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Hotel Chain Strategy - March 2016

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Published Date : Mar 2016

Category :

Hotels & Restaurants

No. of Pages : N/A

Brand proliferation is likely to continue as the big chains attempt to compete in each nook and cranny of the hotel market through offering a specifically tailored product. Consolidation will go forward in the current low interest rate environment as chains continue to feel the need to

Table of Content


Key findings

Data Sources


Issues in the Market

Consolidation of the hotel sector
OTAs and their growing dominance of distribution
Competition from accommodation-rental platforms
Security concerns

Global Summary

Economic outlook
Nominal vs. PPP
Figure 1: World Economic Outlook projections, year-on-year % change (unless otherwise noted), January 2016
Oil and commodity impact
Outlook for commodity prices
Figure 2: Forecast for commodity prices, 24/11/15
Interest rate outlook
Figure 3: Forecast for 3-month Libor rates & 10-year government bond rates by currency zone, 24/11/15
Outlook for exchange rates
Figure 4: Exchange rate forecasts, 24/11/15
HNWIs worldwide
There are about 14.6 million HNWIs worldwide
Figure 5: Growth in HNWI population by region, 2009-14
Figure 6: Growth in HNWI wealth by region, (US$ trillion), 2009-14 & 2014- 17
HNWI segmentation
Figure 7: HNWI population segmented by wealth category, 2014
HNWI by country
Figure 8: HNWI population by country*, 2014
The middle class has been gutted
Polarisation of the hospitality offer
Figure 9: Middle class losing ground in the US, 1971 & 2015
Hotel capacity
Figure 10: Hotel capacity* by region worldwide, 2015
Global development pipeline
Asia Pacific
Central/South America
The Middle East and Africa
Figure 11: Top 10 US hotel markets by rooms under construction, 30 November 2015
Top ten chains
1.4 million rooms in the pipeline
Figure 12: The 10 largest hotel companies* by room count, 2016
Leading hotel groups in the US
Figure 13: Leading hotel groups in the US ranked by number of rooms, June 2015
Leading hotel groups in Europe
Figure 14: Top 5 hotel groups in Europe at 1 January 2014 & 2015
Hotel performance
Figure 15: Hotel performance by region, YTD November 2014 & 2015
Trend in hotel rates
Figure 16: Hotel rates in the UK & Ireland, Q3 2014-Q3 2015
Figure 17: Hotel rates in Europe, Q3 2014-Q3 2015
Figure 18: Hotel rates in Asia Pacific, the Americas & the Middle East , Q3 2014-Q3 2015
Brand satisfaction results
Keeping up to date
Luxury brands
Figure 19: Luxury brand overall ranking & score (out of 6), 2015
Four Seasons
Luxury score improved
Pipeline and performance
Figure 20: North American luxury Brand Satisfaction Ranking*, (score out of 6), 2015
Upper-upscale brands
Figure 21: Upper-upscale brand overall ranking & score (out of 6), 2015
Westin tops upper-upscale segment
Hyatt Regency runner up
Figure 22: North American upper-upscale Brand Satisfaction Ranking, (score out of 6), 2015
Select service surpassing full service in the upscale segment
Figure 23: Upscale brand overall ranking & score (out of 6), 2015
Hyatt Place leads upscale
Aloft and Four Points moving up
Radisson trying to catch up
Figure 24: North American upscale Brand Satisfaction Ranking, (score out of 6), 2015
Best Western Plus wins upper-midscale
Figure 25: Upper-Midscale brand overall ranking & score (out of 6), 2015
Best Western Plus
SpringHill Suites
Hampton by Hilton
Performance and pipeline
Figure 26: North American upper-midscale Brand Satisfaction Ranking, (score out of 6), 2015
Midscale segment
Figure 27: Midscale brand overall ranking & score (out of 6), 2015
Wingate by Wyndham
La Quinta
Best Western
Figure 28: North American midscale Brand Satisfaction Ranking, (score out of 6), 2015
Upscale extended-stay
Figure 29: Upscale extended-stay brand overall ranking & score (out of 6), 2015
Residence Inn
Staybridge Suites
Figure 30: North American upscale extended-stay Brand Satisfaction Ranking, (score out of 6), 2015
Pipeline and performance
Midscale extended-stay
Figure 31: Midscale extended-stay brand overall ranking & score (out of 6), 2015
Candlewood Suites
TownePlace Suites
Pipeline and performance
Figure 32: North American midscale extended-stay Brand Satisfaction Ranking, (score out of 6), 2015

