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More than half of the world’s hotels are now branded properties, with franchising being the operating model of choice for most large hotel operators.
This is according to a new report from hotel consultancy firm HVS London which found five of the largest branded hotel companies (IHG, Accor, Marriott, Hilton and Starwood) make up 30% of the current branded room supply across the globe.
The same brands also represent 65% of the development pipeline, which demonstrates the increasing shift away from independently operated hotels worldwide, according to HVS.
However, the report found geographical differences. Across Europe, where independent hotels are more common, franchises account for 50% of rooms in the large listed hotel companies sampled, with the owned and leased model making up some 30% of room counts, and management contracts around 20%.
This contrasts 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.
The report 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.
Sophie Perre, director at HVS, explained that 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.
She said: “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.”
