
The Biggest Trends in Hotel Franchising - 2017 Edition
As 2017 comes to a close, it is important to reflect on some of the key trends in the franchised hotel space this year. With purchase and sale activity continuing to slow, owners are focusing more on new development and renovating and maintaining their existing properties in order to keep their portfolios fresh and competitive heading into 2018 and beyond.
Capitalization Rates
Capitalization rates rise as profits and asset quality decline, and they are often subject to cyclical underlying economic trends which drive inflation and interest rates overall. As has been the case for the last several years now, cap rates in 2017 remained flat to slightly up across most select and full-service property types.
According to Chris Williams, Managing Director of Western Alliance Bank’s Hotel Franchise Finance department, cap rates will remain relatively stable in 2018, but the risk for rising cap rates will continue to increase as the economic expansion continues into its later stages. In general across the U.S., blended cap rates for full-service franchised hotels remained stable year-over-year, at or around 8%, while select-service properties saw a slight increase to about 9% over the same period.
What Are The Big Brands Doing?
The short answer is: planning for and opening a lot of new properties. According to Lodging Econometrics, Hilton, Marriott and IHG will see their current room inventories grow by 4.8%, 3.9% and 4.5%, respectively, in 2017 with all three majors expected to grow at or above these levels in 2018 and 2019.
As is often the case during these periods of expansions, the majors launch new brands to better compete up and down the Average Daily Rate (ADR) curve, while vying to be the front runner for ever-changing consumer trends.
With the success of Hilton’s Home2 Suites product, IHG and Marriott are increasingly focused on their new brands like Avid for IHG or refreshing existing flags such as Fairfield, TownePlace Suites, Courtyard and Hampton Inn to further penetrate the Upper Midscale market segments.
So, what are some of the top hotel chains doing in 2017?
Hampton by Hilton (including Hampton Inn by Hilton and Hampton Inn & Suites by Hilton) was the number one ranked franchise in 2011, 2012, 2013 and 2015, according to Entrepreneur. The chain of hotels “serves value-conscious and quality-driven travelers” with more than 2,100 properties in 18 countries. Hampton is also planning on opening an additional 38 hotels soon, according to its website. One of the signature amenities is a suite with two bedrooms, a living room and kitchen area. These properties offer complimentary hot breakfast and fresh coffee.
Courtyard by Marriott Hotels is the 8th largest lodging brand in the world. The brand has over 1,100 properties currently in 47 countries, and another 271 to open soon, according to its development website. Courtyard is known to suit the modern business traveler with smartly-designed guest rooms, lobbies and public areas.
Which Markets Are Seeing New Supply?
While new supply trends are increasing in most markets across the U.S., the supply/demand imbalance many were expecting in 2017 has failed to materialize as the pace of underlying economic growth continues to accelerate. According to Lodging Econometrics, the new supply pipeline bottomed out in 2011 and increased at a measured pace through mid-2017 across most of the top 50 markets. However, while the overall pace of projects being delivered is starting to plateau across the U.S. in the aggregate, there are markets such as Nashville, Denver, NYC and Seattle where the pipeline will see significant project deliveries through at least 2020.
In general, new supply is projected to be manageable at or below 2.5% of existing room inventory in regions such as New England, the South Atlantic, Midwest, Mountain and Pacific regions. It’s the East, West and South Central U.S. regions, consisting of the Gulf Coast states outside of Florida and states into the Ohio River Valley, which will see new supply being delivered through 2020 in excess of 3% of existing room inventory. Extra caution should be taken if one is looking to enter one of these markets.
According to Hotel Management Magazine, select-service hotels account for the bulk of new rooms under construction and this has been a unique aspect of the current inventory expansion within the space when compared to prior cycles. As the cost to build new properties continues to increase, owners are focusing their efforts on projects that can be delivered quickly, stabilize in less than 24 months and generate stable returns with less oversight than what a full service hotel development project would entail.
With more than $30 billion in assets, Western Alliance Bancorporation (NYSE:WAL) is one of the country’s top-performing banking companies. The company has ranked in the top 10 on the Forbes “Best Banks in America” list for five consecutive years, 2016-2020, and was named #1 best-performing of the 50 largest public U.S. banks for 2019 by S&P Global Market Intelligence. Its primary subsidiary, Western Alliance Bank, Member FDIC, helps business clients realize their ambitions with local teams of experienced bankers who deliver superior service and a full spectrum of customized loan, deposit and treasury management capabilities. Business clients also benefit from a powerful array of specialized financial services that provide strong expertise and tailored solutions for a wide variety of industries and sectors. A national presence with a regional footprint, Western Alliance Bank operates individually branded, full-service banking divisions and has offices in key markets nationwide.
