Why Marriott, Hilton and Hyatt Don’t Actually Own Most of Their Hotels | WSJ The Economics Of
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- čas přidán 13. 05. 2024
- When guests stay at a hotel chain like Marriott, Hilton or Hyatt, these companies don’t typically own the property. They may not even run it. So what is happening in the hotel industry and what benefits are smaller companies receiving from these “flags” in the industry?
WSJ explains why hotel companies like Marriott and Hilton actually own less than 1% of their properties and why hotel owners like MCR Hotels choose to fly a flag or go independent.
Chapters:
0:00 The hotel industry
1:30 Franchise model
2:47 Pricing hotel rooms
4:28 Loyalty programs
5:25 Independent hotels and branding
The Economics Of
How do the world's most successful companies generate revenue? In this explainer series, we'll dive into the surprising stories behind how businesses work--exploring everything from Costco's "treasure-hunt" model to the economics behind Amazon's AWS.
Hyatt is smaller than its hotel chain competitors. So how did it get to be the most expensive? Watch the Economics of Hyatt: on.wsj.com/3PLS0T6
How did Marriott become the largest hotel chain, with over 30 brands? Marriott’s CFO explains why this is just the beginning for the hospitality giant: on.wsj.com/4aFZFds
#Travel #Hotels #WSJ
Hyatt is smaller than its hotel chain competitors. So how did it get to be the most expensive? Watch the Economics of Hyatt: on.wsj.com/3xt9yNf
How did Marriott become the largest hotel chain, with over 30 brands? Marriott’s CFO explains why this is just the beginning for the hospitality giant: on.wsj.com/3xhNqpb
Why no mention of IHG? How do they stack up? What is their model?
@@jasonk125this seems to be focused on the US market, IHG is a european brand.
What a complex way of explaining that many hotels are franchisees.
Its a CZcams vid they need attention
That’s what I was thinking
Can't make a long video with 1 sentence, eh?
I love being a Hilton Diamond Member.. especially staying at overseas Hilton properties, you get treated like a millionaire lol
didn't ask lil bro @@ninzki143
I’ve seen a shift in Marriott hotels where the quality is inconsistent. This makes a lot of sense.
No it's always been like that. I know plenty of folks who own Marriott and igh hotels. It's nothing new
Marriott loyalty program is inconsistent, bizarre and unsettling. I don’t like have to debate and argue with mgt. 👎
@@newagain9964 ah debate and argue with mgt. is fun...then you can insult them....to their face...
There are certain brand standards owners have to follow in order to operate under a certain name; but yes it does become inconsistent sometimes as some owners care more about operations than others.
When I heard the CFO of Marriott say "we are the largest, 8700 hotels in 139 countries and territories, really showing expertise around the world for what we think hospitality means", I thought this meant, you know, making a nice hotel for guests. Turns out this is left to the franchisees, and what hospitality means to Marriott is figuring out how to charge as much as "the market can bear", and setting up anti-competitive loyalty programs to stop customers from shopping around outside of their flag.
While that true, what they also have is data to tell the franchises what attracts customers in terms of what makes a customer happy with their hotel choice, amenities, room layout/style etc.
Shoutout to the stock footage of random people at the Berlin-Brandenburg airport.
Hahahaha
lol
It's funny how the CEOs of the hotel companies, who make money from selling their brand, *look* like rich people; while the MCR CEO looks like a used car salesman.
He's not the owner of the properties, just the operating partner.
@@PalaundDidn’t the video and him say he was the owner of the properties who also operated them? The brand don’t own or operate the hotels.
They want to look presentable. What’s wrong with that?
They are pandering to their audience and brand image. You really think the MCR CEO can't afford a suit and nice watch?
I’m sure those hotel executives are doing just fine.
And overtime, the marriot, hilton, etc will slowly go down hill. A fact they acknowledge within this video. When you loose control over quality standardization, it becomes inevitable that the brands reputation looses value as well.
Hard to go downhill when u make up the majority of the market.
They have strict QA requirements
Not necessarily. If they go the McD's route, they can impose strict standards & plenty of brand-support (design, suppliers, advice on where/how to locate, etc). The issue is that they are *also* going the Subway route - allowing way too many franchisees in smaller markets, or in close-proximity in larger markets, such that supply exceeds demand. Outsourcing the risk in this way can be good for all parties, but you have to impose some reasonable limits.
@@mandisaw everything from your second sentence still stands true. They are just trying to sell as many of their brands to owners as much as possible. As long as the hotel is making money off royalties they don’t care. Even if margins are thin for the owner. But yeah if margins are thin for the owner, it’s harder for the owner to keep up with new brand requirements and renovation cycles which require a lot of capital at times.
This is why most hotels are a complete crapshoot on what you get. Very little consistency in physical product, amenities, and especially service. Breakfasts are weaker, housekeeping services reduced, loyalty recognition is greatly minimized. Not saying every chain hotel was perfect before, but ever since the pandemic and the offloading of property by the chains, the service has gone downhill at nearly every hotel I have stayed at.
