Some experts doubt the real value of the hotel franchise in this day and age and believe the value proposition of franchising has rapidly diminished in today's hyper-connected, tech-enabled world.

A world, where independents can thrive, tech is democratized, and data is king - why franchise at all?

Here is my take:

The branditization of the hospitality industry is a fact: 73% of hotel rooms in the U.S. belong to branded hotels, 27% to independents. Branded vs independent hotel room ratio in the UK is 50:50, 45% in Europe, 50:50 in APAC.

The process of "branditization" is accelerating even further, judging by the robust pipeline of all major hotel brands. The question is why?

Post-pandemic, independents have emerged weakened, without resources to update their tech stacks to appease the tech-savvy guests, equip employees with much needed tech tools, and invest in marketing and AI to decrease over-dependence on the OTAs.

For most independent hotels, the OTAs have been increasing their share at the expense of direct online bookings. While for the major hotel chains the ratio direct vs OTAs bookings is on average 4:1, for independents this ratio is 1:4 in the U.S. and 1:5 for European independents. Did I mention that, on average, independents pay 2x-2.5x higher OTA commission on top of the 4x-5x greater dependence on the OTAs?

Add to all of this the robust loyalty programs of the major hotel brands, which have become their main assets and engines of repeat business. Marriott Bonvoy already has over 260 million members, while Hilton Honors - over 235 million. On average, over 58% of roomnights at major hotel brands come from members of their loyalty programs. At Marriott and Hilton this percentage is 62%. Compare this to independents’ paltry repeat business of less than 10%.

How about agentic AI? The major hotel brands, together with the OTAs, are the preferred partners of the agentic AI platforms and protocols like Google’s new Universal Commerce Protocol (UCP) poised to turn hotel distribution upside down.

In Google’s own words: “To make agentic AI a reality, Google is working on building out the experience with industry partners such as Booking..com, Expedia, Marriott International, IHG Hotels & Resorts, Choice Hotels International and Wyndham Hotels & Resorts.”

The reason for this preference is very simple: the major hotel chains provide the agentic AI platforms immediate access to tens of thousands of hotels worldwide plus affiliate commissions for every booking referral.

So, is there future for independent hotels?

Independent hotels can survive only if the invest adequately in technology, marketing and talent. If they don't, their future is only as branded hotels (franchisee or soft brand).

Max Starkov
Hospitality & Online Travel Tech Consultant & Strategist

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