Spain’s top hotel chains are increasingly adopting expansion strategies centered around management or franchise models, moving away from direct ownership. This shift is highlighted in a report by Christie & Co, an international consultancy, which reveals a significant increase in hotels operating under rental, management, and franchise contracts since 2016.
Titled ‘Hotel business models: a new era’, the report showcases how major chains are leaning towards an ‘asset light’ growth strategy. From 2019 to 2023, there has been a substantial rise in franchised rooms (39%) and managed rooms (30%).
Christie & Co notes that from 2016 to 2022, over 500 contracts in rental, management, or franchising were established under both national and international brands. This shift is attributed to the sector’s continued professionalization, leading to more flexible contract demands and higher investment returns.
The study also indicates a strong increase in international hospitality groups’ presence in Spain, particularly through management and franchise agreements. This change is driven by various factors, including investor interest, generational shifts in ownership, and the benefits of brands’ distribution networks. Notably, hotels operated by the same owners have seen a 6% decrease in market share due to these dynamics and the impact of the pandemic.
In 2016, only 17% of Spain’s 6,960 hotels were under operating contracts. By 2023, this percentage had grown to 23% out of 7,517 assets.
The evolving profile of hotel investors in Spain, who invested 1.9 billion in hotel assets in 2022, reflects a recognition of the commercial value of major brands and their distribution channels. This shift has enabled them to be more efficient and competitive.
Hotel chains adopting an asset-light strategy are providing owners with more resources, management expertise, and market reputation, enhancing both operational performance and market value.
HOTEL BUSINESS MODELS: THE NEW ALTERNATIVE
In terms of business models, there’s a notable distinction between holiday and urban destinations. Resort ownership typically remains with national chains or local families, emphasizing management agreements. Conversely, investment firms favor urban destinations, buying assets and entering franchise agreements with brands. The resort sector, with its quick recovery and strong performance, is increasingly attracting institutional investors.
Luxury brands prefer management contracts to maintain control over standards, while the economy segment leans towards leasing or franchising with national or international brands. The mid-market segment, traditionally dominated by independent hoteliers, primarily operates under self-management or rental models.
Christies & Co anticipates a significant increase in management and franchise agreements in the coming years, driven by industry trends, new operators, and the global market’s evolving demands.