❓️ Franchise system only existed post pandemic?
That are exactly my thoughts!
Yet AirBnB still managed to be worse 😂
polarspacebear: As the video notes, Marriott/Hilton made the decision to go "asset-lite" decades ago. The franchised hotel model dates back to the early 1970's...this was not an idea that took hold post pandemic. Your experience is not unlike any business post-pandemic...harder to find staff, etc. Not due to a dramatic shift in who owns the hotel real estate.
@@siewheilou399 I didn't say that. But they are complementary factors
as a former hotel worker. the real loser here is the loyalty customers, it's literally a sign on the front door. that's it. nothing special about the hotel. use your brain, look at all hotels individually and pick what you like for a price you are willing to pay.
Yeah but people want to take a selfie in front of that Sign or they want to spit out 'I stayed at Marriott. It was so nice hehe'
I used Marriott almost exclusively for 17 years of business travel. Now that I'm retired, I've found that IHG is a much better value and the service is much more consistent. Also, as a lifetime Platinum with Marriott, I used to get upgrades quite often pre-COVID but haven't seen one since.
Platinum level is no longer the highest ranking tier. There is not Titanium and Ambassador, those guest receive priority upgrades over Platinum now.
SPG was the Top until Marriott bought it. I got 10 years of the most undisputably amazing membership with SPG. Still got the many gifts and SPG "NO BLACKOUT"points. Today that concept is hardly doable.
Time for Monopoly to update the game rules. lol
Landlordgame² ;)
Capitalism, amiright? 😅
I work at a Marriott trust me if your service sucks its because quality of work has been destroyed. We have been reduced to so few workers we cant keep up. They made a new building where i work at . Never hired more people. Trust me it sucks to the extremes. All of our best employees that were diamond left my Marriott and found better jobs and that was in every department btw.
that has nothing to do with franchising, Marriott has franchised decades ago.
@@kingderpington6082 this has nothing to do with what im writing
@@Sololeveler344 you say that while commenting on a video about Marriott franchising their business?
We seem to do a whole lot of the asset light business model here in the US. Outsourcing Manufacturing, Uber , Air BNB , Hotel ownership , Franchised Restaurants , Finance , Call centers, health insurance . Capital likes to take the path of least resistance It's no wonder other countries are growing their economies. It's just more financialization here.
Great insight but I don't understand how the impact comes about. Explain please
Now I know which day to book - Sunday. Thanks for the tip.
The only real takeaway. Weird to me because I always see Sunday as the most expensive hotel day
@@Trainsallday Yes, it was weird to me to. But the logic is that both the leisure & business people opt out on Sundays.
So, who do you think pays for those franchise fees?! Hotel prices have gone up astronomically over the last 5 years and the highest prices hikes are the Brands in this video. This is the same thing happening in Las Vegas with MGM and Caesars where they have sold their properties and are now paid to manage these hotels (again, prices have gone through the roof!).
With regards to Vegas VICI properties is the biggest casino landlord. 😊They own the buildings and MGM and others (casino operators) are tenants. Imagine being the landlord to the casino business. It’s an ingeniously profitable business model. Blackstone is getting in on the game too.
With regards to Marriott, take a look at it’s stock performance.. These businesses are built for the shareholders so deploy your capital appropriately
Good job WSJ!! Great storytelling and very informative.
4:18 i honestly travel TO destinations on Sundays 💯💯😩😩😩 i noticed flights and hotels are waaaaay cheaper on those days and i like that 😩
very informative, thanks!
I didn't expect the hotels have such level of complexity in their business model. Maybe you can feature the nature US hospital businesses too.
This is gooooood! I love these kinds of informative videos WSJ!!!
you didnt know this? LOL
@@maxjb9941Americans don’t really know much…except falsities.
stumbled upon this on my recommendations, and i am impressed! i think it's common to choose a hotel you are more familiar with, especially with the trust people have if the hotel has a "by x company" because you can be in the other side of the world and can trust properties that are labeled as "by marriot, by wyndham, by hyatt," and the like
I work for a best western but it's operated by a group the manages the employees of a Hilton, best Western and a holiday inn, all within 5 miles of each other
and watch youtube content about marriott and hyatt?? get a life my guy!
Having worked at a hotel I can also say that the owners of hotels also hire a management company typically to staff their hotel and run it for a percentage of the revenue/profit. And a lot of times if you get awful experiences it might not be the people at those hotels but rather the terrible management and lack of or micromanaging oversight and scrutiny you’re under. The hotel industry is tough in its own way and it’s not very kind. I came from one with awful management and they were kept because the books looked good despite the work morale and culture being diminished because the management company covered it all up.
Hilton, Hyatt and Marriott don’t mean much in Australia.
However Accor is massive here, but the membership systems work as we only book Accor hotels.
What an interesting video, quality content.
very informative
Wonder if hotel brands points business now is worth more than the hotels business (just like Airlines and their miles)?
