Franchising in the hotel space has been growing in recent years. Hotel brands, or "flags" as they are referred to by industry insiders, are lending their name and likeness to third party owners, while the building and operations are run by the franchisee (or often a third party hotel management company). For the popular-name hotel companies like Marriott International (MAR 1.97%) and HiltonWorldwide(HLT 2.53%) thatare doing this well, this could lead to consistent earnings growth.
A look inside hotel franchising
Hotels area capital intensive business that take a lot of time and resources to open each new property. However, if the flag can be licensed out to an existing property, or another group will put up the investment for building development, then the larger hotel brands can benefit from receiving a percent of revenue from the franchisee, with far less risk or up-front costs.
Image source: Getty Images.
Larry Speltsis a VP of the hotel management company CharlestowneHotels, whichhas no owned properties but manages nearly 50 properties including the top hotel in the U.S. as voted byTravel + Leisuremagazine this year.In an interview, Speltssaid that most of his company's managed properties are private hotels without a major flag, but the company does also manage franchised properties under brands likeHiltonWorldwide,among others.
Many of the properties they manage are owned by real estate investment trusts (REITs), or by other property companies that are in the business of hotel building, not branding. These real estate companies benefit from having the major brand to use with their property while a separate company manages operations, such as Charlestowne Hotels or sometimes the hotel parent brand itself. Having a recognizable name brand can also help the developers get investors on board with the project, according to Spelts, meaning that more projects can get completed this way.
Hotel brands increasingly going asset-lite
As for the big hotel brands like Marriott and Hilton, this is a pretty good deal. Spelts says that "The risk that's inherent in owning an asset like a hotel is high, but the risk of owning a franchise contract is fairly low. The costs of getting a new franchise are minuscule and the brand is still going to get between 8%-12% of sales, and that's gross not net, so there's really no risk."
The major hotel brands are increasingly asset lite as a result, relying on franchise agreements to grow their footprint worldwide rather than owning physical properties. This helps the brands to grow faster, especially internationally or in tier two or three sized markets where local developers might want to put a hotel that a big brand otherwise might not consider. This strategy also helps these hotel brands to grow in the burgeoning boutique hotel space. Marriott and Hilton have multiple smaller brands in the "lifestyle" space that they can lease out to smaller properties that fit into the boutique hotel market without building out such small properties on their own.
Another major benefit of this franchise model, both for the franchisee and the hotel flags, is that it allows the big name brands to focus more on their digital strategy and customer loyalty program, giving the hotel owner access to those systems and rewards, while also getting more members to join the programs and keep tighter control over the customer's experience and data.
Image source: Marriott, from the company's most recent quarterly earnings SEC filing.
Hotel stock growth in focus
Marriott and Hilton now franchise or manage nearly all of their hotels, with only a very small percentage still owned by the parent companies. Instead, they are relying on their distinct brands to drive growth.
Following the acquisition of Starwood Hotels this year, Marriott now has 30 brands, an arsenal of names that can be turned into residual revenue with little work by licensing the flag out. Hilton has 13 brands, including the more recently launched brand called Tru, a digitally focused concept that tries to appeal to younger travelers. In Hilton's most recent earnings call, management said that franchisee deals for the Tru brand have been ahead of expectations and helped to drive the 7% increase year over year in franchise fee revenue.
The hotel industry faces some serious challenges ahead. Slower economic growth in the U.S. and China, uncertainty in many important markets such as Latin America, and increasing security challenges with political turmoil and terrorism in key markets all could put a damper on hotels ability to continue growing aggressively. However, the asset-lite strategy many of the top hotel brands have made in recent years to sell their brand name to franchisee hotel owners and operators could continue to pay off in a big way in the years ahead.
This strategy includes its own risks, such as lack of control over brand image if franchisees don't follow brand guidelines or the risk of falling franchise fees among great competition from other big hotel brands. Marriott and Hilton, among other big names in this industry, are still going more aggressively toward this franchising model than ever before. For investors -- the winners in the hotel industry look like the ones with the best brand portfolio to bring even more franchisees on going forward.
Seth McNew owns shares of Marriott International. The Motley Fool owns shares of and recommends Marriott International. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
FAQs
2021 Marriott Hotel
We estimate the average Marriott franchise owner makes $8.1M in sales a year. The above estimated sales do not include the cost of financing, depreciation, and taxes.
What business strategy does Marriott use? ›
Marriott is one of the foremost recognized luxury hotel chains. It has a unique product strategy that is centred around luxury travellers. For Marriott, the core product in its marketing mix is within the sort of hospitality services. Their product strategy covers everything that goes into running the hotels.
Who owns more hotels Marriott or Hilton? ›
Even though Marriott has more properties than Hilton, both hotel chains are massive, which means there will likely be one or more of each hotel no matter where you're going.
