Major brands now dominate global hotel sector: HVS

Major brands now dominate global hotel sector: HVS

Five of the largest branded hotel companies lay claim to 65% of the world's development pipeline, according to new data

Five of the largest branded hotel companies lay claim to 65% of the world's development pipeline, according to new data

More than half the world’s hotels are now branded properties, with franchising being the operating model of choice for the majority of large hotel operators, according to a new report from hotel consultancy HVS London.  

More than half the world’s hotels are now branded properties, according to HVS.
More than half the world’s hotels are now branded properties, according to HVS.

Five of the largest branded hotel companies (IHG, Accor, Marriott, Hilton and Starwood) make up 30% of the current global branded room supply and 65% of the development pipeline, demonstrating the increasing shift away from independently operated hotels worldwide.

There is also a geographical difference. Across Europe, where independent hotels are more common, franchises account for 50% of rooms in the large listed hotel companies sampled by HVS, with the owned and leased model making up approximately 30% of room counts, and management contracts around 20%.

This contrasts sharply with the North American market, where 85% of the research sample were franchised, just 13% under management contracts and only 2% were owned and leased properties.

“In the US, the franchise sector is highly regulated, making it more transparent and easier to compare the results of one brand against another,” says Stephen Collins, consulting & valuation analyst with HVS London. “In Europe, franchise regulations differ from one country to another, making it more difficult to compare like-for-like.”

HVS has also identified the growing use of Third Party Operators (TPOs) to operate franchises, bridging the gap between the owner of the hotel and the franchisors who own the brand.

“While many franchisees are owner-operators and have the management expertise to be successful, there remains a gap between owners that are unable or unwilling to control the daily operations of the hotel and the franchisors that provide the brand,” said HVS director Sophie Perret.

“This is where third-party operators have come into prominence. TPOs have allowed companies to sell their flag first and direct their management efforts towards the hotels and brands they deem appropriate, while the owner is able to realise advantages of both franchises and management agreements while avoiding a number of the limitations.

“The franchise model, with or without a third party operator, is expected to carry on gaining momentum in Europe, as it continues to deliver better value for all parties involved,” she added.

Gary Marshall
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Gary Marshall
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