-
Recent NewsBridge Bank Extends $25,000,000 Credit Facility to Health-AdeCloudBolt Announces $35 Million in Series B FundingBridge Bank Hires Tech Banker Jon Berry, Builds on Growth Momentum in AustinBridge Bank Expands Equity Fund Resources Group Hires Dragomir Sipovic, Vice PresidentBridge Bank Extends $2MM Credit Facility to Miva, Inc.
-
Recent InsightsCytoSorbents Delivers Technology to Calm the StormMasterClass Streams Inspiration When It's Needed MostLeaving LIBOR: 4 things to know about changing interest rate benchmarksRegional Intelligence Report Series: California OutlookRegional Intelligence Report Series: South Bay Outlook
-
Get Started
-
TwitterOur Life Sciences Group recently provided a Term Loan to Bolder Surgical, a medical device company focused on commercializing mini-laparoscopic surgical devices aimed at improving and enabling laparoscopic procedures for pediatric patients. #lifesciences #medicaldevices pic.twitter.com/hKgRzmVhaZ“Not everybody can be famous but everybody can be great because greatness is determined by service… You only need a heart full of grace and a soul generated by love.” ~ Dr. Martin Luther King Jr. In observance of MLK Day, all Bridge Bank offices will be closed on Mon. 1/18. #MLK pic.twitter.com/rBAo4INJXBOur Technology Banking group recently provided a growth capital term loan to Funraise, a software company that provides a state-of-the-art fundraising platform, saving nonprofit organizations time and resources spent on data management. pic.twitter.com/StETyssfLeOur #Technology Banking group recently provided a credit facility to @DrinkHealthAde, an organic beverage company. To learn more details, read our press release. westernalliancebancorporation.com/bridge-bank-ho… - about 1 month 3 weeks ago pic.twitter.com/0eWWI16N08Our Technology Banking Group at Bridge Bank recently provided a credit facility to CloudBolt Software, an enterprise leader in cloud management and integration solutions. Visit westernalliancebancorporation.com/bridge-bank-ho… - about 2 months 7 days ago to learn more details. pic.twitter.com/8fzjGbAL6BWe honor all of the veterans who have served our country. Thank you. #HappyVeteransDay REMINDER: In observance of Veterans Day, all Bridge Bank offices will be closed on Wednesday, November 11. pic.twitter.com/IfoGP8ecCAWe would like to welcome Jon Berry to the Bridge Bank team! Jon supports our Technology Banking group and will be based in Austin. Read our press release to learn more. #technology #banking #Austin #Texas westernalliancebancorporation.com/bridge-bank-ho… - about 2 months 2 weeks agoIn observance of Columbus Day, all Bridge Bank offices will be closed on Monday, October 12. pic.twitter.com/BtX52D5RTPWe wish everyone a safe and relaxing #LaborDay holiday weekend. REMINDER: In observance of Labor Day, all Bridge Bank offices will be closed on Monday, September pic.twitter.com/09SIuoO7XGOur Technology Banking Group recently provided MIVA, an #ecommerce #software and service provider, with a credit facility. Read our press release to learn more: westernalliancebancorporation.com/bridge-bank-ho… - about 4 months 3 weeks ago #technologybanking pic.twitter.com/OUj49RdD5VOur Life Sciences Group is pleased to announce an upsized term loan for Fennec Pharmaceuticals, a pharmaceutical company focused on the development of PEDMARK™ (a unique formulation of Sodium Thiosulfate) for the prevention of ototoxicity from cisplatin in pediatric patients. pic.twitter.com/zrH2JslA27Stay safe as you celebrate #IndependenceDay. REMINDER: In observance of Independence Day, all Bridge Bank offices will be closed on Friday, July 3.” pic.twitter.com/EFLG0KJ3u5Our Technology Banking Group is pleased to announce that they have recently provided a credit facility to aPriori Technologies, a leading provider of design for manufacturability and cost (#DFM/DTC) solutions. #computersoftware #technology #banking pic.twitter.com/PuTYcnKMttLast chance to join us for what is sure to be one of the most interesting economic discussions in the history of this long-standing event, featuring economist, Dr. Christopher Thornberg & SJ Deputy City Manager, Kim Walesh Register now! #sjsueconsummit event.on24.com/wcc/r/2316585/… - about 8 months 5 days ago pic.twitter.com/sqxWOiCvsZThis Memorial Day, we honor and remember those who lost their lives while serving our country. REMINDER: In observance of Memorial Day, our offices will be closed on Monday, May 25. pic.twitter.com/Ae97NsXsDaThere’s still time to join us for what is sure to be one of the most interesting economic discussions in the history of this long-standing event, featuring keynote speaker and noted economist, Dr. Christopher Thornberg. Register today! #sjsueconsummit event.on24.com/wcc/r/2316585/… - about 