A Comparison of the Performance of Independent and Franchise Hotels: The First Two Years of Operation

Abstract

Although franchising has become a dominant mode of entry for hotel owners, a substantial number of entrepreneurs open their property as an independent and unaffiliated hotel. Given the finance community’s desire for a brand flag as a condition of many loans, this analysis used STR Global data to compare the performance of newly opened franchise properties to that of independents. A comparison of the financial results for the first two operating years of 104 franchised and independent hotels in the United Kingdom found that the performance picture for franchise properties was overall not superior to that of independent properties. For full-service hotels (those in higher chain scales), the data revealed an early advantage in RevPAR for franchise properties, but that difference faded as time went on. For limited-service hotels, the independents experienced stronger RevPAR from six months after opening through two years after opening.