Franchising has fundamentally reshaped the hospitality industry. Instead of owning and operating hotels, brands like Marriott and Hilton have built empires by licensing their names and systems to independent owners. In return, they collect royalties, reservation fees, and loyalty program contributions, often totaling 15–20% of gross revenues.
This asset-light model has fueled explosive growth. Between 2017 and 2022, thousands of new franchised hotels opened globally, while brands launched more than 120 new sub-brands to capture every customer segment. Financial markets reward this model with high valuations due to its scalability and low capital intensity.
However, the franchising boom comes at a cost. Franchise agreements typically provide minimal support for human capital development, leading to inconsistent employee experiences, high turnover, and weakened employer branding. Many employees do not know who actually employs them, creating confusion and eroding loyalty.
Moreover, aggressive brand proliferation has blurred brand identities. Limited-service hotels often command rates higher than legacy full-service properties, confusing consumers and undermining direct bookings.
To sustain long-term success, hotel companies must reinvest in talent pipelines, rationalize brand portfolios, and align employer branding across their networks. Otherwise, the financial success of franchising risks undermining the very brands that built it.
This asset-light model has fueled explosive growth. Between 2017 and 2022, thousands of new franchised hotels opened globally, while brands launched more than 120 new sub-brands to capture every customer segment. Financial markets reward this model with high valuations due to its scalability and low capital intensity.
However, the franchising boom comes at a cost. Franchise agreements typically provide minimal support for human capital development, leading to inconsistent employee experiences, high turnover, and weakened employer branding. Many employees do not know who actually employs them, creating confusion and eroding loyalty.
Moreover, aggressive brand proliferation has blurred brand identities. Limited-service hotels often command rates higher than legacy full-service properties, confusing consumers and undermining direct bookings.
To sustain long-term success, hotel companies must reinvest in talent pipelines, rationalize brand portfolios, and align employer branding across their networks. Otherwise, the financial success of franchising risks undermining the very brands that built it.
