The hospitality industry has evolved tremendously over the years, and with it has come to a plethora of options for investors and real estate owners. The two most popular options are independent hotels and branded hotels. As a potential hotel investor or hotel owners, understanding the differences between these two options is crucial to make informed decisions. In this article, we will conduct a comparative study between independent hotels and branded hotels.

What is the current market share of independent and branded hotels in India?

As of 2021, branded hotels in India, which are typically affiliated with international chains, make up around 18% of the market share, while independent hotels make up the remaining 82%. However, the market share of branded hotels is expected to increase in the coming years, as more international hotel chains are entering the Indian market. 

“The growth of the branded hotel sector can also be attributed to increasing demand from both domestic and international travellers for standardized, high-quality accommodations.“ 

Independent Hotels

An independent hotel is one that operates without any affiliation to a brand or chain. These hotels are typically owned and managed by individuals or small groups, which means that they have more flexibility in terms of operations, marketing, and branding. They can cater to a specific niche market, provide personalised services, and offer unique experiences that are not found in branded hotels.

Pros:

One of the most significant advantages of an independent hotel is the freedom it offers in terms of operations. The owners can decide on everything from the hotel’s design to the services they offer. This flexibility allows them to adapt quickly to market changes, make decisions more efficiently, and create unique experiences that set them apart from the competition. If any hotel owner is looking the development of boutique hotels, opting for standalone property can be the best option.

Another advantage of independent hotels is that they do not have to pay franchise fees or royalties, which can be significant cost savings. Additionally, they can negotiate with vendors and suppliers for better deals and pricing.

Cons:

The main disadvantage of an independent hotel is the lack of brand recognition. Without a well-known brand, it can be challenging to attract guests, particularly if the hotel is in a competitive market. Also, independent hotels have limited marketing resources, which means they may not be able to reach a broad audience.

Another disadvantage is that independent hotels may not have access to the same resources as branded hotels. For instance, large hotel chains often have a centralised reservation system, which can help drive bookings. Independent hotels may have to rely on third-party booking platforms or manage their bookings manually, which can be time-consuming.

Branded Hotels

A branded hotel is part of a larger chain or franchise. These hotels are owned and managed by individual owners, but they operate under the same brand and follow the same standards and procedures. Branded hotels can offer a sense of security and familiarity to guests and may be more attractive to corporate travellers.

Pros:

One of the biggest advantages of a branded hotel is brand recognition. Guests are often more likely to book a room in a hotel they recognize and trust. This recognition can help drive bookings and increase occupancy rates.

Another advantage is the access to resources that branded hotels offer. For instance, they often have a centralized reservation system, which can help drive bookings and manage occupancy rates. They may also have access to marketing and advertising resources, which can help increase brand awareness and drive bookings.

Cons:

One disadvantage of a branded hotel is the lack of flexibility. Owners must follow the brand’s standards and procedures, which may limit their ability to cater to a specific niche market or provide unique experiences. Additionally, branded hotels may have to pay franchise fees and royalties, which can be a significant expense.

Another disadvantage is that branded hotels may have to compete with other hotels within the same chain. This competition can lead to a lack of differentiation between properties and may make it challenging to stand out in a crowded market.

As a potential hotel investor in India, deciding whether to opt for a brand franchise or an independent hotel requires careful consideration of various factors. Here are some key factors to consider:

Market Demand and Competition: Before deciding to open a hotel, it’s essential to research the market demand and competition in the area you’re considering. If there is a high demand for branded hotels in the area, then it may be more beneficial to opt for a brand franchise. On the other hand, if the area lacks a specific niche market or unique experiences, then an independent hotel may be the better option.

Budget and Financing: Another crucial factor to consider is your budget and financing options. Opting for a brand franchise may require a higher initial investment due to franchise fees and other associated costs. Independent hotels, on the other hand, may have lower initial investment requirements, making them a more attractive option for those with a smaller budget.

Brand Recognition: Brand recognition is an essential factor to consider when deciding between a brand franchise or an independent hotel. If you opt for a brand franchise, you’ll have the benefit of established hotel chains that may attract more guests. However, if you’re confident in your ability to build a unique and compelling brand, then an independent hotel may be the better option.

Operational Control: Brand franchises often come with strict operational guidelines and standards that you must adhere to. If you’re looking for complete control over the hotel’s operations, an independent hotel may be a better option. However, if you’re comfortable following set standards and procedures, then a brand franchise may be more suitable.

Marketing and Sales: Opting for a brand franchise can provide you with access to marketing and sales resources, loyalty programs, and centralized reservation systems. If you’re looking for support in these areas, then a brand franchise may be a better option. However, if you’re confident in your marketing and sales skills, then an independent hotel may be the better option.

In India, both branded hotels and independent hotels are performing well in their respective markets. However, the performance of each type of hotel depends on various factors such as location, target market, brand reputation, and competition.

In recent years, branded hotels in India have seen significant growth and are becoming increasingly popular, particularly in major cities and business hubs. These hotels offer brand recognition, standardised services, and access to resources and support from the parent company, which can be attractive to corporate travellers opting for budget hotels and high-end leisure travellers opting for luxury resorts. The strong brand recognition of these hotels can also help to drive bookings and increase occupancy rates.

However, independent hotels in India are also performing well, particularly in tourist destinations and smaller cities. These hotels offer personalised services, unique experiences, and more flexibility in terms of catering to a specific niche market. Independent hotels can also have lower initial investment requirements, making them more attractive to investors with limited budgets.

Ultimately, the performance of branded and independent hotels in India depends on various factors such as location, market demand, competition, and brand reputation. As an investor, it’s important to carefully consider these factors and conduct thorough market research before making a decision on whether to opt for a brand franchise or an independent hotel.

If you’re considering investing in the hotel industry in India, Spectra Hospitality can provide you with the best consultancy services. Spectra Hospitality is a leading hospitality consultancy firm in India that provides comprehensive services to help you achieve your goals. From market research and feasibility studies to project management and operational support, Spectra Hospitality has the expertise and experience to help you succeed. Contact Spectra Hospitality today to learn more about their consultancy services and how they can help you make the right investment decision.