CBRE examines why selecting the wrong brand can matter

CBRE Hotels Research analyzed 10 years of hotel brand performance for six large public hotel companies: Choice, Hilton, Hyatt, IHG, Marriott and Wyndham, which includes over 3 million rooms and 60% of the U.S. hotel supply at the end of 2022. The report can be downloaded here.

Since 2013, those six companies have expanded their brand count by nearly 70%. The bulk of this growth was in the luxury and upper-upscale brands, which nearly doubled to 49. Luxury has been the fastest-growing chain scale by both room count and number of brands. The economy segment room count shrank by 5% over the same period although the total number of brands stayed the same.

Aggregate room counts for full-service hotels have grown the fastest since 2013 at 42% compared to 30% growth for limited-service brands. The study said it expects unit growth to shift toward extended-stay and limited-service and all-inclusive conversion over the coming years.

In the past years, all six brands have launched new moderate-priced brands, and the extended-stay segment has nearly doubled its room count since 2013. At the same time, the all-inclusive segment has had the biggest growth rate since 2013.

The study found that RevPAR growth for 10 of the 49 brands met or exceeded the 2.9% compound annual growth rate of the Consumer Price Index from 2013 to 2022. The other 39 brands had RevPAR growth that was negative or didn’t keep pace with inflation. Overall, RevPAR growth underperformed the national average, while unit growth was stronger and outperformed the average.

The study stated that those numbers suggest that easier access to capital and potentially higher demands, driven by loyalty programs, support stronger unit growth but perhaps contribute to RevPAR cannibalization.

The study also found that selecting the wrong brand could have big consequences. The RevPAR growth difference between the strongest and weakest luxury brands was 7%, resulting in an 87% cumulative premium over the period.

It also found that both brand and brand family matter. The strongest brand family outperformed its weakest by nearly 30% from 2013 to 2022. The standard deviation of performance is relatively high, meaning the performance can vary depending on the brand chosen within that chain scale. And organically grown brands outperformed acquired ones. Nearly 40% of organically grown brands had above-average room count and RevPAR growth compared to 17% of acquired brands.

The growth rate for extended-stay and limited-service room counts in the upscale brands grew 4.3% — the highest of any chain scale, while RevPAR grew a more modest 1.1%. The study found that nearly half of the upscale brands have above-average room and RevPAR growth since 2013, which suggests that near-term cannibalization may be less of a risk in this segment.

Upper-midscale brands posted the highest RevPAR growth at 2.4%, with room count growing at 2.3%. However, the study found that 43% of the brands were below RevPAR and room count averages, suggesting that a few brands likely drove overall performance.

RevPAR growth was positive overall for midscale brands at 1.2% with room count growing at 1.5%. Economy brand RevPAR grew by 1.5%, while room count contracted by 0.7%. However, the report said that the segment benefited from the study ending in 2022 rather than in 2023, when economy RevPAR declined.

The report also said that while acquiring other brand families can add rooms, it doesn’t always accelerate unit growth. It found that unit growth for organic brands (4.4%) outpaced growth for acquired brands (1.7%) over the past nine years, while the RevPAR growth was similar (1.4% for organic vs. 1.7% for acquired).