Owning a hotel might sound glamorous, but behind the scenes, it’s all about choosing the right ownership model to fit your goals and resources. Whether you're dreaming of running a cozy independent inn or investing in a branded chain, understanding the different types of hotel ownership is crucial. This article breaks down the four common hotel ownership models and explores their advantages and considerations.
Table of contents
Understanding hotel ownership
The four types of hotel ownership
Comparing hotel ownership models
Table of contents
Understanding hotel ownership
The four types of hotel ownership
Comparing hotel ownership models
Understanding hotel ownership
What is the meaning of hotel ownership?
Hotel ownership isn’t just about owning a piece of property where guests come and go. It’s about managing the day-to-day operations, ensuring guest satisfaction, and navigating the ever-changing tides of the hospitality industry. Whether you’re directly involved in every detail or you’ve hired a team to do the heavy lifting, your decisions as a hotel owner shape the guest experience and, ultimately, your bottom line. From setting room rates to managing revenue streams, hotel ownership is as much about strategy as it is about service.
Are hotels independently owned?
Yes, many hotels are independently owned, particularly smaller, boutique properties that are not affiliated with major brands. These hotels offer unique experiences but face challenges in marketing and guest acquisition compared to their branded counterparts.
How does ownership impact day-to-day hotel operations?
Ownership type directly affects daily operations. Independent owners have full control over every aspect, while franchised hotel owners follow brand guidelines. Managed hotels entrust operations to a management company, while REIT investors focus purely on financial returns, with no involvement in daily activities.
The four types of hotel ownership
What are the 4 types of hotel ownership?
The hotel industry offers a variety of ownership models, each with its own set of perks and challenges. Let’s break down the four most common types: Independent Hotels, Franchised Hotels, Managed Hotels, and Real Estate Investment Trusts (REITs).
1. Independent hotels
What are independent hotels?
Independent hotels are exactly what they sound like — hotels that operate without any affiliation to a major brand or chain. This ownership model gives you total freedom to design your guest experience, from the décor in the lobby to the kind of breakfast you serve.
Advantages & Considerations
Operating an independent hotel offers the significant advantage of complete creative control. You can craft a unique brand identity and deliver a personalized guest experience without the constraints of franchise rules or brand guidelines. This flexibility allows independent hotels to stand out in a crowded market, offering something truly distinct that guests may not find elsewhere.
However, the freedom that comes with independence also brings challenges. Without the marketing muscle and brand recognition that larger chains enjoy, independent hotels often struggle to attract guests and build a loyal customer base. Additionally, the financial and operational risks are higher since you’re responsible for all aspects of the business, from marketing and revenue management to guest satisfaction and staffing.
Independent hotels are exactly what they sound like — hotels that operate without any affiliation to a major brand or chain. This ownership model gives you total freedom to design your guest experience, from the décor in the lobby to the kind of breakfast you serve.
Advantages & Considerations
Operating an independent hotel offers the significant advantage of complete creative control. You can craft a unique brand identity and deliver a personalized guest experience without the constraints of franchise rules or brand guidelines. This flexibility allows independent hotels to stand out in a crowded market, offering something truly distinct that guests may not find elsewhere.
However, the freedom that comes with independence also brings challenges. Without the marketing muscle and brand recognition that larger chains enjoy, independent hotels often struggle to attract guests and build a loyal customer base. Additionally, the financial and operational risks are higher since you’re responsible for all aspects of the business, from marketing and revenue management to guest satisfaction and staffing.
2. Franchised hotels
What are franchised hotels?
Franchised hotels operate under the umbrella of a well-known brand, like Marriott, Hilton, or Holiday Inn. In this model, you, as the owner, pay a franchise fee to use the brand’s name, marketing, and reservation systems.
