US independent hotels thriving in secondary markets with strong YoY growth in demand and ADR, but branded properties still dominate

17 July, 2019

For the third consecutive year, Expedia Group data shows that independent hotels in the United States of America (USA) are continuing to experience demand growth with a nearly +5% rise for the full year in 2018. The performance of independent hotels is particularly strong when looking beyond popular, large city destinations to smaller markets.

Across the globe, tourism is a key driver for local economies, directly introducing economic investment as well as supporting jobs. For smaller, secondary markets that have traditionally been overlooked by visitors for their larger counterparts, recent increases in tourism is helping create healthy opportunities for independent hotels to thrive.

The Expedia Group data highlights three secondary markets that showcase the rise of the independents particularly strongly. These comprise Albany, the capital city of New York state; Gatlinburg and Pigeon Forge, mountainous towns and gateways into park areas in eastern Tennessee; and Maine’s southern coast, an area that commonly includes York county and Cumberland county.

In the case of Albany, independent hotel occupancy levels increased more than +20% year-on-year versus 2017, compared to just a +5% rise for branded properties. Average daily rate (ADR) grew almost 15% year-on-year with a nearly +45% increase in independent package bookings - package bookings for branded hotels experienced an almost -10% decrease.

In Gatlinburg - Pigeon Forge the growth in independent property occupancy was almost +20%, double that of the +10% level recorded by branded properties. ADR levels were up nearly +10% year-on-year, while there was a more than +40% increase YOY for independent package bookings; nearly +20% for branded package bookings

For the Maine Southern Coast region occupancy levels were up more than +15% year-on-year, versus +10% for branded properties. ADR was up more than +5% year-on-year and there was a more than +30% year-on-year increase for independent package bookings against around a +5% rise in package bookings for branded properties.

The popular summer destination of Cape Cod, a hook-shaped peninsula of the US state of Massachusetts, is another destination that showed independent demand growth in room nights in 2018, as well as a nearly +10% year-on-year increase in ADR. In comparison, branded properties saw an increase of nearly +5% in ADR.

Now, with more travellers, especially younger generations, opting for off-the-beaten path destinations and unique and memorable experiences, independent hotels have a further opportunity to capitalise on the growing interest in these second-tier markets.

The data shows that independent hotels today can compete against their branded counterparts, cost efficiently, and with technological developments they can more easily leverage tools and resources of OTAs our other digital platforms.

The independents may be rising, but recent research from benchmarking specialist STR has highlighted the dominance of branded properties in the North American market with three hotel company holding portfolios that exceed 500,000 rooms - Marriott International (886,308 hotel rooms), Hilton (703,238) and Wyndham Hotels & Resorts (546,716) reported the largest room counts across the US, Canada and Mexico at the end of May-2019. A further two brands held more than 200,000 rooms in their existing supply: Hampton by Hilton (227,581) and Holiday Inn Express by IHG (203,792).

Those top three parent companies represent 34% of the almost 6.3 million rooms in North America, and just under 69% of the total inventory across the continent flies a brand flag, according to STR. “Brands have been a favourite of lenders for the better part of the last three decades. With most of the development pipeline focused in the branded segments, especially in limited-service chains, brand presence is only going to grow,” says Vail Ross, STR’s senior vice president of global business development and marketing.