What's Happening?
CBRE's recent analysis highlights the growth in hotel brand portfolios and loyalty program memberships over the past decade. Major hotel companies have expanded their brand portfolios at a 7% compound annual growth rate (CAGR), while loyalty program memberships have grown at a 15% CAGR. Despite this growth, the analysis suggests that adding more brands does not necessarily lead to stronger RevPAR performance. Since 2019, the fastest-growing brand family by number of brands posted the slowest median RevPAR CAGR of just 0.3%. Inflation has eroded RevPAR gains, with real RevPAR down 10.9% in inflation-adjusted terms since 2019. The upper-midscale segment has consistently outperformed other segments, offering more predictable returns due to its wide brand recognition and simplified operations.
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Why It's Important?
The findings underscore the importance of careful brand selection for hotel owners and developers. While brand affiliation can offer access to loyalty programs and operational efficiencies, the RevPAR performance of individual brands can significantly affect asset value over time. The widening gap between the best and worst-performing brands highlights the critical role of brand selection in profitability. The analysis suggests that the upper-midscale segment offers the most predictable returns, benefiting from strong brand recognition and a flexible customer base. This information is crucial for stakeholders looking to optimize their investments in the hospitality industry.
What's Next?
Hotel owners and developers are advised to conduct thorough due diligence when selecting brands, focusing on proven performers within brand families. Aligning incentives and negotiating performance-based franchise terms are recommended strategies. The analysis suggests considering soft brand affiliations, which have shown significant room growth compared to traditional brands. As the industry continues to evolve, stakeholders must remain agile and adapt to changing market conditions to ensure long-term profitability.
Beyond the Headlines
The analysis reveals deeper implications for the hospitality industry, including the impact of alternative lodging sources and the proliferation of hybrid work on travel patterns. The divergence in hotel brand performance makes it increasingly challenging to select winning brands, emphasizing the need for strategic decision-making. The findings also highlight the importance of sustainability and community engagement in driving brand success, as seen in the upper-midscale segment's focus on simplified operations and guest preferences.
