Independent Hotels Decline Due to Mergers, Funding Problems

Not long ago, independent hotels were on the rise. Their ability to offer experiences different than the larger, branded hotels appealed to the younger generation, anxious to have one-of-a-kind experiences.

Roughly 30 years ago, independent hotels accounted for about two-thirds of the properties in the hospitality industry. And just two years ago, a study by Expedia found that they had a greater average daily room rate and faster overall growth than their branded counterparts. But today, independent hotels account for less than 30 percent of hospitality venues.

Multiple factors account for this decline. In “The Shifting Scene of Independent Hotels in America,” a research report by STR, a systems and tech research company, various reasons were unveiled, such as independent hotels’ lack of funding in comparison to larger brands, such as Marriott and Hilton; the steady absorption of these independent hotels by larger brands; and smaller hotels’ difficulty in keeping up with the ceaselessly changing industry.

Blurred Lines

Some boutique brands, such as Autograph Collection—which is owned by Marriott International and has more than 175 properties globally—have the benefit of both retaining their autonomy and receiving financial backing from larger parent companies. Each Autograph Collection hotel has its very own look and feel, making it improbable that most consumers can discern that any two are under the same umbrella.

Due to the degree of independence of subsidiary hotel brands, it’s sometimes difficult to distinguish between a boutique property that’s owned by a large company and one that is truly independent­­—financially and otherwise. And as large companies continue to grasp more control of the hospitality industry, smaller, independent hotels are suffering.

Potential for Expansion

Big brands are much more likely than small, independent hotels to buy property to build new hotels, according to the study by STR, a systems and tech research company. This is partially due to lenders viewing larger, more reputable companies as less of a financial risk, said Ting Phonsanam, founder of Momentum Hospitality Group.

Small hotels don’t have big-brand financial backing to aid them if they need renovations, expensive repairs—or a revamp after a natural disaster, which could put them out of business. According to the STR report, from 2003 to 2007—which saw more than three dozen hurricanes, in places such as the Gulf and Atlantic coastal regions of the United States—1,000 independent hotel properties faced a permanent closure.

Growth in Different Places

Despite independent hotels’ decline, the number of hotel properties in the United States has been increasing, from 38,000 in 1990 to 56,000 in 2018. Much of this growth is in midscale properties, which increased from 4,400 in 1990 to more than 16,000 in 2018, and upscale hotels, which grew from 2,500 properties in 1990 to 7,500 in 2018.

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