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Hotel franchising to increase by 50% in next five years

17 August 2015 by
Hotel franchising to increase by 50% in next five years

Hotel owners in Europe will be more likely to choose franchise deals over management agreements in the next five years, according to property advisor CBRE.

The firm predicts more than 50% of all new four-star hotel deals will be under franchise 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 more 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% of total openings whilst the pipeline [as at the end of May 2015] shows this rising to just over 61% of the total planned openings [in rooms], including conversions."

He added: "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."

In London, 3,705 new bedrooms are scheduled to open in the next three years under a franchise agreement with 4,479 planned for regional UK.

Examples include the proposed Hampton by Hilton at Bristol Airport and Courtyard by Marriott in Edinburgh to be operated by Redefine BDL.

CBRE said the hotel sector's solid growth across the majority of Europe meant that opportunistic investors are confident of increased returns on investments.

It said there is a greater appetite for unencumbered assets in comparison to those under a less flexible management agreement.

CBRE said new brands from existing companies as well as new entrants to the hotel industry are targeting the franchise market, including Tribute from Starwood Hotels & Resorts and Curio by Hilton.

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