Hotels lead franchise world with 7 percent pop
As the recession fades further from memory, companies, couples and families have reopened their pocketbooks to fuel massive year-over-year growth in the hotel category. Gains are widespread, but high-end legacy chains like Marriott, Hilton, Hyatt and InterContinental are leading the pack with double-digit growth at many of their most prominent flags.
Industry juggernaut Hilton Hotels & Resorts has increased its sales by 6 percent, and many of its other properties reported double-digit revenue growth. Hilton Garden Inn’s sales grew by 15.6 percent with a 3.3 percent increase in units. Homewood Suites was up by a staggering 18.6 percent, with a 4.1 percent jump in units.
With 2,005 units open (a 2.1 percent increase), Hilton’s Hampton Inn & Suites increased its revenue to $5.5 billion in 2014, which represents a 5.8 percent jump for the year.
Saying the industry’s fundamentals are as good as he’s ever seen, Hilton Executive Vice President of Global Brands Jim Holthouser said a generational shift in the value and frequency of travel is further supplementing the economy’s boost to the hotel business.
“If you look at X-ers and gen Ys and millennials, travel used to be considered a luxury—travel is now a birthright,” he said. “In very affluent western societies, Europe, the U.S. and Canada, people have the means of traveling.”
Translating that into dollars, Holthouser added Embassy Suites, Hilton Garden Inn, Hampton Inn and Homewood Suites all have RevPAR (revenue per available room) exceeding 120, meaning they get 20 percent more revenue on average for every room in their system.
The rise of design- and urban-focused brands like Canopy and Curio, he said, are a boon to franchisees, giving them the chance to be creative in designing their own properties, and that traditional brands like Hilton, are being reserved for convention center-style environments.
Echoing that sentiment of best-ever conditions in the hotel industry, Marriott’s Liam Brown, president of North America select and extended stay lodging and owner franchise services, said the company saw record occupancies in 2014, which translates to signing more than 650 hotel agreements—also a record.
“We’re on target this year to reach more than a million rooms open or under development before the end of this year, and our owners and franchisees are set to invest $50 billion in new hotels over the next few years,” he said.
The brands in Marriott’s luxury portfolio—The Ritz Carlton, Bulgari, Edition, JW Marriott, Autograph and Renaissance—are performing particularly well, with Autograph expanding to 75 at the end of 2014 and on track to reach 100 by the end of this year.
“Our business is highly correlated to GDP growth,” Brown said. “Our highest rates and most loyal travelers are business travelers, so when GDP is positive there are capital expenditures going on … and that drives the profitability of our business.”
Looking at the hotel category as a whole, RevPAR increased more than 7 percent, while new units increased only 2.6 percent—a trend that bodes well for continued expansion during the rest of 2015 and into 2016.