323 | Be Quick, Be Nimble: Independent hoteliers tell how they operated amid the pandemic

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SOME LIKE IT HOT: Thelma’s Coffee & Confections at Dunes Manor Hotel in Ocean City, Maryland, opened amid the pandemic. Real Hospitality Group manages the beachfront property, which is steeped in local history. Local hoteliers Milton and Thelma Conner bought the Dunes Motel the 1960s. After Milton’s death, Thelma Conner realized her dream of building a Victorian-style hotel on the site. She was 74 years old when the Dunes Manor Hotel opened in April 1987. She died in 1999. Ron Loman, SVP at Real Hospitality, said amid the pandemic restrictions, the hotel opened the shop and crafted a menu that told the story of Thelma Conner and included her favorite teas. The concept was an instant hit with guests. Creative F&B offerings helped increase revenue at independent hotels during the pandemic crisis, say Loman and other hotel managers featured in Lodging Leaders’ Episode 323.

Innovations in guest programming key to survival, say independent owners and managers

‘Moving forward, you have to be nimble; you have to understand where the trends are going; and you have to reshape your business model to accommodate the preferences.’ Brian Sparacino, CEO, Rebel Hospitality

Real Hospitality Group’s Senior Vice President of Operations Ron Loman said as the coronavirus crisis rapidly swept through the U.S. hotel industry in spring 2020, the independent hotels in its portfolio were free to quickly shift their business strategies.

Though it was a fearful and anxious time, creativity and innovation abounded, says Loman and other owners and operators of independent hotels.

The transition to a new era of hospitality continues as owners and managers of independent assets develop solutions that will strengthen their businesses now and post-pandemic. What independent operators have learned may be useful for the hotel industry as a whole as it emerges from the coronavirus crisis and positions for recovery.

“Independents have that ability to gather feedback from their customers and pivot really quickly in relation to that feedback,” Loman said. “We can make specific decisions based on the demand and the customer profile.

“As the landscape changed we were able to increase direct bookings because we were talking directly to those customers. And anytime we can decrease the cost of acquisition, it’s a plus for us.”

BE QUICK, BE NIMBLE: Employees at Deer Path Inn, an independent boutique hotel in Charlestowne Hotels’ management portfolio, wear customized face masks. Charlestowne Hotels’ leaders say independent properties were able to respond to rapidly evolving expectations of guests as well as investors at the height of the coronavirus pandemic. Episode 323 of Lodging Leaders podcast explores the impact the coronavirus crisis had on independent hotels. What independent operators have learned may be useful for the entire hotel industry as it emerges from the coronavirus crisis and positions for recovery.

As with nearly all hotels in the U.S., independent properties have taken a beating over the past year. Kalibri Labs reports, at the peak of the crisis nearly 600 independent hotels closed from March 2020 to March 2021.

Today, the news is improving.

Kalibri Labs reported on May 17th hotel closures dropped significantly across the board, including independents which had 460 hotels closed.

Real Hospitality Group was included in a previous report by Lodging Leaders about hotels that transitioned to health-care facilities and shelters for people at risk of homelessness during the pandemic. Every hotelier interviewed for this report had kept some hotels afloat by serving essential workers as well as providing housing for at-risk populations.

SIGN OF THE TIMES: Vipul Dayal, owner and CEO of VNR Management in San Diego, in February 2020 removed the Days Inn sign from his franchised hotel in San Bruno, California, when he transitioned the 48-room property into an independent property. He shared this photo of the dismantled sign on Facebook. It was a bittersweet moment as Dayal’s late father-in-law, Navine Patel, had owned the hotel. It was the first Days Inn to open in California in the 1980s.

Vipul Dayal, owner and CEO of VNR Management in San Diego, said he housed essential workers at his 48-room independent hotel in San Bruno, near San Francisco International Airport.

Just two weeks before the coronavirus pandemic struck the U.S. and caused lodging business to plummet, Dayal had completed transitioning the family-owned Days Inn to an independent midscale hotel.

“I officially converted on March 1, 2020, and the state of California closed on March 18,” Dayal said.

He had begun the process to terminate the franchise agreement with brand owner Wyndham Hotels & Resorts in summer 2019. Looking back, he said, he should have begun the transition at least a year in advance as the process requires more work than he anticipated.

It was a bittersweet event as Dayal’s late father-in-law, Navine Patel, opened the hotel in the 1980s. It was the first Days Inn to open in California.