Advantages & Considerations
One of the main attractions of franchised hotels is the immediate brand recognition and trust that comes with being part of a well-known chain. Guests are more likely to book with a brand they know and have had positive experiences with in the past, which can lead to higher occupancy rates and increased revenue. Furthermore, franchised hotels benefit from the brand’s established marketing strategies, training programs, and reservation systems, which significantly reduce the owner’s burden in these areas. Revenue management becomes more manageable as well, with many brands providing sophisticated tools for dynamic pricing and demand forecasting.
However, franchising does come with its considerations. The franchise fees, which can be substantial, will reduce your profit margins. Moreover, owning a franchised hotel means adhering to the brand’s standards and guidelines, which can limit your ability to make independent decisions about the property. While the support and recognition are valuable, they come at the cost of some level of autonomy.
While you might have less control over certain aspects of a franchised hotel, tools like Hoop can streamline the management process, helping you keep a firm grip on day-to-day operations and guest satisfaction.
Franchised hotels operate under the umbrella of a well-known brand, like Marriott, Hilton, or Holiday Inn. In this model, you, as the owner, pay a franchise fee to use the brand’s name, marketing, and reservation systems.
Advantages & Considerations
One of the main attractions of franchised hotels is the immediate brand recognition and trust that comes with being part of a well-known chain. Guests are more likely to book with a brand they know and have had positive experiences with in the past, which can lead to higher occupancy rates and increased revenue. Furthermore, franchised hotels benefit from the brand’s established marketing strategies, training programs, and reservation systems, which significantly reduce the owner’s burden in these areas. Revenue management becomes more manageable as well, with many brands providing sophisticated tools for dynamic pricing and demand forecasting.
However, franchising does come with its considerations. The franchise fees, which can be substantial, will reduce your profit margins. Moreover, owning a franchised hotel means adhering to the brand’s standards and guidelines, which can limit your ability to make independent decisions about the property. While the support and recognition are valuable, they come at the cost of some level of autonomy.
While you might have less control over certain aspects of a franchised hotel, tools like Hoop can streamline the management process, helping you keep a firm grip on day-to-day operations and guest satisfaction.
3. Managed hotels
What are managed hotels?
Managed hotels are properties where the owner hires a professional management company to handle all operations. This model is popular with large hotel chains and real estate investors who want to enjoy the benefits of hotel ownership without getting involved in the nitty-gritty.
Advantages & Considerations
The key advantage of managed hotels is that they allow owners to leverage the expertise of professional management companies to run their properties efficiently. This often results in higher guest satisfaction, as experienced managers are adept at ensuring smooth operations and meeting guest expectations. For owners, this hands-off approach reduces the stress associated with the day-to-day running of the hotel, allowing them to focus on other investments or aspects of their business.
However, this convenience comes with its own set of considerations. Management fees can be quite high, and these costs can quickly add up, impacting the overall profitability of the hotel. Additionally, by relying on a third-party management company, you’re placing a significant amount of trust in external professionals to uphold your standards and represent your brand appropriately. While you may enjoy the benefits of their expertise, you also relinquish some control over the operations of your property.
Managed hotels are properties where the owner hires a professional management company to handle all operations. This model is popular with large hotel chains and real estate investors who want to enjoy the benefits of hotel ownership without getting involved in the nitty-gritty.
Advantages & Considerations
The key advantage of managed hotels is that they allow owners to leverage the expertise of professional management companies to run their properties efficiently. This often results in higher guest satisfaction, as experienced managers are adept at ensuring smooth operations and meeting guest expectations. For owners, this hands-off approach reduces the stress associated with the day-to-day running of the hotel, allowing them to focus on other investments or aspects of their business.
However, this convenience comes with its own set of considerations. Management fees can be quite high, and these costs can quickly add up, impacting the overall profitability of the hotel. Additionally, by relying on a third-party management company, you’re placing a significant amount of trust in external professionals to uphold your standards and represent your brand appropriately. While you may enjoy the benefits of their expertise, you also relinquish some control over the operations of your property.
4. Real Estate Investment Trusts (REITs)
What are REITs in the hotel industry?
Real Estate Investment Trusts (REITs) allow individuals to invest in large-scale, income-producing real estate, including hotels. As a hotel REIT investor, you own shares in a portfolio of hotels, but you’re not involved in day-to-day operations.
