The Independent Hoteliers Conundrum, “Can I (or should I) do it all on my own?”

Independence is your raison d’être yet you often wonder if it would be better to have more external support. The options available in sales, marketing, distribution, and management typically swirl around your head. Perhaps more so during troubling times? 

You don’t want to give away control of the business, become just a number and provide a bland experience for your customers. But times are hard, generating revenue and ultimately cash is key to survival and compromises may be in order. 

What’s the answer? In this article, the first of a series, we consider partners and brands (we’ll cover more topics in later articles). So, let’s see if there’s an option that suits you best, whilst focusing on 4 key decision areas; 

• Cost
• Return 
• Independence
• Long term impact

For the purpose of this article we’ll consider certain Distribution Partners, Consortia, Soft Brands and Core Brandswith our key decision areas being influenced by the levels of branding and integration. 

Firstly, we’ll cover some of the main players within the UK.

Distribution Partners

Distribution partners do just this, they distribute your hotel’s bedroom inventory and rates and packages, through global networks to increase its visibility to new markets and customers with reservations being made via their booking platforms. The likes of HotelREZ, TravelClick and Navarino for example, who don’t require branding or onerous membership agreements, may be an option worth considering. Often the distribution partners Central Reservation System (CRS) provides distribution across all Global Distribution System (GDS) platforms along with Internet Distribution System (IDS) channels. Connecting to the likes of Sabre, Amadeus, Travelport and DHISCO. These ensure you are available to book, globally, by thousands of Travel Agents, Travel Management Companies, Hotel Booking Agents and Corporate Clients. 

Consortia

As an alternative to the soft brands and more connected than the distribution partners, consortia provide additional benefits, to that of a distribution partner, specifically; increased distribution, and sales and marketing. Consider, Leading Hotels of the World, Small Luxury Hotels of the World, Preferred Hotels & Resorts, Mr & Mrs Smith and Classic British Hotels to name a few. 

Each of these consortia is effective, to varying degrees, in driving business to your hotel and the choice of which one to choose can come down to the segments and channels you need to work with, for both corporate and leisure business. 

In terms of corporate business, and granted there is very little corporate travel currently, do you expect there is enough volume of business that books via Agents and the Global Distribution System once we get back to some form of new normal? The strength in using these types of partners, rather than just connecting directly to a GDS provider, is in the partners recognised chain code (the code that precedes your hotel name in the systems used by the agents) and that you are more likely to feature higher up the agents search due to the preference given to these organisations and their hotels. These partners will also assist in driving corporate business through their sales activity with the agents (AMEX, Capita etc) as long as your hotel is situated in an area that has enough corporate business that you can avail of or is currently using a competitor property. 

With regard to leisure business, and some of these consortia are better than others, the consortia can generate business through; their own customer databases, their distribution expertise, their own online marketing, and their reward / membership programmes (varying degrees of membership size apply). 

As an example, you may consider, if you fit within the boutique and luxury sector, Mr & Mrs Smith, the “Travel Club for Hotel Lovers”, who have 1,200 properties in 80 countries and who recently partnered with IHG to be listed in their (IHSs) direct booking channels and allow IHG members to earn and redeem points in some of the Mr & Mrs Smith properties. 

Soft Brands

Here we have found a blurring of the lines in recent years as consortia have hardened their marketing and brand propositions slightly, whilst the core brands have entered the independent space realising there is a market up for grabs. At the same time the core brands were unable to badge many more hotels in certain locations and needed a new vehicle. 

So, for the purpose of the article we describe a soft brand as a collection of hotels using a core brands system / platform and without the need to adhere to certain hard branding requirements, rules and regulations and potentially having different features and amenities. Consider the likes of Trademark Collection by Wyndham (collection of “distinctive” independent hotels), Curio – A Collection by Hilton, Ascend by Choice, By Magnuson Hotels, some Best Western brands including, BW Signature, SureStay Hotel by Best Western, SureStay Plus Hotel by Best Western and SureStay Collection by Best Western. Consider, perhaps, that with all the brand variations there is too much consumer choice, which may lead to brand confusion.

Clearly the key benefit is the utilisation of a powerful brand platform, including; distribution, CRS, sales and marketing, loyalty / reward programmes and all without the need to go through extensive refurbishment programmes (PIPs). 

