In a presentation to the UK House of Lords last June, we raised the alarm that the UK independent hotelier share of market was declining rapidly, falling from 78% in 2010 to a projected 22% by 2026.
Meanwhile in the USA, independent hotel market share has declined from 67% of the USA’s 55,000 hotels in 2003 to less than 40% of US hotels today.
So how did we get here?
Rapid supply growth via brands and Airbnb.
From 2008-2010, the USA hotel supply grew by 17.5%, largely driven by IHG new builds. UK supply rise fuelled by Travelodge and Premier Inns, took on Starbucks approach of ‘a hotel on every corner’ to saturate markets.
At the end Q2 2022, the USA accounted for 37 percent of all new global hotel projects, with Marriott, Hilton, IHG and Accor driving 55% of all new construction.
In the UK, 2016 Airbnb supply represented an equivalent of 27% of the UK room inventory. Today in 2022, Airbnb represents 88% of the total UK room supply, and nearly 25% of the USA hotel industry.
Are these global superpowers winning the game? Our money is betting on independent hotels and non-traditional hotel brands as the next post-Covid growth sector.
When Magnuson Hotels was launched in 2003 as the first global chain to provide online booking capabilities for independent hotels, hotels operating outside the traditional hotel brands were disparaged by the major chains as second-class, questionable quality. Major brand executives shared the winking nod at industry panels that the market was not over supplied, but because of too many independent hotels it was “under-demolished.”
Can thousands of independents and non-traditional brands move faster than a few publicly traded slow giants? Our research says yes we can.
- Recent USA class action lawsuits filed against IHG and Choice Hotels list retaliatory actions against franchisees who complain about areas of encroachment, or purchasing high cost franchise mandated supplies.
- Legislation introduced in New Jersey prohibiting hotel franchisors from receiving kickbacks from required supply vendors.
- Major brands have been slashing thousands of corporate positions in marketing, advertising and franchisee support.
Always focus on the long game, but don’t be afraid to move fast.
While corporate strategy of the publicly traded hotel brands has continually accelerated toward short-term actions, we advise hoteliers to always play the long game. Build your business with the strength to profit through recessions, survive pandemics, and grow for generations.
9/11, the 2008 crash, 2020 Covid, 2022 inflation and labor shortages illustrate the business cycles of the last twenty years. We will always have to make decisions against the backdrop of uncertainty.
The highest growth companies of the past 2 years, Amazon, Apple, Netflix, online grocers and Zoom all leverage instability and displace giants by focussing on serving customers with operational efficiency, accountability, and accelerated technology implementation.
Traditional hotel franchise brands dictate standardisations in design and procedures, impacting the ability to succeed by being nimble.
Over 50% of first time Airbnb users state they will never go back to a standardised hotel experience again. Although Airbnb has flooded the market with supply, they have also broken the advertising myth perpetuated by large chains that standardisation is better. Capitalise upon this movement by accentuating your hotel’s unique characteristics in service, location, design. Renovate in your own way, on your own schedule and within your budget to meet expectations of your local market.
Transform labor shortages into service-based efficiencies.
Leverage new low cost and simple automations such as automated front desk software and online check in. New PMS housekeeping management modules help manage limited staff more efficiently.
Change rising operational costs to opportunities.
By not having to follow traditional hotel franchise brand corporate mandates, independent and non-traditional brand hotels can move faster than the competition. Choose your own insurance, hotel suppliers and providers without franchisor markup and kickbacks.
Take ownership of your guests with accountability and friendship.
Many traditional franchise hotel chains and airlines no longer offer customer service or even a face with a name. Take ownership of your guest relationship to build new customers for life.
Own the new ‘essential business travel’ sector.
While traditional global business travel has fallen as much as 85%, Magnuson has continued a twenty-year focus of the ‘essential business travel’ market; a sustainable and non-seasonal 52-week business base of key worker segments. Primary local employers, industrial, government, energy, medical, transportation, educational and construction sectors are now the fastest growing sector, representing recession-proof and non-seasonal revenue.
Global travel is growing at 8.5% per year, vs. 2% in US.
Look ahead, because global travel growing at 8.5% per year vs. a 10 year US growth rate of 2%. If you know your numbers and own your niche, you can move faster than the competition. By achieving a 4/5 review score you can set the rates in your market, and determine a long-term pathway to profits.
Always focus on the long game, and don’t be afraid to move fast if you want your hotel to be a part of the post-Covid growth sector.