportunity for hotels because they can provide localized experiences while also being a safety net most people are familiar with, Gulla said.

There is not an Airbnb product that compares with some of the hotel industry’s top rooms, Marquis said. Airbnb’s Chip Conley was a genius with the company’s marketing, he said, but at the end of the day, it’s about economics. People go to Airbnb because they see the Dream Hotel in Los Angeles is $1,000 a night but an Airbnb rental is $400 a night and go there. Airbnb and companies like it mean hotels won’t be able to push rate as high as possible during peak times in their markets, he said.

“Maybe that’s a good thing, it makes us think outside the box a little bit and create a better experience,” Marquis said.

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