Hotels increasingly managed by third parties

GLOBAL REPORT – Branded hotels comprise an increasingly large portion of global hotel supply, with nearly 50% of them managed by third parties, according to new data from JLL Hotels & Hospitality. However, the third-party management space remains extremely fragmented, with the largest companies controlling less than 3% of that inventory. As such, JLL said look for increased M&A to unfold akin to Stonebridge’s $60 million acquisition of Real Hospitality group earlier this year.

As of October 2024, according to STR Census and JLL Research, 56.9% of global hotel inventory was branded (12.6 million rooms). Of those 12.6 million rooms, 46.9% (5.9 million rooms) are franchised (i.e., managed by a third-party as opposed to the brand itself). Of those 5.9 million rooms, no single operator manages more than 3% in total.

JLL said the portion of global hotel rooms that are branded has increased 360bps over the past 10 years as they offer access to a wider customer base via better distribution and vast loyalty networks. Marriott currently leads the way with just under 1.6 million rooms globally, followed by Hilton (1.2 million), and IHG (900,000).

Hotel brands have increasingly turned to third parties such as Aimbridge, Highgate and Pyramid to manage their properties to help mitigate risk and lower corporate expenses while continuing to drive high fees. JLL said it expects franchised hotels to comprise a larger share of the branded hotel universe in the coming years.

"As profitability continues to be a challenge for many hotels, more owners are turning to third-party management as a way to drive better margins and unlock additional asset value,” said Zach Demuth, global head of Hotels Research in JLL’s Hotels & Hospitality Group. “Look for investors to gravitate towards assets in which there is management optionality, with third-party operators likely to increasingly offer sliver equity and/or key money to help facilitate deals and acquire additional management contracts.”