Do independent hotels benefit from the presence of branded ones?

Abstract

This paper investigates the performance changes of independent hotels due to the presence of nearby branded hotels in Texas. The moderating effects of these performance spillovers are also examined. Evidence from empirical analysis shows the existence and moderate significance of spillover effects from branded to independent hotels. Further analyses indicate that younger and higher-class independent hotels benefit significantly from performance spillovers from branded hotels. Higher-class branded hotels generate the vast majority of spillovers for their independent peers in the vicinity. Moreover, between the two types of branded hotels, franchised hotels generate the vast majority of spillovers, whereas contributions from chain-operated hotels are negligible. Suggestions are provided to independent hotels on how to improve their performance through spillovers from branded hotels.