Independent luxury is king in these 3 markets
14 JULY 2014 6:53 AM
Independent luxury properties beat the brands in New York, Boston and Miami/Hialeah.
BROOMFIELD, Colorado—Not all luxury properties are created equal. And for that reason there is a large variance in performance within this class.
On a macro level, the luxury chain scale historically has achieved premiums in rate (32.4%) and occupancy (12.6%) over luxury independents. But that isn’t true when narrowing in on a few markets where luxury independents take the cake.
For the purpose of this article, we examined three markets where luxury independents consistently outperform luxury chains’ average daily rate. There are more than three markets nationwide where this is the case. However, after sufficiency checks and excluding properties that had participated for less than 84 months, the remaining markets were: New York, Boston and Miami/Hialeah.
The mixture of luxury chain and independent properties varies between the three markets. New York and Boston have a similar composition to the total United States, with chains representing more than 65% of the luxury properties. Miami luxury properties are the reverse: 60% independent and 40% chain.
The above chart details the ADR premium that independents have over chains. Miami independents have the largest ADR premium of the three markets, topping out at a $80 thus far into 2014. This is largely due to the concentration of independent properties on Miami Beach, a tract which outperforms the market. Miami independents also were hit harder by the recession. Boston and New York independents maintained their premiums during the downturn, with Boston’s gaining ground in 2009.
Occupancy, however, is a different story. New York independents have been unable to compete with the occupancy of branded properties, falling between 2 to 6 percentage points below. Boston hotels have made slow gains and eventually surpassed the occupancy of branded properties by 5.4 percentage points in 2012. During the recent recovery, Miami independents finally surpassed branded properties by a small margin of 0.3 percentage points, and 2.5 percentage points so far this year.
Even though the independent occupancy premium is much lower (or nonexistent) compared with the rate premium, the absolute occupancy values for independents in these markets is well above the national average. Luxury independents achieved 64.2% occupancy in 2013.
In terms of absolute rate, the luxury independents in these sets are also above the comparable rate of $225.34 in 2013 for luxury independents nationwide.
With continued discussion in the industry of independents versus soft brands versus traditional brands, this suggests there are some independents in the landscape of these markets that are doing fine on their own.