Core Brands

Core brands, many of whom are bringing out more and more independent friendly brands to the market (again, is it now becoming too confusing for consumers?), may include, Accor’s; Mercure, Ibis, Ibis Styles, Ibis Budget. IHG’s; Hotel Indigo, Holiday Inn, Holiday Inn Express. Wyndham’s; Ramada, Days Inn. Hilton’s; Hampton by Hilton, Hilton Garden Inn, DoubleTree by Hilton, Best Western core brands. Each of these international brands have many more brands of course. More recently, in relative terms, the introduction of Magnuson Hotels perhaps creates an alternative. Sat within the core brand camp with its Magnuson Grand and Magnuson Hotel, yet unusually they apply no stringent property improvement plan (PIP) criteria. 

Core brands bring powerful platforms, distribution, PMS (in some cases), CRS, revenue management systems, active loyalty and reward programmes, brand recognition and potential for increased asset value, but at a cost, in terms of fees, control and identity. As we’ll mention later the decision whether to go down this route or not must be tied, in part, to revenue delivery and assurances thereof.

Driving the top line is going to be vital over the next 18 months as we recover and aim to get back to pre-pandemic levels. There are compromises with most of these core brands and soft brands as you’ll be associated with the chosen organisation, its reputation and that of its other hotel members, and you’ll potentially be seen in the same light, good or bad as that may be. 

4 Key Decision Areas

The choice is vast, and decisions must be made based on several factors, including, 

• Independence 
• The impact on how you operate, which moves from no impact (distribution partners) to huge impact (core brands)
• Brand alignment, does the brand really reflect the style of your hotel and align to the expectations of the customers you attract or want to attract? 
• Support, how much focus and genuine attention will you get as a customer? 
• Long Term Impact 
• How long are you tied into the agreement, is there a break clause included? The commitment level rises as you move from distribution partner to core brands. 
• How will the length of the agreement affect your exit strategy? Will it add value having a brand in place (add to the price you can achieve with brands generally improving multiples) or will selling the hotel with a brand in place put off certain hoteliers, investors and operators?
• Once signed up you have to adhere to brand standards and even major re-brands with the core brands. Whilst in the same instance you are tied to certain systems (PMS and distribution) with all the distribution partners and brands. Some of these systems may not be as well developed for the future as you think. 
• Cost 
• Onboarding – property costs driven through property improvement plans (PIP), signage, systems and integration costs, training etc.
• Operating fees – membership, marketing, royalty, commissions, rewards, distribution and channel costs, and more.
• Return
• Perhaps most important of all how much profitable business will the partner or brand deliver for you through their systems and what guarantees are in place? 
• If the partner or brand can demonstrate to you their ability to deliver and is able to determine the level of new business delivered through their own systems, and not purely redirected existing business (hotels own website or OTA), then any compromises on identity and control may well be worth it. But don’t cannibalise your existing business (a point worth making twice).
• With greater distribution to different markets core brands may have a greater impact on ADR and occupancy (%) and command a higher multiple when it comes to asset valuation as previously mentioned. 

Lots to consider and we haven’t even scratched the surface really! It is not easy to compare the value proposition of the available core brands, soft brands, consortia and distribution partners and often for this reason hoteliers go for the easiest route, which is certainly not always the best and can often be an expensive mistake both in fees and missed revenue opportunities. You should also never underestimate the work that goes into making a major transition and the fact that any relationships needs to be worked at, any switch to a partner, consortia or brand will require initial and ongoing work if it to prove successful.

Internal resource and lack of skillset are, in economically difficult times, often impacted and outsourcing elements of the operation to bring additional expertise, knowledge and experience into the business in a way that delivers cost benefit should be seriously considered. Those hoteliers that plan ahead and get ahead of future challenges more often than not find themselves not just surviving but growing and leading the way. 

During the next 18 months the UK will, hopefully (no one can predict with any certainty), move towards the pre-pandemic levels of trading. STR in its September 2020 report suggested that Q4 2021 occupancy will see London and the UK Regionals 10-15 and 10 percentage points lower than 2019 respectively. Whilst ADR in London may be 15-25 % lower than 2019 with the UK Regions 10% lower than 2019. This is just one potential outcome of course, with much riding on the next 6 months.

To ensure you are at least in line with the predicted trends, trading profitably, driving sales, keeping ahead of your local market, can you do it all on your own or would a carefully selected and suitable partner(s) or brand strengthen your chances of coming out of this in the best possible position. It may be a decision that needs to be made, despite some compromises. 

Can you afford to work with a partner or brand, can you afford not too?

Apart Hospitality