Whether you are a hotel owner or a manager, you will often have to make hard business decisions. One of the hardest decisions you’ll ever have to make is whether to do hotel chain affiliation or not. Hotel chains are as old as the hospitality industry. Nevertheless, giving up independence is something many hotel owners don’t take lightly.
How do you make a decision then? You need information. That’s why we are here. We did research to help you make the right decision, and below you will find everything you need to know about hotel affiliation, ranging from what it is to its upsides and downsides.
What is hotel affiliation?
Hotels have plenty of opportunities to set themselves for success in the given market. One of those opportunities is a brand affiliation or hotel affiliation. It refers to a process of a hotel becoming a part of a large hotel chain. When it comes to the classification based on affiliation, there are two types of hotels – chain hotels and independent hotels.
What does it imply? To become a part of a chain hotel, you will need to conform to certain rules and policies which may be completely different from yours. You may not be able to make some decisions regarding your facilities, branding, and even rooms.
List of hotel affiliation groups
You would be surprised to find out that many of the leading hotels worldwide are a part of a hotel affiliation group:
- InterContinental Hotel Group – founded back in 2004 today it has over 600,000 rooms which attribute to 5.9% of global room supply.
- Wyndham Hotel Group – the most famous US hotel chain includes almost 400 properties. The group even managed to acquire two brands from Global Hyatt – Hawthorn Suites and Microtel Inns & Suites.
- Marriott International – the group includes over 800 hotels and 125,000 rooms.
- Hilton Hotels – founded in 1919, Hilton Hotels is now one of the fastest-growing hotel chains in the US. It currently includes over 200,000 rooms spread across almost 600 properties.
- Accor Group – the chain includes almost 500,000 rooms and has the plan to expand adding over 100,000 new rooms.
What is an independent hotel?
Independent hotels are often family-owned and operated establishments. They have complete independence, as their name suggests. It simply means that an independent hotel’s management can make all business decisions on its own. The hotels in this group usually target a niche market and cater to the specific needs of guests.
It’s important to note that there are fewer independent hotels with every passing day. According to the latest statistics, only 40% of hotels in the US are independently owned and operated. Owners of boutique hotels or hotels that offer exclusive location and amenities or feature unique architecture often choose to remain independent.
Difference between hotel ownership and affiliation
The difference between hotel ownership and affiliation is huge. We’ve already addressed one of the major differences – independence. Staying independent implies that you will be solely responsible for developing your strategy, positioning your hotel according to market changes, and managing revenue
If you decide to do hotel affiliation, your hotel will become a part of a larger brand. You will have to give up the identity you’ve been building for your hotel and start following strict policies and procedures. It often implies that you will have to pay brand affiliation fees. Hotel affiliation also means that you will have minimal to no control over management and entrepreneurship.
How does a hotel lose its affiliation?
Hotel affiliation is not something that follows a verbal contract but a written and legally abiding one. There are several instances in which a hotel can lose its affiliation. The most common reason is an expired franchise agreement, such is potentially the case with The Trenton Marriott and its Marriott affiliation. In “The Trenton” case, the hotel chain wants to move on. But both parties get to decide what happens once the franchise agreement expires.
A hotel can also lose its affiliation if it doesn’t follow the rules and policies as outlined in the agreement. This often invokes specific penalties and is rarely seen in the industry. Affiliations transfers can also occur. For instance, one hotel chain can purchase a number of hotels from another chain. In this instance, a hotel loses its affiliation with one chain but immediately goes into the next one.
What are the benefits of having an international chain affiliated with your hotel?
Having an international chain affiliated with your hotel delivers many benefits. The most noteworthy ones include:
- A high volume of purchase
- Better advertising exposure
- Valuable management insights
- Access to brand support systems
- Access to the brand tech stack
- Ability to leverage consultancy power only a chain hotel can offer
- Ability to leverage rewards programs such as lifetime status to bring in more guests
What are the downsides?
While having an international chain affiliated with your hotel offers very attractive benefits, it comes with a couple of downsides as well:
- Brand affiliation fees can be too high
- Inability to make business decisions on your own
- Inability to quickly react to market changes
How to measure the benefits of a hotel franchise affiliation
Measuring the benefits of a hotel franchise affiliation is easy if you keep a record of your performance indicators. The most important performance indicators you need to pay attention to include average daily rates (ADR), occupancy rates (OR), and revenue per available room (RevPAR).
To measure the benefits, you will need to cross-reference performance indicators pre and post affiliation. The better performance indicates that your hotel is thriving in the hotel chain.
Conclusion: is it worth it?
Finally, is doing hotel affiliation worth it? It’s not a straight answer to give since every hotel is unique. If you are doing well in your market and value your independence, then there is nothing wrong with staying independent. You can go affiliate anytime you want. If your hotel is struggling to make ends meet and all your attempts to generate additional revenue streams have failed, you should consider doing hotel affiliation.
Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at UpStay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.