With an 88 per cent share of the market, independent hotels form the backbone of the European hotel industry, and they often offer a better price/performance ratio than chain hotels according to results of a recent analysis conducted by HRS. An overnight stay in a three-star independent hotel costs, on average, 84 euro (£71) – that is 15 per cent cheaper than in a chain hotel of the same category. In the four-star category, independent hotels are ten per cent cheaper. In the luxury hotel sector, the average price difference is eight per cent.
Independent hotels: higher guest satisfaction but lower room rates
Chain hotels often incorporate a marketing and franchising fee into the room rate. Independent hotels, on the other hand, operate leaner structures and are usually run more efficiently – which has a positive impact on costs. As a result, they can invest more in facilities and services to ensure an equal or better quality of service despite their lower rates. Travellers appreciate the value for money and rate medium-sized hotels as high, or even higher, than large chain hotels. According to HRS’s analysis, the average rating for independent hotels is 7.48 out of ten, compared to 7.42 for chain hotels (three-star category). In the four-star category, independent hotels are on an equal footing (7.93) with chain hotels (7.92), despite the rates being ten per cent lower. Only in the luxury sector do the chains score more highly (8.25) than the independent hotels (7.74).
Business travellers often still prefer chain hotels
In terms of sheer numbers, independent hotels dominate the global hotel market. In Europe and Asia, they are the very foundation of the hotel industry, with a market share of 88 and 95 per cent, respectively. Yet, despite offering better value for money, they are still often overshadowed by the chain hotels when it comes to doing business with global companies. The reason for this is market fragmentation. The lack of transparency associated with medium-sized hotels presents a huge challenge for corporate travel managers when putting together their hotel portfolio. Therefore, in order to minimize the time and effort spent on negotiations, many companies are inclined to turn to selected hotel chains rather than negotiate with a multitude of independent hotels. However, by categorically disregarding the majority of the market in this way, companies are missing out on as yet untapped cost-saving potential.
Huge savings can be gained from embracing independent hotels
“At first sight, the focus on negotiations with chain hotels seems reasonable. But by including independent hotels in the discussion, companies can make huge savings on room rates and, at the same time, meet the needs of their travellers more effectively,” explains Keith Watson, Director, Hotel Solutions for Western & Northern Europe at HRS. HRS has around 180,000 independent hotels available on its booking portal. With the Intelligent Sourcing solution, HRS takes care of the central negotiation of corporate rates on behalf of its customers. This negotiation also includes smaller owner-operated hotels in the corporate hotel programme. Following a customer needs analysis, HRS invites suitable hotels to submit a quote via a proprietary platform. For travel managers, this service represents significant time saving, because all they need is a contact person for the hotel – and the independent hotels in particular – it opens the door to global business with international corporate groups and enables the smaller hotels to compete with chains.
The white paper “Think Independent” is available for download here.