The number of hotel owners using third-party operators to run their properties looks set to increase across Europe, according to a new report by HVS.
The trend for third-party operators has emerged from the USA, where the concept has become commonplace, with most franchised hotels from midscale upwards now being run this way. The practice eventually made its way to Europe where it is growing in popularity.
In the UK firms like RBH Hospitality Management have become partners for brands such as Accor, IHG, Marriott and Hilton.
In Europe, the use of TPOs is more common among small and mid-sized hotels, particularly limited service or extended stay properties. As the concept has matured, however, more experienced TPOs are being sought for large corporate and luxury hotels, some in addition to operating under a licensing agreement with a hotel brand.
In a sample of major European hotel operators that we compiled for our report, the number of hotels in the sample operated by TPOs has grown by around 40%. This percentage is expected to grow a further 5% by 2025.
Dealing with TPOs rather than the brands directly can have benefits for the property owner, including:
- Shorter contracts sometimes just 12 months compared with 20-30 years
- Owner-friendly termination rights
- More direct involvement in operations
What they said
Nikola Miljković, a senior associate at HVS London and the report’s co-author, said: “The rise in TPOs has arguably been prompted by an increase in franchising as branded operators move from the operational management of hotels to focus more on brand development and distribution.”
“Whilst the use of a TPO often implies fees in addition to franchise costs, larger TPOs benefit from operational advantages such as being less restrictive, being able to react more quickly to market changes to each individual property and improved buying power. Being more objective, they can also choose which brand programmes to participate in on a property-by-property basis.”