The hotel groups' credo to develop their income.
The core business of Hotel Groups like Accor, Hilton, Marriott and IHG is to provide services to property owners who either want to join their brand system under a franchise agreement or entrust them with the day-to-day operation of their hotel under a management contract. In either case, it’s as much the Group’s brand awareness as it is the quality of its services that will drive hotel performance and convince the owner to choose its flag.
Service fees (distribution, marketing, IT, etc.) and brand trademark royalties make up the bulk of a Hotel Group’s revenue. This means that revenue growth is fueled by two key factors: the Hotel Group’s ability to expand its network through new franchise and management wins (hunting) and its ability to sell more services (farming).
More brands, more expansion opportunities
A Group’s potential to expand its hotel network worldwide is directly related to the size of its brand portfolio. The larger its repertoire, the easier it is to offer a solution – economy, midrange, luxury & upscale, short stay, extended stay residences, standardized or lifestyle – in line with the property’s location and the owner’s objectives. With this in mind, Accor expanded its portfolio from 17 brands in 2015 (ibis, Novotel, Mercure, Sofitel, etc.) to 33 in 2019, thanks to acquisitions, equity investments and brand creations across all market segments (Raffles, Orient Express, Fairmont, Rixos, 25 Hours, Swissötel, Mövenpick, Mantra, Mama Shelter, Tribe and Joe&Joe).
Needless to say, brand awareness and reputation are critical factors of development.
Hotel expertise through services
All Hotel Group contracts impose an obligation on the owner to purchase certain basic services (distribution, marketing, loyalty programs, etc.). Other than that, the range of complementary services varies from one operator and geography to another. Some Hotel Groups include a large number of mandatory services in their contracts (renovation, revenue management, employee training, etc.) in order to secure a certain level of revenue, but also to ensure the hotel’s performance and alignement with brand standards. Other groups adopt a more flexible approach, focused on providing adequate services on an as-need basis throughout the hotel’s life cycle (marketing support, energy expense management, quality improvement, etc.).
Whatever the Hotel Group’s strategy – required or optional services – the endgame is always to drive profit to the owner.
Services Provider driving profit to the ownersHotel Groups offer service catalogs of varying sizes but, as a general rule, the services can be divided into eight main sources of profit for the owner. Below are some concrete examples.
- Mastering Brand Development
- Powering Hotels
- Optimizing Visibility
- Maximizing Revenue
- Magnifying Customer Experience
- Easying Operations
- Empowering Hotel Talent
- Committing to Society