The
report highlights what hotel owners in the region need to assess before
franchising with a brand.
SOUTHEAST ASIA - Hotel franchising is rapidly becoming a viable business model in Southeast
Asia’s hotel real estate market post-COVID, according to a new report by JLL.
The number of
hotels operating under franchise agreements has doubled over the past decade,
from 3% in 2014 to 6% in 2024, JLL reports. While this number is still small compared to
other markets, the trend has been further driven by major hotel brands like
Marriott International, Hilton, Wyndham Hotels & Resorts, Choice Hotels
International and IHG Hotels & Reports shifting toward an asset-light
strategy.
The report added that Thailand is especially poised to embrace the hotel franchising opportunities of the post-COVID era.
The franchise hotel model is much smaller
in Southeast Asia compared to the growth in the U.S. and Europe because of
numerous small local owners, a need for more options for third-party operators,
and regulatory and legal barriers. According to the report, management
contracts are the region’s most common model of hotel ownership but often
result in radically different operations standards and inconsistent branding.
The report further suggests hotel owners must
address the following before thinking about a franchise deal:
- Balance independence with brand
recognition: owners must weigh the benefits of affiliating with a brand against
remaining operationally independent.
- Use asset enhancement initiatives (AEIs)
to stand out: AEIs can allow owners to improve their assets and differentiate
their property in the market.
- Use data to analyze progress and market
position: Owners must use benchmarks against industry standards to assess their
performance and identify areas for improvement.
- Streamline operations with multiple
franchise hotels: Owners can achieve greater efficiencies over a portfolio of
properties versus just individual assets, especially when centralizing
operations under a single general manager or commercial team.
- Seek alignment: Owners must ensure they
are aligned with the brands and management companies in maximizing value,
driving operational efficiencies, and creating value.
The report said the hospitality industry in
the region is expected to continue to rebound this year, with RevPAR reaching
93% of pre-COVID levels by the end of 2023.