Brand proliferation not helping RevPAR: CBRE

NATIONAL REPORT – Since 2019, CBRE analysis suggests hotel companies that add additional brands don't necessarily register stronger RevPAR performance. For example, the fastest growing brand family by number of brands (+15% compound annual growth rate) had the slowest median RevPAR CAGR at just 0.3%. Click here for complete findings.

At the same time, CBRE reported that inflation has fully eroded RevPAR gains over the past five years. While RevPAR for the brand families included in their analysis is nominally up 9.3% since 2019, it is down 10.9% in inflation-adjusted terms. This suggests, CBRE wrote, that shadow supply from alternative lodging sources and growth in traditional lodging supply are more than offsetting the demand recovery, resulting in reduced pricing power.

In a new study, CBRE reported major hotel companies (Choice, Hilton, Hyatt, IHG Hotels & Resorts, Marriott, Wyndham) added brands at a 7% CAGR and loyalty program members at a 15% CAGR over the past 10 years.

The gap between the best and worst performing brands is widening, according to CBRE, as the percentage of those that have outperformed the 50-brand sample average has fallen to 28% since 2019 from 52% between 2014 and 2019.

The strongest brand family posted a 2.1% RevPAR CAGR from 2014 to 2024, while the weakest contracted by 0.2%. Cumulatively, CBRE said, this 26% spread can significantly affect long-term investment returns and, depending on leverage levels, be the difference between profits and losses.

The upper-midscale segment has consistently been the best performer both before and after the COVID pandemic, offering more predictable returns, CBRE reported. The segment benefits from wide brand recognition, a flexible customer base and simplified operations, while guests prefer its offer of free breakfasts and lack of resort fees.

Midscale and economy chains that are facing both RevPAR declines and closures posted the slowest RevPAR growth between 2019 and 2024. The reduction in room count should ultimately bring supply and demand into balance, setting newer economy and midscale prototypes up for improving topline and profits.

Implications for owners

CBRE added that with performance gaps widening and new brands continuing to launch, it is more important than ever to assess whether a brand’s positioning, fee structure and customer mix are well aligned to generate profits across cycles and throughout the franchise agreement.

Here are its suggested winning Strategies:

• Analyze five- and 10-year RevPAR growth and indices by brand.
• Analyze dispersion among brands.
• Focus on proven performers within brand families.
• Align incentives. Negotiate performance-based franchise terms.
• Don’t just consider the brand’s performance, consider the brand family’s performance.
• Where possible, be agile. The era of 20-year flag commitments may be at an end.
• Consider a soft brand affiliation. Over the past 10 years, soft brand room growth has been nearly 10 times the growth in room count for the traditional brands in our sample, growing by 42% in the past year alone.