Are we entering the era of hotel chainification in Europe?
In an increasingly globalised service industry, customer choice has never been more important.
It has been said that “strength lies in differences, not in similarities.” The diversity of the European travel and tourism ecosystem is a source of pride and celebration.
Independent businesses — whether family-run restaurants, bookshops or hotels — reflect the unique identities and cultural heritage of their locality, providing customers with much more freedom to choose and allowing small business owners to serve a global customer base. At the same time, the rise of international brands, franchise restaurants and chain hotels has been one expanding megatrend across multiple sectors in recent decades.
ever-growing “chainification” brings significant customer benefits such as consistent quality and often lower prices
The same shops and coffee houses can now be found in almost every major city’s high street across Europe. This ever-growing “chainification” brings significant customer benefits such as consistent quality and often lower prices. But it is also important to explore how we can preserve the independent businesses that define so many places in Europe — and what it takes for SMEs (small & medium enterprises) to thrive in the increasingly globalised competitive landscape. After all, we are talking about the backbone of our economy.
Increasing “chainification”
Europe has witnessed rapid growth in chain businesses across different sectors recently. And Italy provides a compelling example. Given the country’s world-famous culinary tradition, Italians have fiercely guarded their heritage of independent restaurants and cafés. Yet chains are expanding there at breakneck speed.
Researchers at Deloitte have estimated the annual growth rate at 23% from 2020 to 2021. It’s true that chain restaurants constituted only 8% of the Italian market. That is well below the European average, which is more than three times higher. But all signs point to increased chainification.
The growth of international travel is outpacing domestic, giving hotel chains structural advantages.
The accommodation sector has witnessed a similar expansion in the growth of hotel chains at the expense of independently-owned competitors. The growth of international travel is outpacing domestic, giving hotel chains structural advantages. Customers are more likely to choose established names they recognise, and larger hotel groups have the financial resources to ensure worldwide visibility online and offline.
While chain hotels are yet to achieve the same market dominance in Europe as in the US, the trendline is pushing relentlessly upwards. In the UK and France, for example, the room-share of chains has nearly doubled in just two decades.
If we look at the number of properties with 25 rooms or more, for every chain hotel in Europe, there are roughly three independent ones. This is because independent hotels tend to be smaller, while the large mega-properties often belong to branded global chains. So this is what explains the marginal change in the overall accommodation count versus the phenomenal growth in room-share.
on the investment-front, independent hotels lag behind
On our continent, independent hotels still maintain a lion’s share of the hotel market if we look at a simple property count. When it comes to the number of rooms, it is much less pronounced: chains account for 43% of European room-share, whereas independents cover the rest (57%). However, on the investment-front, independent hotels lag behind. As chain hotels have been expanding at faster speeds over the last decade, they are also able to attract funding to fuel future growth.
independent accommodations provide an unrivalled sense of authenticity and originality, curated for the customers they serve
As with restaurants, chain hotels fill the market niche. They offer a reliable, consistent service at often lower prices than competitors, which means a traveller knows exactly what to expect when they arrive in a different city or country. Visiting guests appreciate this value proposition, and that drives growth. But independent accommodations provide an unrivalled sense of authenticity and originality, curated for the customers they serve. They reflect the local culture around them, as well as a chance for “mom-and-pop” providers to create a highly personalised experience that is not typically found elsewhere.
Levelling the playing field
Online travel agencies help to level the playing field for these independent accommodation providers. They represent one of the most cost-effective marketing and distribution channels, particularly useful for small and medium enterprises (SMEs). Not surprisingly, 85% of European hoteliers agree that online platforms are a cost-efficient way to increase their reach, helping them to remain as competitive and visible as large, branded hotel chains.
There is a distinct difference in marketing calculus for independent providers versus global brands, which isn’t unique to the travel accommodation industry. It’s just how the economy of scale works. If you find yourself in the latter category, a single marketing spend is spread across many stores, cafes, or hotel rooms. Small and independent hotels have no such advantage.
Listing on Booking.com comes with no cost, and accommodation providers only pay a commission at the point of sale.
Platforms like Booking.com offer a risk-free way to showcase rooms for SME accommodations to customers around the world, in the local language and with localised customer support. Listing on Booking.com comes with no cost, and accommodation providers only pay a commission at the point of sale. Neither is there a requirement for exclusivity, meaning accommodation providers can use Booking.com to fill as many rooms as suits their needs.
This global visibility, trust, and convenience that online platforms bring to bear ultimately translate into incremental bookings for independent hotels. It was, thus, especially encouraging to see the results of the recent European Commission study. When hoteliers were asked directly by researchers, they confirmed that online travel platforms boost their sales.
At Booking.com, we believe that safeguarding the diversity of our European travelscapes is a worthwhile pursuit. Chain hotels meet the market demand and are very efficient at that. But small and independent hotels have a role to play too. It’s our privilege to partner with European hoteliers, large and small, and be part of their entrepreneurial journey.
