CBRE’s report on 2025 Hotel Brand Performance Report, the evolution of the hotel industry has seen the proliferation of brand names not always translate into increased revenue per room available (RevPAR). Over the last decade, major hotel companies have increased their brand portfolios by a compound annual growth (CAGR) of 7%. The expected increase in RevPAR did not occur, as inflation has eroded nominal gains. This article explores the impact that brand proliferation has on RevPAR. It also examines the growing performance gap between brands and its implications for hotel developers and owners.
Brand Proliferation, RevPAR and the Impact of Brands
In the last ten years hotel companies have increased their loyalty program members and added new brands at an accelerated pace. The correlation between the expansion of brands and RevPAR is weakening since 2019. The fastest-growing family of brands by number, with a CAGR of 15%, had the lowest median RevPAR growth of only 0.3%. Inflation further undermined RevPAR gains. Real RevPAR is down 10.9% in inflation-adjusted figures since 2019. This suggests that the increased supply of hotels and other lodging alternatives have offset the recovery in demand, reducing pricing.
Widening Performance Gap
The performance gap between brands that are performing well and those who are not is growing. From 2014 to 2019, 52% brands exceeded the CAGR sample average of 1,6%. This figure has fallen to 28% since 2019. Between 2014 and 2024, the spread between top and bottom performing luxury brands increased by nearly seven percentage points. This divergence resulted in an increase of 41% in cumulative RevPAR for the strongest brands compared to the 29% previously.
Brand Family Impact
The performance of RevPAR varies greatly by brand family. The CAGR of RevPAR for the strongest brand family was 2.1% from 2014 to 2024. Meanwhile, the weakest brand family contracted by only 0.2%. This cumulative 26% spread can have a significant impact on long-term returns. Performance is influenced by factors such as loyalty program strength and marketing efficiency.
Implications for Developers and Owners
The analysis shows the importance to do thorough due diligence in selecting a particular brand or family of brands. Brand affiliation provides access to operational efficiencies and loyalty programs. However, individual brand performance has a major impact on asset values. When performance gaps increase and new brands appear, it’s important to evaluate a brand’s positioning, fees, and customer mix.
Winning Strategies
Hotel owners and developers can navigate the current market by focusing on brand families that have proven themselves and negotiating performance-based terms for franchises. It is possible that the era of long-term flag affiliations will be over. A soft brand affiliation may be a good option. Soft brand room has grown faster than traditional brands in the last year, by 42%.
Chain Scale Trends: Upper-Midscale Outperforms
The upper-midscale sector continues to be resilient, outperforming all other segments in both the pre- and post pandemic period. Upper-midscale brands have the highest RevPAR CAGR among all chain scales, thanks to their strong brand recognition and simpler operations. They are drawn to the fact that there are no resort fees, and they can easily upgrade or downgrade their stay in response to the economic climate. This segment provides more predictable returns during uncertain times.
Free Breakfast and Guest Preferences
Brands that offer complimentary breakfast in the mid-tier segment have seen higher occupancy rates, and their RevPAR has grown more than twice as fast over the last five to ten years. Although consumers are happy to receive a complimentary breakfast, there is no way to know if higher occupancy rates translate into higher gross profits.
Midscale and economy chains: A contrarian opportunity
The slowest growth is expected between 2019 and 2024 for midscale and economy chains. These declines can lead to a balance in supply and demands as non-performing property are converted or razed. The result is a new generation of lean prototypes, which can improve profitability and topline.
You can also read our conclusion.
Hotel industry is currently facing both challenges and possibilities. The brand proliferation hasn’t led to the expected RevPAR increase, and the performance gaps between brands are widening. To navigate this complex environment, hotel owners and developers need to conduct due diligence and think about strategic brand alignment. Upper-midscale brand continue to perform well, providing a stable investment opportunity in uncertain times.
Find out more about CBRE.