Dayal renamed the property Hotel 1550 because its address is 1550 El Camino Real.

VNR Management owns several other independent hotels, and Dayal was glad to be unencumbered from a brand when the pandemic struck.

“At this hotel specifically, we donated a lot of our rooms to the first responders in the city. Being independent allowed me to do that,” said Dayal, noting he heard from other franchisees that their brand leaders pushed back when they tried to do the same thing.

His friends and colleagues who own branded hotels said although occupancy and revenue were dramatically low, franchisers still required their monthly fees. “You’re already hurting as a hotelier, but now the brand is not doing anything to bring any business in, but yet they’re taking whatever business you have, 15 percent of it.”

An independent hotel owner or manager is not necessarily anti-brand and as it became clear that the coronavirus pandemic was here for the long haul most hotel brand franchisers eased up on collecting fees and waived mandates on PIPs and guest services, including breakfast buffets.

INDEPENDENT STANCE: Vipul Dayal, owner and CEO of VNR Management, converted his Days Inn in San Bruno, California, into the independent Hotel 1550 two weeks before the state shut down in March 2020 as a result of the COVID-19 outbreak. Dayal was able to give first responders free overnight stays, something he said many franchisers would not allow despite the pandemic.

F&B Boosts Revenue

Dayal says by removing the hotel’s brand affiliation, he was able to refresh the property and its amenities and increase the property’s star rating, which will lead to higher prices when business returns post-pandemic. He also is free to develop Hotel 1550’s F&B programming, including adding a bar.

Other managers of independent hotels say getting creative with F&B services helped drive the hotels’ revenue over the past year.

Loman at Real Hospitality Group said re-making the customer experience at these properties yielded positive results for the company. The hotels promoted their outdoor amenities with a focus on wellness and developed new dining concepts.

The programs “ended up driving new revenue streams for us, in many cases better than we would have ever imagined,” Loman said.

“One of our hotels developed a real specialty grab-and-go venue. And it really took off. We focused on indigenous things that were from the local area and we just found that our customers really enjoyed the story behind it. It made it very popular.”

The hotel, the Dunes Manor Hotel in Ocean City, Maryland, opened a coffee shop and named it Thelma’s Coffee & Confections after Thelma Conner, the original owner of the property. It enabled employees to tell the story of the hotel and some of the local items on the menu, including the former owner’s favorite teas.

“I think that brings it to life for the customer and they quickly can relate to it. And that goes without saying those customers that have been coming to that hotel for years and years, it was an immediate magnet for them.”

Real Hospitality also expanded F&B programming at its other independent properties, using social media to broadcast its message and attract local attention.

“Initially, we focused on the guests because obviously we’re in business to drive additional room nights,” Loman said. But through social media, many of the hotel restaurants engaged with the outside community through Facebook Live presentations of specialty cocktails and cooking classes with the hotel chefs.

The chefs and bartenders gave a face to their hotels and created a familiarity that carried over when people chose to book a stay.

“You can connect to your customers quickly if you know what your customer base is,” Loman said. “And by now, with the way technology is, we can see a lot of different data that we couldn’t see before. So being able to understand and connect with that customer, I think is easier than it has been in the past.”

Real Hospitality Group has more than 100 hotels in its management portfolio and most of them are branded assets.

The pandemic crisis pulled back the veil on what might constrain a branded hotel’s ability to get creative with marketing, amenities and programs.

“There were even a couple of cases of our independent hotels that we really took time to revamp our own specific loyalty program to be sure we provided the value to the customers,” Loman said.

For Real Hospitality Group’s owners, “you want to communicate to them that you’re turning over every rock to find every penny,” he said.

“From the top line perspective, you want to reach every customer you can because they may not want to stay tomorrow but two weeks from now or three months from now, and we’re ready to welcome them at any point in time.”

NEW NAME TAGS: Employees at Charlestowne Hotels’ Deer Path Inn in Lake Forest, Illinois, wear uniforms that feature name tags with their photos so guests know what they look like behind the masks. Matthew Barba, vice president of operations at Charlestowne Hotels, said as a result of pandemic restrictions the hotels in its portfolio came up with many innovative and creative solutions to engage guests and enhance their experience.

Bringing Closures

Though Real Hospitality Group’s independent hotels were able to access and use guest data to drive revenue, it was a challenge for most unaffiliated properties to message their customer base as the coronavirus pandemic forced communities in shutdown mode. As a result many independent hotels closed, too.

