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International hotel groups are stepping up plans to add independent hoteliers and smaller brands to their European franchises as they seek to capitalise on soaring demand for travel amid high construction costs for new resorts.
Holiday Inn owner InterContinental Hotels Group and Marriott both set out plans this week to add hundreds of existing hotels across Europe to their brands to field a surge in holidaymakers from a post-pandemic travel boom.
InterContinental Hotels Group aims to double its portfolio in Germany to more than 200 hotels by 2028, through a 30-year franchise agreement with the country’s largest family-run hotel operator Novum Hospitality. The latter’s Yggotel, Select and Novum hotels will be rebadged as Garner, IHG’s new mid-range brand, while its niu brand will become Holiday Inn — the niu.
Marriott, meanwhile, said it would add 100 more hotels in countries such as the UK, Italy, Spain and Turkey by the end of 2026, by rebranding third-party hotels and converting existing buildings.
International hoteliers are racing to expand their portfolios at a time when high borrowing costs in Europe have slowed the pace of new construction. Property consultancy JLL said the number of conversions surged to an all-time high in 2023, with hotels converting offices as well as existing resorts.
“The momentum in Europe has been building and accelerating,” said IHG chief executive Elie Maalouf, adding that high construction costs and the continent’s large number of independent hotels presented “an opportunity”.
“[The region has] lower penetration of global brands, a lot of independent properties . . . but a strong industry,” he said. “People want more hotels.”
European travel is expected to remain strong this year, buoyed by a return of Asian and business travellers as well as events such as the Paris Olympics and singer Taylor Swift’s Eras tour in Europe kicking off next month.
Hotel groups are seeking a way to gain market share in the region at a time when growth in the pipeline of new hotels is slowing. From 2009 to 2023, overall European hotel supply grew at an annual compound growth rate of 1.3 per cent, according to CBRE. That is expected to moderate to just 0.9 per cent this year, well below the estimated 3 per cent annual growth in visitor arrivals, CBRE said.
Mark Hoplamazian, chief executive of US hospitality group Hyatt, said building new hotels had become harder due to “very tough” markets for raising capital, causing the company to turn instead to converting and rebranding existing buildings. There is “much more demand than supply”, he said.
Hyatt, which owns brands including Grand Hyatt and Andaz, said in January it was adding more than 70 hotels to its portfolio across Europe, Africa and the Middle East.
Hotel operators said the European hotel industry was still rife for consolidation, with 59 per cent of hotel rooms still independently run, down from 65 per cent in 2008, according to industry data tracker STR. In the US, only 28 per cent of rooms are independent.
Groups such as Hilton argue that small hoteliers benefit from franchise deals, which give them the power of a bigger brand. However, such agreements come with a cost too, as hotels must pay fees to the franchisor.
Kenneth Hatton, CBRE’s head of hotels for Europe, said the travel boom had given an “air of confidence” to small hoteliers, who were able to raise their room rates without the added cost of being affiliated with a large brand.
But as demand starts to normalise later this year, they are likely to “acknowledge they need brand support for distribution”, he added.
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