8 months 1 week ago pic.twitter.com/TWo0MiGjijJoin us for what is sure to be one of the most interesting economic discussions in the history of this long-standing event, featuring keynote speaker and noted economist, Dr. Christopher Thornberg. Register today! #sjsueconsummit event.on24.com/wcc/r/2316585/… - about 8 months 1 week ago pic.twitter.com/pdtYAF2XrDBridge Bank’s #LifeSciences Group is proud to partner with iCAD, a global #medical #technology leader providing #innovative cancer detection and therapy solutions. bridgebank.com/lifesciences - about 8 months 3 weeks ago pic.twitter.com/oPIrnYlOTjWe’re proud to sponsor Venture Summit | Virtual Connect May 5th - 7th! #startups #venturecapitalCongratulations, @ArcturusRx on your big announcement and the accomplishments you and your team are achieving as you work on a vaccine for COVID-19. #COVID19 #coronavirus #vaccines #LifeSciences ir.arcturusrx.com/news-releases/… - about 9 months 2 weeks agoOur #LifeSciences team is proud to provide Valencell, a company that transforms the science of wearable #biometrics to enable impactful #health outcomes, with the creative #bankingsolutions they needed. pic.twitter.com/XCmNJpaVuvOrganizations of any size are at risk of data breaches or other types of #cybercrime, but you can defend yourself against #fraud by knowing the dangers and implementing best practices whether you’re #WFH or the office. #fraudawareness #cybersecurity westernalliancebancorporation.com/bridge-bank-ho… - about 9 months 3 weeks ago pic.twitter.com/bzKAaLYRGPLearn more about the several key initiatives we’re focused on right now. #WeAreInThisTogether #covid19 #CoronaVirus westernalliancebancorporation.com/~/media/pdfs/b… - about 9 months 4 weeks ago pic.twitter.com/ssOjI7DGnXCybercriminals are using concerns about COVID-19 to perpetrate scams – learn how to defend your organization against these scams and best practices to keep your business safe. #fraudawareness #cybersecurity #fraud #cybercrime #fraudprevention #WFH westernalliancebancorporation.com/bridge-bank-ho… - about 10 months 1 day ago pic.twitter.com/kZo07GPhVvBridge Bank is a proud sponsor of #FVCC2020, Florida’s largest statewide #VentureCapital Conference. pic.twitter.com/9l2lOPceVROur #LifeSciences Group helped @alluriontech create a customized #financialsolution to support their rapid growth. Allurion Technologies is a #medicaldevice company and creator of the Elipse™ Balloon, a breakthrough product in weight-loss technology. pic.twitter.com/OS96djwOA8Our Life Sciences Group welcomes Derek Scalf. Also, find out how to meet with our entire team during #JPM2020 westernalliancebancorporation.com/bridge-bank-ho… - about 1 year 2 weeks agoWe wish you peace, joy, and prosperity in the new year! #happynewyear2020 NOTICE: All Bridge Bank offices will be closed on Wednesday, January 1st in observance of New Year's Day. pic.twitter.com/B8efpD0GlQREMINDER: In observance of Christmas Day, all Bridge Bank offices will be closed beginning at 3 pm on Christmas Eve and remain closed through Christmas Day. pic.twitter.com/TIP2gGLliHOur Southern California Capital Finance Group is proud to announce their most recent relationship with H Code Media, Inc., the leading technology platform offering a full suite of integrated marketing and media solutions for the U.S. Hispanic market. pic.twitter.com/n9NyyS7odbBridge Bank extends $4MM credit facility to H Code Media, Inc., the leading technology platform offering a full suite of integrated marketing and media solutions for the U.S. Hispanic market. westernalliancebancorporation.com/bridge-bank-ho… - about 1 year 1 month agoWe honor all of the men and women who have served. Thank you. #VeteransDay pic.twitter.com/EpGp17Q39kThankfully #technology works its magic on our electronic devices. We wish you the best of luck changing the clock on your microwave! #daylightsavings pic.twitter.com/9VVKbEyeYgOur Technology Banking Group is proud to announce their most recent deal with Zipari, a growth-stage #technologycompany that offers the first and only consumer experience platform built specifically for #healthinsurance. pic.twitter.com/ImSLIn2TW5Bridge Bank Extends $10MM Growth Capital Term Loan to Zipari prnewswire.com/news-releases/… - about 1 year 3 months agoWe wish everyone a fun and relaxing #LaborDay holiday weekend. REMINDER: In observance of Labor Day, all Bridge Bank offices will be closed on Monday, September 2nd. pic.twitter.com/OscfoI61Q4Our Life Sciences group is pleased to announce that Innovative Health has upsized their credit facility to $9MM. Innovative Health is committed to helping #healthcare realize the potential of medical device #reprocessing, enabling hospitals to provide better care through savings. pic.twitter.com/bMFiLdLyyM