Third party hotel operators set to grow across Europe, says HVS

The number of hotel owners using third-party operators to run their properties looks set to increase across Europe, reflecting the “desire for flexibility as well as a number of other benefits”, according to a new report from global hotel consultancy HVS. It said the trend for third party operators (TPOs) has emerged from the US where the concept has become commonplace, with most franchised hotels from midscale upwards now being run by TPOs. These operators are not affiliated with the owner or the franchise brand and as such can be more aligned with owner objectives. Examples of TPOs in the UK include RBH Hospitality Management, which has been a key partner for brands such as Accor, IHG, Marriott and Hilton. In Europe it found the use of TPOs is more common among small and mid-sized hotels, particularly limited service or extended stay properties. As the concept has matured, however, HVS saidmore experienced TPOs are being sought for large corporate and luxury hotels, some in addition to operating under licensing agreement with a hotel brand. In a sample of major European hotel operators compiled for the report by HVS, the number of hotels in the sample operated by TPOs has grown by around 40%. This percentage is expected to grow a further 5% by 2025. Report co-author Nikola Miljković and a senior associate at HVS London said: “The rise in TPOs has arguably been prompted by an increase in franchising as branded operators move from the operational management of hotels to focus more on brand development and distribution.” The report outlines the often more favourable terms obtainable from TPOs including shorter contracts than usual brand management arrangements, sometimes just 12 months compared with 20-30 years. Jon Critchely, report co-author and director at HVS Hodges Ward Elliott, the brokerage and investment services division of HVS London, added: “The fundamental focus of brands remain the brand’s success and this can conflict with the interests of owners “The popularity of third-party managers is partly due to the alignment of interests, particularly regarding asset value and profitability. We are likely to see their use across the UK and Europe grow moving forward as we see an increase in the number of credible and established TPOs.”