HVS Report Reveals Franchising is the Preferred Method of Expansion

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. April 27, 2015

LONDON. - April 27, 2015. Over half of the world's hotels are now branded properties, with franchising being the operating model of choice for most of the large hotel operators, according to a new report from hotel consultancy HVS London.

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, which demonstrates the increasing shift away from independently operated hotels worldwide.

The report, which examines trends in the way hotels are being operated, identifies the proliferation in the number of players and stakeholders that can be involved in a successful hotel - including brand owners, owners and management companies as well as combination of operating models and hybrid models.

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.

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

HVS also identifies 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.

To download the report, Decisions, Decisions: Which hotel operating model is right for you? by Stephen Collins and Sophie Perret please click http://www.hvs.com/article/7303/decisions--?decisions--?which--?hotel--? operating--?model--?is--?right/

About HVS

HVS is the world's leading consulting and services organization focused on the hotel, mixed--?use, shared ownership, gaming, and leisure industries. Established in 1980, the company performs 4500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 35 offices and 450 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. HVS.com

Media Contact:
Stephen Collins
Consulting & Valuation Analyst
[email protected]
+44 (0) 2 787 7754

Sophie Perret
Director
[email protected]
+44 (0) 2 787 7722