Independent hoteliers don’t have a level playing field with the big brands when it comes to attracting direct bookings. But smart use of social media can improve things a lot.
I’ve reported frequently on branded hotel companies, and last week I interviewed the CEOs of Marriott and IHG on stage at the Skift Global Forum.
So I wanted to switch gears and take the pulse of the independent hotel sector.
I talked to Andrew Benioffwho knows as much about independent hotels in the US as anyone I know.
- Benioff is founder and managing partner in Philadelphia LINROCK REALITY PARTNERSA company that invests in and develops independent hotels.
- He is busy preparing for independent housing conference It will happen next month in Los Angeles.
- It is America’s largest festival for independent hoteliers and designers, and was founded nearly 15 years ago.
Benioff told me that independent hotel ownership is not for everyone.
- “If you are a developer and want to invest in housing, the easiest and least risky option is to find a location, roll out a specific service product from a major brand, hire one of the few hundred management companies in the United States or perhaps hire a brand to manage it,” Benioff said. .
- “For the most part, depending on how much interest you or your asset manager pays, you will make somewhere between a very good amount of money and a lot of money,” Benioff said.
- “Independent hotels are, as a rule, more difficult to fund than branded hotels,” Benioff said. “I come from the mortgage banking industry and have worked in both branded and unregistered transactions. It’s guarded. The gate opens more often to independent hoteliers than it used to but doesn’t open as often.”
- “Some banks and lenders don’t realize that between 90 per cent and 95 per cent of the benefits enjoyed by the big brands can be mitigated through many other means,” he said.
- “Investing or developing independent hotels is basically something you do when you want to leave a legacy that goes beyond, say, dozens of buildings and a pile of money,” Benioff said.
- “Independent hotels can be profitable, but they can also be a nuisance,” said Benioff. “You do it so you can say, ‘You made something really compelling and meaningful to people who will remember it for years. “
Social media can be a “change agent” for independent hotels when it comes to driving direct distribution.
- “Big brands have great loyalty programs in driving direct bookings,” Benioff said. “They have an advantage there, although there are some loyalty programs for freelancers as well.”
- “Freelancers can make up for the rest by creating a hospitality experience that guests talk about with everyone they know,” Benioff said.
- Social media can help independent hoteliers attract more direct bookings and avoid commissions charged by online travel agencies.
- “Social media can be a game changer if you have an inspiring and impressive design with delicious cocktails,” Benioff said.
- “If you assign someone responsible for social media marketing at the associate level, they could get their compensation back within a month thanks to the enhanced flow to the bottom line, depending on the property and location,” he said.
Higher interest rates have complicated deal-making for independent hotels.
- There is a disconnect between capitalization rates – a measure of property returns – and financing rates – or the cost of debt.
- Capitalization rates have fallen since before the pandemic. In some US markets, it was at about 4 percent, down from about 5 percent before.
- However, the cost of industry debt rises to more than 6 per cent.
- The situation will correct itself. Capitalization rates should rise over time.
- “But for now, the owners still want very high ratings,” Benioff said. “However, buyers cannot fund purchases because deals generally don’t make sense.”
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