Charlestowne Hotels is a 40-year-old company that specializes in developing and managing independent boutique properties. Johnathan Capps, vice president of revenue at Charlestowne, said he was not surprised by Kalibri Labs’ report that 600 independent hotels had closed last year.

After all, owners and operators of unbranded hotels usually can quickly respond to current trends and market forces. In contrast, many franchise agreements prohibit closing the property or license holders that do shutter the hotel might face costly fees and penalties.

But Capps notes that though independent hotels had the most closings in any of Kalibri Labs’ segments, the percentage of rooms closed was less than 5 percent. That’s because many boutique independents typically have fewer rooms than branded assets. In addition, a significant number of independents are seasonal operations.

“We talked to someone right before the pandemic that has a property in Maine and they only open seasonally,” Capps said. “And they were in the process of selling. It sold, but the buyer wasn’t going to open it until they saw the numbers come back.”

Coastal South Carolina is dotted with family-owned independent hotels and motels that closed at the height of the pandemic. He expects them to reopen this summer as the numbers of re-opened independents continue to increase.

Capps said in some cases, owners of independent hotels closed because they wanted to use the downtime to renovate and refresh their properties and be prepared to welcome guests back when the pandemic eases.

Balancing Act

Matthew Barba is vice president of operations at Charlestowne Hotels and he agrees owners and operators of independent hotels can react to fast-evolving circumstances.

“For us, it really came down to responding quickly,” he said. “While some thought maybe this was going to pass quickly or others had a little bit of a deer-in-the-headlights response and panicked, we assumed the worst.”

Charlestowne Hotels “right away” moved to pause or defer contract obligations and drilled down on expenses and spending controls, he said. “We focused on cleanliness, health and safety, obviously, and encouraged constant communication and knowledge sharing amongst our peers.

“And then there were the program shifts – the evolution of carry-out and curbside pickup; all things contactless; and the resurgence of QR codes for dining menus and things of that nature.

“In hospitality, we thrive on touch points and engagement, but touch points and engagement were no longer safe and engagement needed to be measured literally,” he said.

“So it became about doing whatever was necessary to strike a delicate balance between providing a level of service guests have come to expect from our portfolio of hotels while staying focused on their safety and health and our clients’ financial stability, even if it’s just meant to do whatever we needed to do to mitigate losses.”

As with the entire lodging industry, independents were able to save on labor costs as guests declined daily room service.

Expenditures shifted to buying cleaning products and PPE for staff, but overall, Barba said, Charlestowne was able to offset supply costs by cutting back or eliminating amenities that guests did not want anyway.

The bonus with operating an independent hotel is there are no brand mandates and no need to seek franchiser waivers or approvals to change guest programming.

“The brand versus independent, it’s always a conversation that comes up and we manage both, so we have examples of both,” Capps said. “But I think pandemic related, we look at the independents and just our flexibility and ability to move faster when it came to implementing standards. We didn’t have to wait on brand approval or a full-blown brand-cleanliness plan.

“We always say we can add and test things. We can update things on the fly. That’s a lot of why we like being independent. You can roll something out and tweak it as you go.”

Capps said Charlestowne Hotels manages its own as well as each of the assets in its care as a small business. That means Capps and his team members could draw on their relationships with vendors to ask for breaks or more time to satisfy an obligation. That personal relationship with suppliers is valuable, especially as the larger franchisers have buying and distribution agreements with large distributors.

As it was with Real Hospitality Group, Charlestowne Hotels got creative in coming up with ways to drive revenue to its properties. It marketed package deals, staycations and special F&B programs.

It complemented its pricing strategy by looking at ways to build in value while driving revenue, Capps said.

CREATIVE EATS: Charlestowne Hotels’ Deer Path Inn in Lake Forest, Illinois, added to-go and in-room dining options to add value and drive revenue as it stayed open and in business amid the coronavirus crisis. At left is an order of cake that was part of a local curbside pickup. At right is a charcuterie box delivered to a guest room.

Pre-pandemic, Charlestowne Hotels added special touches and treats as a value-add for guests. During the pandemic, the hotels’ spas, swimming pools and restaurant dining-rooms were closed. The hotels did not lower rate in response to reduced guest access but rather added value by enhancing their offerings through room service.

“Sometimes you build those offerings for a PR standpoint, other times you build them to sell,” Capps said. “And we knew at this point we had to build those to sell.”

