The European brand landscape has been evolving rapidly since the pandemic, with diverse international hotel groups keen to access the Continent’s most lucrative markets.
But one of the biggest drivers of change has been a softening of brand requirements from some of the major US names, which has enabled them to ramp up conversions and power into the midscale market, often without even breaking ground.
Cody Bradshaw, group CEO, L+R hotels, suggests that European hotel chains should be “sounding the alarm” at this development, which has been driven largely by “non-standardised conversion brands entering the market for the first time”.
“When the top leading global chains come in to disrupt this space, the impact is profound,” he adds. Bradshaw cites examples of US chains accepting properties with “windowless rooms or no AC” in their drive for market domination, adapting to standing stock with a new agility. “Their target is to convert hundreds, if not thousands of hotels across Europe, institutionalising economy and midscale hotels with brands that have a worldwide presence,” he notes. This is being made all the more possible, he adds, because “the power of the brands that have dominated Europe have not been that compelling”.
Localised brands
Satya Anand, president, EMEA, Marriott International, says that Marriott is an example of a group which has honed its brand strategy over a number of decades. “Thirty years ago we simply exported our brands across the globe,” he says. “But we found we needed to develop brands that are more localised.”
The locally developed brands, in turn, often deliver surprising appeal for multiple markets, he notes. AC Hotels by Marriott is a good example, having originated as an independent chain in Spain, but later receiving a major financial injection from Marriott to kick-start its evolution. Today, the midscale brand has been successfully adapted to suit around 25 global markets, including Peru, Portugal and Morocco.
Another rising star in EMEA, Four Points Flex by Sheraton, was launched around 18 months ago to accelerate Marriott’s growth by flexible conversion. Also active in Asia Pacific, the brand reached the end of 2024 with 28 open properties (5,037 rooms) and 33 in the pipeline (4,003 rooms). Across the Atlantic, City Express by Marriott, which was acquired in 2023, is a further example of the group’s “flexible standards” midscale brands. In October 2024, the company announced its planned debut in the US and Canada, marking Marriott’s introduction of a transient midscale offering in the region. The brand currently has 153 open properties (17,777 rooms), with 53 in the pipeline (5,673 rooms). It is now anticipated to expand into Nicaragua, Bolivia, Argentina, Peru and Brazil. Notably, the brand comes with more simple fee structures for owners, with Marriott understood to charge a flat fee of 10.5 percent on revenue, rather than breaking up the fees into various categories.
Hilton is scaling operations in Europe and the Middle East through a similar strategy, pushing newer brands like Spark and Tempo. The latter is a “stylish lifestyle brand...designed for a younger generation of travellers," according to Simon Vincent, executive vice president and EMEA president for the group. “We're pretty confident that we've got the right formula. It's taken off pretty well in the States. It's new to Europe, Middle East and Africa, but the initial level of interest has been very strong,” he adds, nodding to its emphasis on design and wellness.
Economic drivers
The non-standard conversion approach has taken hold in the last two years for a number of compelling reasons. Although some conversion strategies reflect a more granular understand of localised markets and urban planning, construction costs have played a significant role. The deglobalisation trend has led to acute labour shortages and affected material costs in markets from Europe to North America, with conflict in the former region and a war on immigration in the latter impacting worker flows. Research from Currie & Brown suggests that global construction costs will rise again in 2025 by around 7 percent, with the chronic lack of skilled workers across the industry set to intensify. “Year-on-year cost inflation has become a fact of life for the global construction industry,” says Currie & Brown group CEO Alan Manuel. Clearly, this year will be no different with moderate rises on the horizon. But the real challenge is uncertainty, which will be exacerbated by continuing macro-economic and geopolitical volatility. So, resilience will be the key to survival and success in 2025 and beyond.”
Minutes from the Federal Reserve’s committee meeting in March notes that consumer price inflation remains elevated in the US, reaching 2.5 percent in February, still above the central bank’s 2 percent goal. Experts believe the institution will continue to focus on the goal of taming inflation at the expense of rate cuts in the near term.
European success
Yet despite the uncertain macroeconomic horizon, global hotel brands remain determined to pursue their rapid growth ambitions. InterContinental Hotels Group (IHG) is another name honing its midscale strategy in Europe; the group revealed that conversions represented around half of its global signings in 2024.
In February, IHG inked a deal for the Europe-based Ruby Group, a brand developed by entrepreneur Michael Struck in close collaboration with ECE Group, a family-owned real estate business with headquarters in Germany. Billed as “lean luxury”, the Ruby brand currently operates 20 hotels (3,483 rooms) in major cities across Europe and has another 10 pipeline hotels (2,235 rooms). It currently numbers nine hotels in Germany, three in the UK, three in Austria, two in Switzerland and one each in Italy, Ireland and the Netherlands. Pipeline hotels are already slated for Edinburgh, Marseille, Rome and Stockholm.
IHG says it believes Ruby can grow to more than 120 hotels over the next 10 years and accelerate to more than 250 properties over a 20-year spell, through franchise operators globally.
Says Elie Maalouf, IHG’s CEO: “The urban micro space is a franchise-friendly model with attractive owner economics, and we see excellent opportunities to not only expand Ruby’s strong European base but also rapidly take this exciting brand to the Americas and across Asia, as we have successfully done with previous brand acquisitions.”