HVS: Europe to see increase in branded hotels

Hotel consultancy company HVS is predicting that Europe seems poised to see an increase in branded hotels as the concept of franchising gathers pace among hotel operators in the region. 

Until now, the uptake of franchise agreements in Europe has been relatively slow. But HVS reports that an increasing recognition of the strength of a hotel brand and brand affiliation has prompted the concept to expand. An estimated two-thirds of European hotel stock remains unbranded, and HVS believes that this presents a "huge opportunity" for branded operators who are looking to expand.

The HVS report, Hotel Franchising in Europe, claims that franchising agreements enable rapid expansion for brands entering new markets. The franchises are increasingly operated with the assistance of independent management companies - the franchisor provides the brand name and marketing platform and the independent management company provides the expertise and know-how to manage the hotel.

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“There is clearly a huge opportunity for growth of branded hotels in Europe, including franchises," report co-author and HVS London director Sophie Perret said in a statement. "A few years ago, hotel operators were keener on management contracts. Now, franchise contracts are equally as likely to be proposed to owners by the brands."

Europe has seen a slower uptake of franchise agreements compared with the US, where some 70 percent of hotels are branded, with half of those held under franchise agreements.

Over the past few years the presence of independent management companies has expanded greatly in Europe. This opens the door for expansion for both the franchisor and the owner.

The emergence and increasing presence of independent management companies has led to many brands making the strategic decision to expand via franchises. HVS suggests that the brands know that these companies can manage the properties efficiently and to a high standard. 

“Independent management companies have a good track record and are an efficient way to grow brands," co-author Lucy Payne, a consultant and valuation analyst with HVS London, said, noting that the "nimbleness" of these companies is a key advantage compared with the "heavier corporate structures" of established brand operators.

“We don’t expect the franchise sector to grow in Europe to the extent it is popular in the US; however, we do expect a significant uplift over forthcoming years,” added Payne.

2014 Hotel Franchising in Europe, by Sophie Perret and Lucy Payne, can be downloaded at www.hvs.com/article/6934/hotel-franchising-in-europe-2014.