Along with enhancing the guests’ experience through F&B, Charlestowne Hotels also looked to the surrounding communities, Barba said. “Our business almost exclusively became singularly focused on F&B and serving the local community externally and meeting them at the curb,” he said. “And so it was a way to engage with our communities like we had never before. We were considered sort of the mainstay or a staple in some of those communities as a place of constant sort of 24 seven access.

“It was amazing to see the innovation born out of this,” he said. Even room service took on a new shine as employees came up with ideas to surprise and delight guests.

Charlestowne Hotels made it a priority to serve guests in advance of their arrival by communicating once the stay was booked, especially as COVID-19 protocols and guidance continually changed.

They made the messaging specific not only to the hotel but to the surrounding community, informing prospective and current guests of restaurants that were open or were closed but delivering, the locations of outdoor venues such as parks and updates on ever-evolving beach rules. The communication strategy helped Charlestowne Hotels’ rise above the coronavirus din and stand apart from the competition.

Another manager of independent hotels said communicating with guests as well as hotel owners and operators is its key value proposition as it builds its business now and post-pandemic.

Technology Focused

Rebel Hospitality is a new management company borne out of Capstone Equity in New York City, a private investor in independent hotels.

In March, it named Brian Sparacino as CEO.

His background includes management roles at the former Starwood Hotels & Resorts and then Marriott International. He went on to work for Interstate Hotels & Resorts and helped build its independent boutique management arm. After Aimbridge Hospitality acquired Interstate in 2019, Sparacino worked for the company’s Evolution Hospitality, its boutique hotel management subsidiary.

Sparacino said forming a hospitality company amid a pandemic has some advantages, including being able to deploy technology as solutions for operations as well as guest services.

“We set out to build a company to address areas that we felt the industry needed to change. And one part of it was transparency because for many owners it’s been an issue of misaligned interests between manager and operator. And finding a solution of how to close the gap was very important to (Capstone). So we took pretty drastic measures to infuse as much technology as possible to be able to create something that we feel is going to be an added advantage.”

Rebel Hospitality’s technology platform gives owners access to such information as financial transactions, expenses, labor reports, STAR data. “You name it,” Sparacino said. “It’s accessible and to the owner in real time. We place it on your cell phone through an app where the information flows back and forth. So it’s absolute, complete transparency.”

Capstone investors have also expanded automation to its hotels’ guests by giving them the ability to choose their services.

Knowing the pandemic has altered travelers’ senses and sensibilities, Rebel Hospitality has a program called Rebels Virtual Guest, which gives customers the freedom to design their stay.

“If I were to summarize it, I would say your phone has become the command control center to power your entire guest experience,” Sparacino said. “For example, if you want towels in (your) room, you can use your phone to send into the workflow system that goes right to the room attendants and on demand they’re coming up to your guest room. If you don’t want your guest room cleaned for stayovers, you have the ability to forego that.

“Right now where we are in a psyche of a guest is having a stranger into your guest room every day … is somewhat scary and that’s going to take time to resolve.”

Rebel’s Virtual Guest also provides a mobile room key and remote check-in.

“Everything within that guest experience, that ecosystem is powered through automation. And that’s essentially where the industry’s going,” Sparacino said, adding it’s not unusual for independent hotels to serve as the path for technological innovations and solutions. The coronavirus pandemic merely hastened the development and adoption of hotel technology. And the independent hotel sector has primarily driven the adoption of and adaption to new technology solutions.

“We’ve seen such a fast emergence and adoption of hotel automation over the past 12 months as a result of providing some solutions to get travel restarted,” he said. “Part of it is an independent boutique doesn’t have regimented brand standards and gives you the ability to create your own sandbox.

“There are a lot of companies that are so fast to market with introducing certain type of features. We’ve been spending a lot of time exploring them and testing them to make sure that they work and they’re a feasible solution moving forward, coming out of this pandemic.”

Most guests expect to have digital options and without them a hotel will fall flat on providing customer satisfaction.

Despite the profound impact the coronavirus crisis has had on the hotel industry, Sparacino said innovation in the independent hotel sector will continue to emerge and evolve long past the pandemic.

Independent boutique hotels rarely stay in one place for long. The sector, Sparacino said, is “always trying to catch the new trends. It’s always trying to stay ahead.

“Moving forward, you have to be nimble; you have to understand where the trends are going; and you have to reshape your business model to accommodate the preferences.”

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