How many hotels does Hilton own vs franchise? ›
Hilton Hotels and Resorts has more than 500 hotels and resorts worldwide. Over 175 of those franchises are in operation in the United States. Hilton Hotels and Resorts is committed to providing quality, comfortable, and luxury hotel stays all over the world.
What is the highest salary in Marriott? ›
Marriott International Salary FAQs
The average Marriott International salary ranges from approximately ₹0.6 Lakhs per year for a Restaurant Hostess to ₹48.9 Lakhs per year for a General Manager. Salary estimates are based on 5.4k Marriott International salaries received from various employees of Marriott International.
Who owns the most hotel franchises? ›
Marriott is the largest hotel chain in the world by the number of available rooms. It has 30 brands with 7.642 hotels including 1.423.
Who is Marriott's main competitor? ›
1. Hilton Worldwide. What is this? Hilton is the second-largest hotel chain globally after Marriott.
Why is Marriott so successful? ›
Marriott was founded on the principles that if you take care of employees, they will in turn, take care of customers; employees feeling good about themselves will be inspired to serve others. It is this belief that is utilized for business effectiveness.
What are the three pillars of Marriott? ›
With over 100 curated experiences, the program focuses on three pillars – Environmental Protection, Community Engagement, and Marine Conservation.
What makes Marriott better than Hilton? ›
Overall, Marriott edges out Hilton on both number and variety of properties. You have a lot to choose from with both hotel chains, but Marriott shines with its 30 hotel brands compared with Hilton's 18. This gives you a wider selection to choose from if you like a mix of budget, mid-scale, and luxury properties.
The world's top hotel chain is Marriott International. As the largest in the world by the number of rooms, it encompasses 30 brands with more than 6,500 hotels in 131 countries and territories.
What hotel chain is the richest? ›
Hilton was the most valuable hotel brand in 2022, with a global brand value of approximately 12.04 billion U.S. dollars. Other major hotel brands in the ranking included Hyatt and Holiday Inn.
How much net worth do you need to franchise a Hilton? ›
You will operate a Hilton hotel under a Franchise Agreement with us. The total investment necessary to begin operation of a typical 300-room Hilton hotel, excluding real property, is $38,704,705 to $162,293,082, including up to $467,585 that must be paid to us or our affiliates.
How much does a Hilton hotel owner make? ›
We estimate the average Hilton franchise owner makes $8.85M in sales a year.
How much are Hilton franchise fees? ›
Hilton Hotels and Resorts Franchise Cost, Initial Investment and Franchise Income Potential. To open a Hilton hotel franchise, a franchisee should expect to invest a minimum of $29 million and as much as $112 million, including an initial franchise fee of $75,000.
What discount do Marriott employees get? ›
Associates can participate in Marriott Bonvoy and also receive: 20% Food and Beverage Discount. 20% Spa Treatment Discount. 30% Retail Discount at Marriott Stores.
Who gets highest salary in hotel industry? ›
Top 8 Highest Paying Hospitality Jobs
- Hotel Manager.
- Restaurant Manager.
- Executive Chef.
- Sommelier.
- Event Manager.
- Travel Manager.
- Food and Beverage Director.
- Housekeeping Director.
Hotel Manager salary in India ranges between ₹ 0.2 Lakhs to ₹ 12.0 Lakhs with an average annual salary of ₹ 2.4 Lakhs. Salary estimates are based on 2.1k latest salaries received from Hotel Managers.
Do hotel owners make a lot of money? ›
Owning a hotel can be profitable if you have the right combination of location, price point, quality of the physical asset, marketing strategy, dedicated employees, and supportive investors and management partners. However, a hotel isn't profitable by default, so you can expect a lot of hard work to generate profit.
What is the secret of a successful hotel company? ›
Staying on top of the needs and wants of customers can improve reviews and engage loyal guests. This includes having an ideal location, using reviews for valuable feedback and marketing for passion points in a multichannel campaign.
Having since grown to $117.7 billion, Airbnb's market capitalization makes it more valuable than many top hotel chains combined. Marriott, Hyatt and Hilton's combined market capitalization is roughly $40 billion shy of Airbnb's, despite their higher revenue.
Are Marriott and Hilton competitors? ›
Hilton competitors include Hyatt, Marriott, IHG, Loews Hotels and Holiday Inn.
What is Marriott's top tier? ›
At Bonvoy's highest level, Ambassador elites receive two valuable perks. The first, Ambassador Service, provides “personalized service” for each stay. This is essentially a personal travel concierge who can help plan your stay and organize activities.
What makes Marriott different from other hotels? ›
Marriott Bonvoy has 30 hotel brands under its portfolio, and travelers can stay at over 7,000 participating properties around the globe. Compared to other hotel rewards programs, Marriott Bonvoy has more participating properties, which gives you greater flexibility when making travel plans.
