Hotel franchise companies spent much of 2020 in defense mode, responding to the COVID-19 crisis with franchisee-support packages, new policies and procedures and heightened levels of communication, while also working with industry associations to advocate for government support. And, while navigating the pandemic has been challenging and forced major hotel companies to make a lot of tough decisions, the franchisors that most effectively supported and guided franchisees through the crisis are expected to see a return on their investment.

Brian Leon, president, Choice Hotels Canada, describes the current economic uncertainty as a “double-edged sword” in terms of its impact on hotel franchising. “We saw very significant impact and have seen the availability of financing [dry up], so that translates to a negative impact on new-build growth,” he explains. “We’ve also seen a big reduction in hotel transactions, [which] are often a good source of conversion growth for a system like ours.”

Combined, this has resulted in a “primarily negative impact on growth in the short term,” says Leon, adding, “We are seeing that change and there are some positives that come out of this as well.”

“What we’re going to see, in hotel franchising, is a lot of hotel owners question what they’re getting out of their franchisors and wanting to make sure they’re getting [good] value,” says Leon. “And, those of us that are able to provide that great value [are going to see] really good opportunities to continue to grow.”

In the current environment, a key part of that value is consumer confidence. With cleanliness and safety top of mind for current and future travel, it’s expected that trusted brands will hold an advantage over their competition going forward.

“What we may have demonstrated to hotels that are not presently affiliated with any brand is that there’s some solid merit in having a brand affiliation, because you do get the weight of global brands to come to the table to create these policies and procedures in a fast, efficient manner,” says Irwin Prince, president and COO of Realstar Hospitality — franchisor of the Days Inn, Motel 6 and Studio 6 brands in Canada.

Future Development
The circumstances of the past year led to the delay of hotel openings, as well as a reduction in the number of new signings, effectively stunting the growth of franchise brands. But, even by the end of the year, signs were improving.

In its Q3 2020 earnings report, Marriott International indicated strong openings in the quarter, with net rooms growth for the year expected to reach 2.5 to three per cent. And, the company’s president and CEO, Arne Sorenson stated, “Although signings are not as strong as in 2019, they’re quite solid considering the extraordinary impact of COVID-19 on our industry…We’re also encouraged by the increasing number of conversations we’re having around conversions.”

Leon also stresses that new opportunities will present themselves. “With the reduced pipeline of new hotels coming online…as demand comes back to the market, there will be a more favourable demand-supply relationship,” he explains. “That’s going to create some good new-hotel development opportunities.”

That said, Leon expects Choice will see more immediate gains on the conversion front, as independent hoteliers recognize the value of branded systems, which has been proven through the crisis. “The support we’ve been providing to our hotels has been a good story for our company,” he says. “Our development team, [is] getting calls from people saying ‘we hear good things about Choice and we want to talk about branding in the future.’”

And, Leon isn’t the only one to hold this sentiment. “In the near term, quality brands should benefit as investors are expected to focus on brand companies that have shown they’re out-performing the market based on strong programs in place in response to COVID-19,” agrees Tim Marvin, EVP of U.S.-based JLL’s Hotels & Hospitality Group.

And, in May, Ralph Hollister, Travel & Tourism analyst for London-based GlobalData, noted COVID-19 may accelerate the trend of independent hotels joining soft brands. “Large, multi-national chains have the brand and marketing power to outline new hygiene standards to vast amounts of potential guests,” he explains. “This may create a new pull factor that could help large chains consume even more of the global market share post-pandemic.”

With the industry’s segments impacted to varying degrees by restrictions and uncertainty — and the resulting effects on demand — some franchises are expected to outperform others when it comes to future development.

According to data from CBRE Hotels, Canadian limited-service properties saw a 69-per-cent RevPAR decline in Q2 2020, while RevPAR for resorts dropped 83 per cent and 88 per cent for full-service hotels. The company’s COVID-19 Recovery Framework also highlights limited-service properties as the first segment to see recovery as local leisure and local/regional corporate travel return, followed closely by focused-service and extended-stay. By comparison, business is not expected to return to full-service and resort properties until much later, due to their reliance on group and business travel.

As Marvin points out, companies that specialize in the property types that have shown resiliency and performed well through the pandemic “are expected to outperform and it’s likely more developers will adjust their short-term strategies to take advantage of these dynamics.”

“We’ve seen that our midscale segment has significantly outperformed the overall industry,” Leon explains. “From a standpoint of profitability, [operators have] realized our limited- service hotels can be operated efficiently [and] have a great agility to be able to respond to things like the [fluctuating] occupancy rates we’ve seen.”

Leon points to Choice’s Quality and Clarion Pointe as mid-scale conversion brands that are poised to present key growth opportunities as the industry moves forward. For more up-scale conversions, he calls out the Ascend Collection soft brand as a key opportunity.

Long-term look
There are other shifts expected to develop within hotel franchising, in the mid- to long-term, as travel recovers and we move through the post-pandemic world.

Marvin notes the pandemic crisis may have a lasting impact on the structure of major franchise companies. “Historically, many brand companies have pushed to maintain a significant mix of managed assets under their brand portfolios. This strategic decision is to help protect the brands (particularly luxury brands) by controlling operations, as well as to provide revenue to support large management infrastructures,” he explains. “During COVID-19, brand companies have downsized their organizations in an effort to reduce expenses. As franchising requires less support and infrastructure than managing properties, we’re seeing brands more willing to franchise than in the past. It’s likely brand companies will use this time to permanently re-structure their organizations to become more profitable and franchising will be more prevalent.”

Also among the lasting shifts will be changes to brand standards. “One of the things we’re looking at pretty aggressively — and I suspect some of our competitors are, too — is opportunities to eliminate costs from the business,” says Leon.

As he explains, short-term service changes caused by COVID-19 restrictions have caused some to re-think offerings. As an example, he says, “My expectation would be breakfast isn’t going to go back to exactly the way it was before. Complimentary breakfast will come back and still be part of the value proposition for guests, but [will] probably look a little bit different.”
What will this look like? Leon suggest a greater focus on grab-and-go offerings could be in store.

Other changes could include more rooms featuring kitchenettes, eliminating in-room coffee, greater use of technology and streamlined operations.

“The pandemic has accelerated the pace of change on some of these fronts,” says Prince, who points to how frequently rooms are cleaned during a stay as a key area where shifts are taking place.

In fact, a U.S. customer survey conducted in May by Fuel, a South Carolina-based software and marketing company, revealed travellers have varying opinions when it comes to the level of housekeeping service desired during their future hotel stays. ‘Only when requested’ emerged as the most popular response, being the preferred service level for 29 per cent of respondents. However, this increased to 35 per cent for the millennial cohort. Daily full-service housekeeping is still preferred by 22 per cent of respondents, while another 22 per cent would like daily towel changes.


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