Consolidation of the Hotel Sector

Valuation of takeover targets
Figure 33: Value of takeover targets in prior hotel transactions, 2005-14
Marriott’s bid to take over Starwood
Creating the world’s biggest hotel group
Starwood was for sale
Figure 34: Starwood Hotels & Resorts share price, 2015
Vistana sale distribution
Valuing the deal
Figure 35: Estimated TEV/EBITDA multiples for a selection of publicly traded hotel companies, 2015
Starwood valuation
Figure 36: Base case & conservative case forecasts for Starwood operating results, (US$m), 2015-20*
Marriott valuation
Figure 37: Base case & conservative case forecasts for Marriott operating results, (US$m), 2015-20*
The implied exchange ratio calculated
Figure 38: Estimated exchange ratios calculated, 2015
Too many brands?
Figure 39: Combined brand portfolio of Marriott & Starwood by chain scale, 30 September 2015
Geographical reach and overlap
How will the merger impact hotel owners?
Anbang crashes the party
Marriott sweetens its offer
But Anbang may come back with an even higher offer…
AccorHotels to buy FRHI
Portfolio details
FRHI performance
Motivation for sale of FRHI
FRHI’s properties
Strategic advantage for AccorHotels
Marriott vs. AccorHotels
Hotel M&A part of cyclical trend
OTA/industry pressure
Blackstone picks up Strategic Hotels & Resorts
Figure 40: Strategic Hotels & Resorts' share price, 2006-15
Strategic’s portfolio
Business strategy
Internal growth strategy
External growth strategy
Asset disposal strategy
Balance sheet management strategy
Capital allocation strategy
Ownership of hotels
Hotel management agreements
Consolidation in China
Jin Jiang buys Plateno
Jin Jiang profile
Plateno profile
Strategic outlook
BTG buys Homeinns
Homeinns profile
Profits under pressure
Terms of the transaction
BTG profile
M&A in Oceania
Asian investors keen on Australian hotels
Recent transactions
Lots of deals in the month of May
Second half of 2015 transactions
More to come in 2016
Boutique merger in US
A complementary fusion
Management structure
Targeted synergies

OTAs and their Growing Dominance of Distribution

Channel trend
Figure 41: Booking channel breakdown for individual reservations at hotels in the top 50 international markets, Q3 2014 & 2015

Competition from Accommodation-Rental Platforms

Airbnb impacting New York hotel market
BHA lashes out at Airbnb
Strategies to confront the ‘sharing economy’
Choice to expand its holiday-rental platform
Be Mate offers hotel services for rental apartments
Selection criteria
AccorHotels buys into holiday rentals market
Oasis Collections

Security Concerns

Terrorism on the rise
Figure 42: Terrorist incidents at hotels by country, 2015-16
Paris attacks
Figure 43: Hotel performance in Paris, Q1, April 2014 & 2015
November attacks compound the problem
Attacks in Tunisia
Beach-resort hotel attacked
Aftermath of the attack
Tourists attacked in Egypt
Government steps up security
Cyber-attacks a growing danger
Hospitality sector vulnerable to attack
Hilton investigating hacking at its hotels
White Lodging data breach investigated
Hacked data at risk
Customers advised to initiate a fraud alert
250 Hyatt hotels in data breach
Apps present a risk
What is the risk?
The crux of the problem
Addressing security concerns
Case example of a data breach
Using technology to upgrade hotel security
Tech-friendly hotel safes
Eliminating lock hardware
Kaba, a security specialist
VingCard Elsafe minimises lock hardware
Fairfield Inns & Suites property in Brooklyn
CISA eSIGNO, a contactless locking system
Handheld access
Starwood’s keyless system
Other hotel companies going keyless
Apps reinforce direct booking
Apps provide data about guest preferences
Keyless to be generalised by 2020
But there are risks…

Expansion Strategies of Major Multi-Brand Chains

Low risk
Figure 44: Revenue categories at Marriott International, 2012-14
Super asset-light
Figure 45: Franchised hotels’ top 10, ranked by number of franchised hotels, 2015
The weak link in the chain
Hilton to spin out property and timeshare
AccorHotels the exception
Very low proportion of franchised hotels
AccorHotels’ dual strategy
Two core missions
Figure 46: AccorHotels’ portfolio by brand & asset management structure, 31 December 2014
Operating structures
Development strategy
Figure 47: AccorHotels' portfolio by geographical location & asset management structure, 31 December 2014
Expansion via partners
Vision Hospitality Group
Figure 48: Vision Hospitality Group’s hotel portfolio, 2016
An active pipeline
Figure 49: Vision Hospitality’s development pipeline, 2016
Host Hotels & Resorts
Figure 50: Host Hotels & Resorts’ hotel portfolio, February 2015
Foreign JVs
Figure 51: Euro JV Funds I & II, 20 February 2015
Other US real-estate investments
Host’s strategy
Katara Hospitality
Figure 52: Katara Hospitality’s portfolio of owned hotels, 2016
Dalian Wanda Group
Hotel portfolio
Figure 53: Wanda Hotels and Resorts’ foreign-branded hotel portfolio, 2016
Figure 54: Wanda Hotels and Resorts’ active pipeline of hotels under construction, 2016

Branding Strategies of Major Chains

Lifestyle segment heats up
Moxy launched in Europe
IHG’s Kimpton acquisition – so far so good…
Why Kimpton was sold
Preserving the brand ethos
Owners still happy
Overseas expansion
Moxy and Tru to go head to head
Smaller is better
An impressive pipeline to start
Big ambitions for Tru
Midscale market overview
Soft brands allow for faster expansion
An attractive proposition for independent hotels
Enhances loyalty schemes
Design Hotels joins the Starwood network
Hyatt launches ‘The Unbound Collection’
Four properties in the active pipeline
Branding criteria
Social media important
Hyatt to move Into river cruising?