Advantages & Considerations
One of the biggest advantages of investing in a hotel REIT is the ability to gain exposure to the hotel industry without the complexities and challenges of direct ownership. REITs offer a diversified investment in a portfolio of properties, which can help mitigate risk. Additionally, they provide a steady income stream through dividends, making them an attractive option for long-term investors looking for passive income.
However, investing in hotel REITs also comes with certain considerations. As a REIT investor, you have no control over the management or operations of the hotels in the portfolio. Your focus is solely on the financial performance of the shares you own, and you are subject to the fluctuations of the real estate market. This lack of control can be a downside for those who prefer to be more hands-on with their investments.
Example: REITs are particularly popular in the luxury segment of the hospitality industry, where large-scale investments and professional management are key.
Real Estate Investment Trusts (REITs) allow individuals to invest in large-scale, income-producing real estate, including hotels. As a hotel REIT investor, you own shares in a portfolio of hotels, but you’re not involved in day-to-day operations.
Advantages & Considerations
One of the biggest advantages of investing in a hotel REIT is the ability to gain exposure to the hotel industry without the complexities and challenges of direct ownership. REITs offer a diversified investment in a portfolio of properties, which can help mitigate risk. Additionally, they provide a steady income stream through dividends, making them an attractive option for long-term investors looking for passive income.
However, investing in hotel REITs also comes with certain considerations. As a REIT investor, you have no control over the management or operations of the hotels in the portfolio. Your focus is solely on the financial performance of the shares you own, and you are subject to the fluctuations of the real estate market. This lack of control can be a downside for those who prefer to be more hands-on with their investments.
Example: REITs are particularly popular in the luxury segment of the hospitality industry, where large-scale investments and professional management are key.
Comparing hotel ownership models
Operational and financial risks
Each ownership model comes with its own set of operational and financial risks. Independent hotels might struggle with marketing and guest acquisition, while franchised and managed hotels face costs like franchise fees and management fees. REITs, on the other hand, offer a more hands-off approach but expose investors to market volatility.
Guest satisfaction and experiences
The type of ownership model you choose can significantly impact guest satisfaction. Independent hotels offer personalized experiences, while franchised hotels provide the consistency that many guests prefer. Managed hotels benefit from professional management, ensuring that guest needs are met efficiently, while REITs rely on the management teams in place to uphold standards.
Revenue management and profitability
Ownership models also influence how revenue is managed. Independent hotels might have to work harder to optimize revenue, while franchised and managed hotels benefit from the brand’s revenue management tools. Technology platforms like Hoop can play a crucial role in streamlining these processes, ensuring that you’re maximizing revenue opportunities no matter the ownership model.
Each ownership model comes with its own set of operational and financial risks. Independent hotels might struggle with marketing and guest acquisition, while franchised and managed hotels face costs like franchise fees and management fees. REITs, on the other hand, offer a more hands-off approach but expose investors to market volatility.
Guest satisfaction and experiences
The type of ownership model you choose can significantly impact guest satisfaction. Independent hotels offer personalized experiences, while franchised hotels provide the consistency that many guests prefer. Managed hotels benefit from professional management, ensuring that guest needs are met efficiently, while REITs rely on the management teams in place to uphold standards.
Revenue management and profitability
Ownership models also influence how revenue is managed. Independent hotels might have to work harder to optimize revenue, while franchised and managed hotels benefit from the brand’s revenue management tools. Technology platforms like Hoop can play a crucial role in streamlining these processes, ensuring that you’re maximizing revenue opportunities no matter the ownership model.
Conclusion
Choosing the right type of hotel ownership depends on your goals, resources, and risk tolerance. Whether you’re hands-on with an independent property, enjoying brand support through franchising, relying on professional management, or investing in a REIT, understanding these models helps you make informed decisions. And with tools like Hoop, managing these complexities becomes a bit easier, no matter which path you choose.
