The main pro of a hotel chain is reliability, meaning that wherever a guest goes they can know what to expect, which is generally a high level of service. 70.32.113.124 A hotel owner needs to assess the benefits and costs of affiliating as well as compare various affiliation alternatives against each other (Carlbck, 2017). Example: an employee for 50 reservations instead of 10 is more profitable. Your IP: The aforementioned brand impact isnt the only area where hotel financing differs from other CRE asset types. On the other hand, Patel noted that in an independent hotel, you dont have someone looking over your shoulder, which offers an investor more flexibility, particularly with regard to reducing expenses; a consideration that becomes particularly critical during turbulent economic periods, such as the one the industry is currently experiencing. Brands can also be critical if youre courting the business travel market. When the brakes come to a halt in the broader economy, they come to a halt in the hotel industry, he said. He added that in order to weather downturns, you really have to ensure that your capital base is built to withstand economic turbulence.. If you continue to see this message, your account may be locked due to too many failed attempts. a. Evolving consumer preferences. Franchise Operators Agreement. Freitag said that another key advantage of hotels is their widespread distribution, which opens up opportunities for investors in almost any market in the country. Patel said that, if everything goes according to plan, investors can expect annual returns approaching 20%, which is certainly impressive when considered in comparison to other real estate assets. While independent hotels tend to be singular and not belong to a group, more and more chains are starting to acquire these types of hotels to diversify their portfolios. Independent Hotels Vs Franchising - Which is Better? Volume: hotel chains, due to their standard and extensive offer, benefit from economies of scale due to the expansion of their business and the reduction of costs for bulk purchases and management. These things stand there for 30, 40, 50 years, but consumer tastes change, consumer preferences change. International Journal of Contemporary Hospitality Management, 18(5), 398-413. doi: 10.1108/09596110610673538, Hua, N., ONeill, J., Nusair, K., Singh, D., & DeFranco, A. We apologize, but the feature you are trying to access is currently unavailable. The author analyzed the performance of hotels that changed brands and suggested that the effect of the brand itself should be separated from the hotel's fit with the brand. According to Freitag, approximately 70% of hotels in the United States are branded. Carlbck (2017) posited that affiliation is necessary when a business is focused on growth and development. With an independent restaurant, you might run into some hurdles if you want to sell. Comparing The Benefits of Boutique vs. Chain Hotels - Social Tables Based on conversations with various industry experts, LoopNet developed the following list of distinctive elements and important considerations for investors contemplating hotel properties: The Brand Element (To Brand or Not To Brand), Jan Freitag, national director of hospitality market analytics, CoStar. The identity of Independent Hotels is unique. Not long ago, independent hotels were on the rise. When you run a franchise, the franchisor is the one who tells you what food you can serve, what your location must look like and what procedures you must follow in your daily operations.
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