Big hotel chains and unbranded-hotel owners find they need each other
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Independent hotel operators and global chains are forming franchise agreements as high-interest rates slow down new hotel construction. Big chains are turning to conversions to open new hotels in the short term and keep investors happy. Independent hotels are switching to franchise agreements to gain access to potential bookings and cheaper financing. Marriott International saw conversions account for 40% of organic room signings in 2023, double the rate from the previous year. The surge in revenge travel has benefited hotel operators, but higher interest rates have made it difficult for smaller operators to secure capital borrowing. Approximately $217 billion in hotel loans are set to mature globally by 2025, and refinancing at higher interest rates is expected. Brand-affiliated hotels have lower cash-flow risk than independent hotels. Large operators have launched soft and conversion brands to attract independent hotels and boost net unit growth. Hilton's franchise and licensing fee revenue rose 14.6% YoY in 2023, while Marriott's rose 13%.
#HotelIndustry #FranchiseAgreements #HighinterestRates #Conversions #IndependentHotels #BigChains