Research into European hotel market shows number of franchises is overestimated
Research by law firm Field Fisher Waterhouse LLP into the hotel industry has shown that only 3-4% of hotels in Europe are part of a franchise, far lower than previous estimates.
A leading firm in the hotel and leisure sector, with considerable expertise in franchising, Fieldfisher conducted the research which found that there are approximately 200,000 hotels in Europe but only a small proportion are franchised. Previous reports had only looked at franchises of major hotel chains, overestimating the figure at closer to 30%*.
Fieldfisher works with a range of leading hospitality companies, from budget operators to luxury brands. Head of the Hotels, Retail & Leisure Group, Babette Märzheuser-Wood, believes that whilst franchising is becoming more commonplace, with big brands seeing it as a flexible and low cost way to expand their business, independent hotels can be reluctant to become part of a bigger chain. European owners are often keen to remain independent and are put off by the potential fees and the perceived legal complexity involved.
Comparing the scale of the franchise industry in Europe to the US and Australia we see that whilst the turnover from franchising in Europe is estimated to be only 2 % of GDP, in the USA it is nearer 6% and in Australia it reaches 10%. This differential suggests that franchising is not realising its full potential in Europe.
Fieldfisher's research showed that brands such as Best Western and Choice who offer a "franchise light" model have been more successful in Europe than traditional US franchisors that have a strict list of mandatory brand standards. Best Western topped the league table of European franchise brands with 1300 hotels followed by French brands Accor and Louvre with 750 and 600 respectively. Choice and Intercontinental with 500 franchised hotels each are also relatively successful whilst major global brands such as Marriott and Starwood have less than 100 franchised hotels in Europe, traditionally focusing their efforts on management agreements. Some regional markets such as the UK, Germany and Spain continue to be mainly lease driven with the likes of Premier Inn, Travelodge, NH and Barcelo showing almost no franchised properties.
Babette Märzheuser-Wood said: "I was surprised to find figures for hotel franchising in Europe were so low. This suggests that hotel franchising presents a real growth opportunity for hotel brands in Europe.
"Franchising can be a very cost effective way for hotel brands to put flags on maps. Many European owners dislike management agreements which do not guarantee a minimum revenue in the same way as a lease. In a franchise model the franchisee will take the lease from the owner and enter into a franchise agreement with the brand so this satisfies the lease driven owner base. For potential franchisees it gives their hotels access to the added reach that the marketing expertise and loyalty programmes of big brands can bring. In some cases room rate can also be increased significantly by adding a major brand. This is not guaranteed however. As increasing numbers of guests look for value options, we are also seeing the franchising model used more and more at the budget end of the spectrum where it is easier to replicate the customer experience."
For further information, please contact:
Louise Eckersley, PR Manager, Field Fisher Waterhouse LLP on 020 7861 4120
Notes to editors
*HVS Hotel Franchise Fee Guide – Europe Mai 2010, Mara Eisenbaum und Sophie Perret quote a figure of 30 %. This figure is commonly used and goes back to a US academic study that was made in the 1998 to establish the number of franchised hotels amongst major global brands (Contractor and Kundu, Global Brand Expansion, Stephen Taylor, Franchising Hospitality Services, Butterworth 2000)
Fieldfisher's survey looked at 18 major brands with a significant presence in Europe to establish a more accurate estimate of the number of franchised properties in the region. This included leading franchisors such as Accor, Choice and Wyndham as well as other global brands such as Hyatt and Four Seasons. This was then compared with the number of hotels in Europe in total l to arrive at an estimate of the overall number of franchised hotels.
About Field Fisher Waterhouse LLP
Fieldfisher is a European law firm providing commercial solutions across a range of industry sectors. We have a particular focus on companies that are highly regulated and those with intellectual property and technology driven business models.
The firm has over 150 partners, 240 other lawyers and nearly 300 support staff across offices in Brussels, Dusseldorf, Hamburg, Paris, London, Munich, Manchester and Palo Alto. The firm also has an exclusive relationship with Italian firm, La Scala.
Our main areas of practice are corporate, IP, technology and regulatory law. We also have leading expertise in areas such as banking and finance, financial services, real estate, dispute resolution, personal injury and medical negligence. We are acknowledged as leading experts in sectors such as technology and communications, hotels and leisure and media as well as for our public sector work.
We have an international client base that includes listed and unlisted companies, multinationals, financial institutions, professional partnerships, trade associations and Government departments.
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