Strategies to Grow Direct Booking

Harnessing loyalty schemes
Digital Key only available to HHonors members

Luxury Hotel Strategy

Personalised experiences, employees are key
Empowerment and a decentralised structure
Location is all important…
Profitability a key concern
Being a star hotelier is not enough, however…
A real-estate expert at the helm
Finding sites and investors is a challenge

Gaming Hotel Strategy

Hotel price a residual value
Figure 55: Breakdown of revenue by source, Wynn Resorts, 2013-14
Revenue management is key
Comparison with conventional hotels
Casino hotel guest segmentation
Sands’ Paiza Club
Room rates are residual
Maximising profits not revenues

Tour Operator Hotel Strategy

Vertical integration at TUI
Portfolio of brands
Figure 56: Asset management structure, FY 2013-14 & FY 2014-15
Figure 57: Geographical dispersion of TUI’s owned hotels (% of beds by region), FY 2013-14 & FY 2014-15
RIU Hotels & Resorts
Grupotel Hotels & Resorts
Atlantica Hotels & Resorts
Iberotel Hotels & Resorts
Jaz Hotels & Resorts
Sol Y Mar
Gran Resort Hotels
Smartbands for enhanced guest experience
Testing and implementation
Advantage for TUI

Strategies to Enhance On-Property Guest Experience

Harnessing technology in hotels
Alice, a hotel mobile tech startup
Automating processes
Mobile service delivery
Automating back-of-house
Breaking down language barriers
Putting guests in the driver’s seat
Customers driving automation of hotel services

Top 50 Brands

Figure 58: Top 25 hotel brands ranked by room count, 2015
7 Days Inn
Best Western
Holiday Inn Express
Holiday Inn
Figure 59: Percentage of room nights booked by booking channel, 2014
Hilton Hotels & Resorts
Figure 60: Hilton brand portfolio by region/country & by asset management structure, 31 December 2014
Hampton by Hilton
Figure 61: Hilton brand portfolio by region/country & by asset management structure, 31 December 2014
Marriott Hotels
Figure 62: Marriott hotels by location & asset management structure, 31 December 2014
Figure 63: Marriott-branded portfolio* by geographical location, 31 December 2014
Super 8
Figure 64: Super 8 rooms by region , 2015
Figure 65: Courtyard hotels by location & asset management structure, 31 December 2014
Figure 66: Courtyard-branded portfolio by geographical location, 31 December 2014
Days Inn
Figure 67: Days Inn rooms by region, 2015
US operations
Figure 68: Quality’s US portfolio 2010-14
Figure 69: Quality Hotels outside the US by country location, 2015
Comfort Inn
US operations
Figure 70: Comfort Inn US portfolio 2010-14
Foreign operations
Figure 71: Comfort Inn Hotels outside the US by country location, 2015
Ibis hotels
GreenTree Inn
Jin Jiang Inn
Figure 72: Ramada rooms by region , 2015
Crowne Plaza
Figure 73: Crowne Plaza’s hotel portfolio & development pipeline by major region, 30 September 2015
Motel 6
DoubleTree by Hilton
Figure 74: DoubleTree by Hilton brand portfolio by region/country & by asset management structure, 31 December 2014
La Quinta Inns & Suites
Figure 75: La Quinta’s hotel portfolio by location & operating structure, year-end 2014
Hotel design
Figure 76: La Quinta hotels by operating structure at year-end 2010-14
Figure 77: La Quinta hotels performance by operating structure at year-end 2010-14
Hilton Garden Inn
Figure 78: Hilton Garden Inn brand portfolio by region/country & by asset management structure, 31 December 2014
Residence Inns
Figure 79: Residence Inn hotels by location & asset management structure, 31 December 2014
Figure 80: Courtyard-branded portfolio by geographical location, 31 December 2014
The next 25 ranked brands
Figure 81: 26th-50th ranked hotel brands by room count, 2015

What Next?

Further brand segmentation
Franchising and white-label managers on the rise
Local market domination
Brand development trends
Too much emphasis on Millennials?
Time for a brand targeting older cohorts?
Consolidation to continue
Carlson Rezidor up for grabs?
Regional chains to be acquired
Extended Stay America
Figure 82: Extended Stay America’s share price from the IPO to 2 February 2016
La Quinta
Figure 83: La Quinta’s share price from the IPO to 2 February 2016
OTA impact to decline
Hilton’s ‘Stop Click Around’ campaign

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