Independent hotels could recover from the COVID-19 pandemic more quickly than branded hotels given their flexibility and the ability to provide experiences, owners and operators said.
Tom Fisher, chief investment officer at Pebblebrook Hotel Trust, said during the pandemic, that flexibility allowed the company to react quickly to protect its independent hotel assets.
The company recognized it had "flexibility in terms of everything we needed to do, and how quickly we could move to either unfortunately suspend operations at our [independent] hotels or make the right moves we needed to do to protect the asset," he said during the "View From the Chief Investment Officer’s Desk" panel at the online 2021 Boutique Hotel Investment Conference hosted by the Boutique Lifestyles Leaders Association.
"All doing it with our operators and doing it immediately as opposed to going through what does the franchise agreement say, what does the lender have to say," he added.
That overall flexibility is what draws the real estate investment trust to the right type of independent assets in the right markets, he said. Not only do independents typically offer more profit per key, but they also tell a story, something more guests are interested in given their desire for creative experiences, he said.
Fisher added that independent hotels are often more attractive to buyers, and there is typically more competition for independent hotels, especially since the buyer can either take it as-is or brand it.
"Typically, independent hotels would be delivered unencumbered and typically would trade at a premium as opposed to a branded hotel," he said.
Jason Altberger, chief investment officer at Sage Hospitality, which operates some of Pebblebrook's independent hotels, said new data shows independent and soft-branded hotels performed "as well if not slightly better" than branded hotels during the pandemic.
With more people working from home and having the opportunity to spend more time with family because of changes brought on by the pandemic, more travelers are seeking experiences when they stay at a hotel, Altberger said.
"During the downturn, most of the travel we saw as it started to come back was in the leisure space, and we know ... that the research has been clear over time, people get more happiness, more benefits out of experiences than they do out of stuff and buying things, so being able to craft those experiences is really important, and I think the pandemic ... has given a lot of people" time to see what is important to them, he said.
Solving the Labor Crisis
During the "View From the Chief Financial Officer's Desk" panel at the online conference, Pebblebrook Executive Vice President and Chief Financial Officer Ray Martz said labor is a huge challenge for the industry and across the board in every market the REIT is in.
While things are difficult now, the labor challenge will hopefully get a little better in the fall, he said. In the meantime, the flexibility independent hotels have could help attract and retain workers.
For example, one of Pebblebrook's independent properties in one of its Florida markets has started offering $500 sign-on bonuses.
"Just to show up and start the job, and if you're there for 90 days, you get another $500," he said.
So far there hasn't been much of a reaction from potential employees, which shows "it's not about a well-paying job," he said.
Martz said hoteliers will have to figure out how to do more with less, which is another area where independent hotels could shine, and make greater use of technology.
That said, the industry will have to figure out the right way to adopt new tech.
"How do you balance that so you’re still providing that experience and that good level of service when you don’t have as many people there?" he asked.
Make Employees a Top Priority
Hilda Delgado, chief investment officer for Viceroy Hotel Group, said to attract and retain employees, companies have to have a good, safe and positive environment — another area in which independent hotels can shine.
Independent hotels "normally have a great curated design, a storyline around the hotel's history and local traditions you're bringing to life," she said. "It's very different from working in a big machine."
Hotels that offer these things tend to make employees proud of where they are working, which "really has decreased turnover in an industry that has high turnover, and really creates that hotel ambassador," she said.
Delgado said for hotels to attract labor, they also need to remember employees are "first and foremost our priority."
"Our line colleagues are really those that are interacting with guests," she said. "If you have that happy employee, you're going to have that happy guest."