Increase in number of hoteliers opting for franchises over management agreements

By Emma Eversham contact

- Last updated on GMT

Hotel owners are seeing franchise agreements as better ways to retain operational control and maximise returns than management agreements says CBRE
Hotel owners are seeing franchise agreements as better ways to retain operational control and maximise returns than management agreements says CBRE

Related tags: Hotel

Hotel owners in Europe will be more likely to opt for franchise agreements with brands than management agreements over the next five years according to property advisor CBRE.

More than 50 per cent of all new four star hotel deals over the next five years will be under franchise, CBRE predicts, as owners seek to retain operational control and maximise returns. 

Owen Pritchard, head of development EMEA at CBRE said: “We are going to see more and hotel companies offering franchises for their full service four star brands as well as continue to push their limited service franchise brands.

"We understand from Hilton that franchises in Europe over the last two years accounted for nearly 57 per cent of total openings whilst the pipeline (as at the end of May 2015) shows this rising to just over 61 per cent of the total planned openings (in rooms), including conversions."

Confidence

In London, 3705 new bedrooms are scheduled to open in the next three years under a franchise agreement and the figure rises to 4,479 for the regions. Examples include the proposed Hampton by Hilton at Bristol airport and Courtyard by Marriott in Edinburgh, both of which will be operated, under franchise by Redefine BDL. 

CBRE said the hotel sector's solid growth across much of Europe meant that opportunistic investors were confident they would be able to get an increased return on investment, hence the 'greater appetite' for agreements which would help them take a share of the profits.  

Asset light

The franchise model also suits the growing trend for large hotel companies, like Accor, to operate an 'asset light' strategy, said Pritchard.  

“The predominance of the asset light strategy from major hotel brands combined with pressure to increase distribution of their portfolio is providing the momentum for the franchise model. There is also an increasing preference from owners to have operational control and an increase in the size and capabilities of third party operators.” 

A number of new brands are being launched by existing companies as well as new entrants, which have been set up to target the franchise market, such as Tribute by Starwood Hotels & Resorts and Curio by Hilton. 

Related topics: Business, Hotels, Trends & Reports

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