Is Marriott considered luxury? ›
Marriott International is known as an innovative leader in luxury hospitality. Each of our globally recognized luxury brands offer owners long term value through category leadership, engagement with loyal and coveted consumers, and dedicated luxury expertise to support operations.
Is the Marriott in debt? ›
Marriott long term debt for 2022 was $9.38B, a 0.5% increase from 2021.
Why do people choose Marriott? ›
Customers choose Marriott brands because of our high level of service, product excellence and worldwide distribution.
What are the 5 core values of Marriott? ›
Our core values make us who we are. As we change and grow, the beliefs that are most important to us stay the same—putting people first, pursuing excellence, embracing change, acting with integrity and serving our world. Being part of Marriott International means being part of a proud history and a thriving culture.
What is Marriott leadership style? ›
The main philosophy of his leadership style specified that people were the main asset of any prosperous company. J. Willard Marriott appreciated his employees and treated them as the members of his family. Mr.
What is the positioning of Marriott Hotels? ›
Currently, the firm's positioning strategy is based on benefits and affordability. JW Marriot has positioned itself as a firm that offers affordable luxury. Thus, customers associate the firm with luxury. However, the firm needs to consider transforming itself into a market leader.
Here are the 19 best Hilton hotels in the world and what makes them so special.
- Zemi Beach House, LXR Hotels & Resorts. ...
- Botanika Osa Peninsula, Curio Collection by Hilton. ...
- DoubleTree Resort by Hilton Hotel Fiji. ...
- Waldorf Astoria Edinburgh - The Caledonian. ...
- The Biltmore Mayfair, LXR Hotels & Resorts. ...
- Conrad Bora Bora Nui.
Salaries. Of the top 3 common jobs between the two companies, Marriott International salaries averaged $61 higher than Hilton.
Is Hilton or Marriott a better company to work for? ›
Compare company reviews, salaries and ratings to find out if Hilton or Marriott International is right for you. Hilton is most highly rated for Culture and Marriott International is most highly rated for Culture.
...
Overall Rating.
| Overall Rating | 4.0 | 4.1 |
|---|
| Management | 3.6 | 3.7 |
| Culture | 3.8 | 3.9 |
3 more rows1. Marriott International. The Marriott International hotel chain involves three hotel companies – Delta, Marriott, and Ritz-Carlton. According to Statista, Marriott is considered the most profitable luxury hotel that generated more sales revenue than any other hotel chain in 2019.
Which hotel company was ranked as #1 to work for? ›
Hilton Tops Fortune Best Workplaces List. Hilton is a leading global hospitality company with a portfolio of 19 world-class brands comprising more than 7,200 properties and more than 1.1 million rooms, in 122 countries and territories.
Who is the world's leading hotel operator? ›
The largest hotel chain in the world is Marriott International, with a revenue of $20.77 billion. As of 2022, the global hotel industry has a market size of $1.5 trillion U.S. dollars. In total, there are over 18 million hotel rooms in the world.
What hotel chain did Bill Gates buy? ›
Bill Gates' investment firm to take control of Four Seasons in $2.21 bln deal. Bill Gates' Cascade Investment LLC is taking control of Four Seasons Hotels and Resorts by buying about half of Saudi Arabian Prince Alwaleed bin Talal's stake for $2.21 billion, the hotel operator said on Wednesday.
What hotel does Bill Gates own? ›
Four Seasons currently operates more than 100 hotels and resorts worldwide. Since 2007, Bill Gates (through Cascade Investment) and Prince Al-Waleed bin Talal (through Kingdom Holding Company) have been majority owners of the company.
Who owns most hotels in the USA? ›
Who owns most hotels in the USA? Wyndham Hotel Group owns the most hotels in the USA, the company has over 8,092 hotels in 66 different countries.
Is Hilton hotels a good investment? ›
On a historic basis, Hilton Worldwide Holdings Inc. has generated cash flow growth of 9%, and is expected to report cash flow expansion of 91.8% this year. HLT should be on investors' short lists because of its impressive growth fundamentals, a good Zacks Rank, and strong Growth and VGM Style Scores.
What Does a Hampton Inn & Suites Franchise Cost? To buy a franchise with Hampton Inn & Suites, you'll need to have at least liquid capital of $50,000 and a minimum net worth of $100,000. Franchisees can expect to make a total investment of $152,000 - $307,500.
Why is the Hilton family so rich? ›
Throughout the 1920s, Conrad Hilton continued to buy and build hotels in Texas. He finally expanded beyond the state in 1942. Hilton bought a luxury hotel in Los Angeles in 1942. In 1946, the Hilton Hotel Corporation was formed.
