The (seemingly) age old question – independent or soft brand?

LOS ANGELES – Whether or not a hotel should stay independent or hitch themselves to a soft brand has become somewhat of a circular conversation in the hospitality world, especially as soft brands and their ease of set-up continue to dominate.

But at a breakout session at ALIS in Los Angeles last week, panelists broke down the pros and cons of each contract, including a few strong reasons to go independent.

“Other than the fees, it's really about flexibility,” said Evan Laskin, chief investment officer, Margaritaville. “It’s about flexibility from the brand standards perspective and for operations and design.”

Joining Laskin on the panel was Kimo Bertram, vice president, Real Estate & Development, Hyatt Hotels Corp.; Kathleen Hollis, senior vice president, Development, Evolution Hospitality; and Jason Reader, executive vice president of Operations, Remington Hospitality. The panel was moderated by Meghan Cocci, Partner, Latham & Watkins LLP.

Another reason for hotels to go independent, Laskin said, is to have better control over marketing.

“I think people don't realize that, when you’re in a soft brand, you’re still now subjected to all the rules of the brand’s marketing,” he explained. “The big brands really have very tight control over how you do your search engine optimization, how you put your message out, where you spend your marketing dollars. They really keep a very tight cap on that.” Laskin added that the bigger brands put their hotels at the top of search engine results, while soft brands get relegated to page two and beyond.

Going independent may also make better sense for your market, particularly if it’s a high-end leisure destination. “Napa Valley is a great example,” Reader said. “You almost want to be independent versus brand there. In certain markets, that independence is more attractive.”

“Just because you’re not part of a big brand’s systems, you still can use a big operator. And they can provide a lot of that [sales and marketing] for you as well.”

Evan Laskin

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Hollis added onto this point, saying up and coming leisure-oriented markets have guests who want a localized and bespoke experience. “Sometimes, for a certain profile of traveler, there is a little bit of a stigma, right? ‘I don’t want to stay at global brand XYZ; I want to stay at a local hotel,’” she explained. “So, the market is obviously a very clear consideration.”

The fees are another reason to consider going independent. “If you’re a small, 100 or less room boutique hotel, do you really need to pay 10% of your gross revenue as a franchise fee to fill those 100 rooms? You might not,” Hollis said. “So, every property, every market is super nuanced and different in that conversation.”

Aside from the market, the physical property has to be considered, as well. “Think about your programming,” Hollis said. “Do you have a lot of meeting space? Are you going to rely on groups to provide a base of business that allows you to shrink your inventory and really maximize your ADR? If so, it might really help to tap into a soft brand and have their national sales office global sales office, all of those resources, to pump group leads into your hotel.”

Bertram said soft brands, who came into existence in 2010 with Marriott’s Autograph Collection, can provide this kind of insight to hotels right at the beginning in the conceptualization phase.

“The brands offer a level of expertise in the design and construction of a hotel,” Betram said, and which provides a safety net for owners to make sure they don’t miss anything when building their hotel. “This is what brands do for a living—they make sure hotels not only function correctly from an operations perspective, but they are making sure that there is a voice in that hotel.”

Having a soft brand also gives an owner freedom from worrying about things like the guest journey. “There’s a halo effect when you associate with a large brand family that gives a customer comfort when booking a hotel,” Bertram said. “They know that there are certain things that they’re going to require that a brand will provide. So, there’s a level of certainty there, which I think helps with driving rates.”

The benefits of a soft brand from a sales and marketing perspective, including loyalty programs, are numerous but for independent hotels it can be hard to drive bookings all on their own. So, the savings from not being a franchisee has to get recycled, Hollis said, and put toward other ways to drive booking.

“You need to have a PR firm, you probably have a firm doing your social media as that’s increasingly important,” she explained. “As I mentioned before, you probably have some more sales people on property because you really need to hustle to get that base of business. So, you have to just realize there are other expenses that you wouldn’t necessarily have to have if you were a soft brand.”

Reader said independents have to invest in other parts of the hotel experience like food and beverage outlets and a spa. “You want something you can kind of cling to that brings people to the hotel, other than just the room itself,” he said.

Or owners can opt for “decentralized services” from bigger brands like Hyatt to help boost sales that include revenue management, property sales, digital marketing, Bertram said.

Another way to get that operational success, Laskin added, is to find a big operator. “Just because you’re not part of a big brand’s systems, you still can use a big operator. And they can provide a lot of that [sales and marketing] for you as well.”