Soft branding emerges as third alternative

The soft-brand movement has come a long way since its early days and has become a strong and exciting trend for both investors and consumers

Soft-branded hotels represent a hybrid between independent hotels and those affiliated with major brands. Typically, soft brand hotels benefit from the marketing and reservation systems of major brands, while maintaining greater flexibility in their facilities, services and operational standards.

Key takeaways

• Independent hotels, whether in urban or remote locations, have generally achieved higher margins at the gross operating profit (GOP) level. This is largely due to the absence of franchise-related fees;
• Urban soft-brand hotels spent an average of 12.6% of their total revenue on sales and marketing, compared to just 7.3% for independent hotels. Lacking the regional, national and global marketing support of major brands, independent properties tend to rely more heavily on their own sales teams;
• Although independent hotels had higher GOP margins, soft-branded hotels had higher EBITDA3 margins. This may reflect the benefits of collective purchasing power that soft-brand owners have for non-operating costs such as insurance.

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