Who is bigger Hilton or Marriott? ›
Although Marriott has more properties than Hilton and thus a wider geographic footprint, the easy elite status afforded to Hilton Honors members means more. This is especially true for business travelers.
How much does it cost to own a Marriott? ›
Start your business today! Marriott's portfolio of hotels, around half of which are franchised units, comprise the world's largest lodging company by number of locations and total revenue.
...
Facts & Figures.
| Liquid capital required | $1,000 |
|---|
| Franchise fee | $419,000 |
| Units in operation | 6,520 |
| Founded | 1957 |
1 more rowHilton Worldwide's operated at median gross profit margin of 66.7% from fiscal years ending December 2018 to 2022. Looking back at the last 5 years, Hilton Worldwide's gross profit margin peaked in December 2022 at 73.3%.
What is the most expensive franchise to own? ›
Here's the list of the most expensive U.S. sports franchise sales to date:
- Denver Broncos, $4.65 billion – 2022. ...
- Phoenix Suns/Mercury, $4 billion – 2023. ...
- New York Mets, $2.4 billion – 2020. ...
- Brooklyn Nets, $2.35 billion – 2019. ...
- Carolina Panthers, $2.275 billion – 2018. ...
- Houston Rockets, $2.2 billion – 2017. ...
- T-7. ...
- T-7.
Franchise Hotel Owner's Salary
The hotel owner salary for a franchise property is modest. According to Shmoop.com, the owner of a chain hotel can expect an average hotel owner's salary of $50,000, with a range of $40,000 to $60,000 a year. Don't forget, the owner is paying a 4% to 6% franchise fee.
How much does a hotel chain owner get paid? ›
Hotel Owner Salaries
| Job Title | Salary |
|---|
| Wyndham Hotels & Resorts Hotel Owner salaries - 1 salaries reported | $84,319/yr |
| Hilton Hotel Owner salaries - 1 salaries reported | $39/hr |
| Self Employed Womens Association Hotel Owner salaries - 1 salaries reported | $73,944/yr |
A well run hotel should typically run ~25-40% EBITDA Margins meaning that if you purchase a hotel doing $1M in annual revenue you could expect to make $250k - $400k per year which is about 3-5x the average salary of a hotel manager.
Can a franchise make you a millionaire? ›
The bottom line is that while a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.
We estimate the average Hilton franchise owner makes $8.85M in sales a year.
Do franchise owners take a salary? ›
Most franchise owners don't receive a salary. Instead, your earnings as an owner come from the excess revenue after overhead costs to support the operation of the business are paid.
Is Marriott more expensive than Hilton? ›
Generally speaking, Marriott tends to be slightly more expensive than Hilton, but there can be exceptions depending on the specific hotel. For example, if you're looking for a luxury suite at a high-end resort in an exclusive area then Marriott may cost more than Hilton.
Are Marriott Hotels profitable? ›
Marriott gross profit for the twelve months ending December 31, 2022 was $4.558B, a 62.73% increase year-over-year. Marriott annual gross profit for 2022 was $4.558B, a 62.73% increase from 2021. Marriott annual gross profit for 2021 was $2.801B, a 91.98% increase from 2020.
Is Marriott a franchise model? ›
Franchise Description: Marriott International, Inc. is the franchisor. The franchisor is a worldwide operator and franchisor of hotels and related lodging facilities. Marriott hotels are full-service hotels that cater to business and leisure travelers.
What is the top salary for a hotel manager? ›
Hotel Manager Salary
| Percentile | Salary | Last Updated |
|---|
| 25th Percentile Hotel Manager Salary | $92,908 | March 28, 2023 |
| 50th Percentile Hotel Manager Salary | $114,006 | March 28, 2023 |
| 75th Percentile Hotel Manager Salary | $136,422 | March 28, 2023 |
| 90th Percentile Hotel Manager Salary | $156,831 | March 28, 2023 |
1 more rowThe hotel and lodging industry is lucrative enough to have created some of the heaviest financial hitters the world has ever seen. With a net worth of $21.8 billion, Sheldon Adelson is the 12th wealthiest American and the 24th richest man on Earth.
How much does an average hotel owner make a year? ›
What Is the Average Motel Owner Salary by State
| State | Annual Salary | Weekly Pay |
|---|
| California | $70,809 | $1,361 |
| New Hampshire | $70,207 | $1,350 |
| Massachusetts | $69,903 | $1,344 |
| Hawaii | $69,509 | $1,336 |
46 more rowsThe richest man in the world 2023 is Bernard Arnault, the chairman and CEO of LVMH (Moet Hennessy Louis Vuitton) is also the owner of the Belmond chain of luxury hotels which includes La Residencia in Deya, which was owned by Sir Richard Branson who is opening a new luxury hotel on the island in June.
