Franchising within the hotel industry is gaining momentum in Southeast Asia, offering a promising avenue for growth and adaptability in the post-pandemic landscape. Over the past decade, the number of hotels operating under franchise agreements in the region has doubled, reaching 6% of the market by 2024.
While still a relatively small portion of the overall market, the success of franchise agreements in other regions has sparked interest among local and regional hotel owners in Southeast Asia.
Major hotel brands like Marriott International, Hilton Worldwide, Wyndham Hotels & Resorts, Choice Hotels International, and Intercontinental Hotels Group have been at the forefront of promoting franchising as an asset-light strategy. However, the model is still in its early stages in Southeast Asia, facing challenges due to the region’s fragmented hotel market, regulatory barriers, and limited options for third-party operators.
For hotel owners considering a franchise agreement, there are key considerations to keep in mind. Balancing operational independence with the benefits of brand recognition is crucial. While maintaining control over talent and cost management is important, leveraging the brand’s global programs can significantly enhance profitability.
Asset enhancement initiatives (AEIs) negotiated with the franchisor can help owners stand out in the market while aligning with brand standards. As the hospitality industry looks towards recovery in 2024, with revenue per available room (RevPAR) expected to reach 93% of pre-pandemic levels in the APAC region by 2023, investor interest in hotel investments is increasing.
Thailand, in particular, is poised to embrace hotel franchising opportunities accelerated by the COVID-19 crisis. JLL predicts that more hotel owners across Southeast Asia will explore franchising options as the market evolves, emphasizing the importance of readiness to unlock the full potential of this growing trend.
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