Why There Are So Many Hotel Brands in the World

If you’ve searched for a hotel property in a mid- to large-size city, you’ll likely come across more than one hotel property from the same brand. For example, Miami has 42 IHG properties alone, while Los Angeles International Airport (LAX) has 9 Hilton properties within a 2-mile radius.

It’s definitely crossed my mind why hotel brands would put so many locations adjacent to one another. Of course, there are many different sub-brands and hotel experiences within each brand, but there is still competition.

So, why do this? Well, your favorite hotel brand (Hilton, Hyatt, or Marriott) is now operating no different than your local McDonald’s. Only 1-2% of hotels are managed by the brands themselves, while the other 98% (or more) are franchised by hotel owner-operators who pay a franchise fee to use the brand’s names.

This structure didn’t happen by accident, as the brands decided to get out of the real estate business per se and get into more of the brand, experience, and platform enterprise. This has been a net positive for the properties, owner-operators, and, most importantly, travelers. Here’s why.

Build, Delegate and Conquer: The New Large Hotel Brand Model

The Wall Street Journal uploaded a great piece on YouTube, highlighting the hotel business and its gradual transformation over time.

It details how hotel brands started decades ago by building their respective brands by rolling up their sleeves and providing the best experiences possible for their guests. This meant that the hotel brands owned and operated each hotel location and were in more of the “real estate” business.

This business model lends a heavy expense onto a corporate balance sheet. Fast forward to today, with Marriott at nearly 9,000 hotel properties, it would be nearly impossible (and not cost-efficient) to own and operate that many hotels.

So now, the top 3 brands (Marriott, Hyatt, and Hilton) have shifted their models to franchising, and it appears to be working well. All 3 major brands have expanded their respective footprints globally through the franchise model without any signs of slowing. There are currently 6,000 hotels in the construction pipeline in the U.S., according to Lodging Economics, with data suggesting the majority of those in the pipeline are from the big 3.

With this consistent growth from the big 3, independent hotels have struggled to keep up. According to data from STR, there were 25,544 independent hotels at the end of 2022. In 2019, there were 25,839 properties. While it was a net growth, in 2022, 359 properties shut their doors. And now, only about one-third of the hotels in the U.S. are independently branded properties.

The Future of the Hotel Business

The hotel business is well and alive after recovering from the pandemic, but the major brands are facing a new kind of issue: confusion.

As more sub-brands begin to emerge from the big 3, consumers are glazing over at some of the vagueness and lack of originality.

Hilton has 22 sub-brands, Marriott has over 30, and Hyatt has 29. Some are easily recognizable, like Holiday Inn, but obscure names like Caption or Spark have left some travelers perplexed with variety. And for the big 3 to win over consumers, they must keep customers within their loyalty programs.

Ultimately, the difference between a Home2 Suites and Hampton Inn in a secondary market is irrelevant to the overall consumer experience. However, the ability to redeem earned rewards at more upscale properties is the real competition for these brands to win over consumers.

How Travelers Can Maximize Hotel Stays

A few different methodologies exist to maximize your hotel rewards strategy and earn the highest status possible.

If you’re a business traveler, it’s best to select one brand and remain loyal to them. Because you will have a high amount of reoccurring stays, you can quickly earn heaps of rewards and move up the ranks of their loyalty program. And if you pair this with a corresponding hotel credit card from the same brand, you can potentially rack up a significant amount of rewards quickly.

Final Thoughts

Despite the hotel business facing an existential crisis during the Covid-19 pandemic, major brands have shown resilience and continue to invest into their respective brands.

For consumers, they have more choices for properties and experiences. However, brands must continue to differentiate themselves to remain competitive.