Independent Hotels in the U.S. Pressured by the Big Brands

25.08.2023 - 14:04 / skift.com / Jan Freitag / Sean Oneill

Some industry observers speculated that the pandemic would speed up consolidation of the hotel sector, as owners of independent hotels might find cost and other pressures too difficult and would essentially sell out to the big brands. So what was the state of the independent hotel sector in 2022, as the pandemic subsided, according to just-released numbers?

In recent years, only about one-third of the roughly 60,000 hotels in the U.S. have remained independent, making the country arguably the world’s most consolidated hotel market.

The gap between independents and brands truly yawns when you look at the hotel development pipeline. As of late December, unaffiliated hotels representing approximately 30,000 rooms were in construction — a growth of about 2 percent, according to STR, the gold standard for hotel performance benchmarking. Yet branded and franchise hotels had a whopping 131,000 rooms under construction.

“We are becoming a country of brands,” said Jan Freitag, national director of hospitality analytics at CoStar Group. “It’s what the banks like, it’s what the owners like, and it’s what the customers want.”

The trend isn’t only a U.S. phenomenon. In Britain and Ireland, the independent hotel sector contracted around 12 percent between 2010 and 2019, according to estimates by Whitbread, the parent company of budget lodging brand Premier Inn. Rising bills for energy and workers’ wages may prompt many independent hoteliers to exit the sector and enable Premier Inn to take share, the company forecasts.

While independent hotels have faced long-term challenges, the pandemic didn’t necessarily hasten the “brandification” of American hotels.

In 2022, growth in the segment of hotels not affiliated with a brand or franchise was anemic, but there wasn’t a decline, per se. In the U.S., at the end of 2022, STR said there were 25,544 independent properties representing 1,511,716 rooms. Compare that with 2019, when there were 25,839 independent properties with 1,531,627 rooms.

Those numbers are net totals. In 2022, for example, 359 independent properties, representing 24,488 rooms, closed, STR reported. But more than that opened, making up for the loss.

Independents did struggle a bit more than hotels that were flagged. Last year, 214 branded and franchise hotels representing 21,070 rooms, closed. Given that there’s a bigger pool of branded hotels than independents, that means independents had a higher percentage closure rate than branded properties.

As context, the long-run average for U.S. permanent hotel closures in the decade before the pandemic was 29,000 rooms a year. That shot up to over 60,000 in 2020, about 35,000 in 2021, and about 45,000 last year. The pandemic did lead to a shaking out of the