I book Marriott because I have status though my Amex and I book them consistently for work so I can use the rewards when I am on vacation. it all checks out
They are playing the McDonald’s play book!
Not really
McDonald's owns about 70% of the buildings and 45% of the land at its locations worldwide. So quite a bit different.
@wsj Here's another intriguing story worth exploring: Service Properties Trust (SVC), which you briefly highlighted. Amid the pandemic, they recognized the cost efficiency of operating under their own flag (Sonesta hotels) and not partnering with brands or other operators. Consequently, they terminated contracts with major players such as Marriott, Hilton, IHG, and Hyatt, effectively reshaping their company virtually overnight.
Great point....all of a sudden, I saw this name "Sonesta" in the past couple of years pop up.
@@piphastings6734 Right! An entire hotel brand born out of a company taking advantage of the pandemic to get out of contracts with the major operators. SVC required minimium income targets to be met and of course - no one was staying at hotels during the pandemic so the brands could not afford to pay these costs and thus were in breach of contract. Hope WSJ picks this up!
Gouge pricing
Dynamic pricing.
I don't look at brand nowadays
reviews are more accurate
Very informative, very humble, keep up the awesome videos. I will follow you ,I liked this trading nice very good very interesting
Marriott sucks these days. They are all the same econo box hotels below a certain category
😂
I guess you never visit Marriott's high end luxury hotels 😅
They figured out how to ruin their brand while turning their business into nothing but a brand. Put a Marriott sticker on a Motel 6. Nobody can afford to travel anymore anyway.
Marriott provides the most overpriced rooms and bizzare and mediocre loyalty program.
Their post-COVID policy of only cleaning rooms once every 2 days "to protect the environment" is quite irritating.
Hilton is just basically airBNB.
All of them are. Except we hope they have a higher quality standard. Hope is the key word
They probably do in most parts of the world outside the US.
@@newagain9964 well generally they also don't come with surprise cleaning fees or whatever when displaying prices
@@GameFuMaster true. And Hilton/a decent hotel chain’s customer care is 80% better than airBnB’s. Not higher simply because some hotel owners just DGA F.
The franchising strategy adopted by Marriott and others is a brilliant move that has drastically scaled their growth while minimizing risk. This model showcases how brands can leverage their reputation and systems to ensure profitability and brand consistency without the direct costs of property management.
Wyndham is much larger than Hyatt, but I guess they could get Hyatt to talk on camera. Nice video and information!
True, but Hyatt makes more than 4x more revenue than Wyndham at a much smaller scale.
It's all relative, sort of like the airline industry.. Southwest airlines flies more passengers per year than United but United makes more money per year.
That woman has joined the Night King!
for real lol
bro her eyes are crazy! she's definitely been beyond the wall @@RAJohnson713
Or Diary of a Vampire
Intriguing business model, didn't know this before! 😮
Great video. However I
have tried for years to figure out which properties the Marriott family actually owns. Other than the two bridges office in Washington Washington DC
the code that dynamically sets the prices in platform according to the demand amazes me
It's a basic math function. How many rooms are left - up the price when there are fewer.
How does Wyndham compare? I seem to see a lot of their hotels now
Dynamic pricing 🤦🏻♂️
dystopia
It's Capitalism.
The absolute bane of the common person. Imagine getting a fair price or a good deal from a business with a full-time revenue manager and algorithms to outsmart you.
They know the average American is not going to do the work of finding the best price, read the fine print and do their homework more than one sitting in from of the computer. I literally spend 2 months monitoring hotel room prices in order to get an idea of the price ranges including point conversions. Who wants to do that and that's just 1 hotel.
Even gave Taylor Swift a shoutout for driving crazy prices. Most 2024 thing ever along with the grotesque tech driven drive of 'dynamic pricing' which more often than not isn't simply a demand & supply equation.
Yep Marriott is winning big on Hotels branding in the South Pacific and bought hotels previously owned by Starwood Hotels and Resorts, when JW Marriott bought the brand back in 2016.
Wonder a how much it cost to keep sandz? Would a love fi start keep events too
Some similarities to car dealerships economics. But still vastly different
Great explainer video! I guess the hotel industry has learned from the fast food industry. What industry will follow this path next? Air travel? You operate a B737 and you get to slap a 'Singapore Airlines' on the side, if you manage it well.
This is already sort of a thing. Some airlines don't own their aircraft, they lease them from a 3rd party.
MCR is a car wreck - I stayed in one of their properties for 3 years and I question how they are still in business
Not only are most hotels a franchise but there are also management companies that the employees of those hotels actually work for and not the franchisee or the main name hotel.
Nice video, managing is everything:)
So they are franchises basically?
The franchise restaurant chains, eg McDonalds, require a local business person to own (or lease) the property, and operate the business.
And the brands don't own or operate the properties. They're just selling their flags for a cut of the revenue. Isn't that basically a franchise?
Or am I getting the whole video wrong?
No. There are owned, managed and franchise hotels carrying those flags.
Basically, yes.
Yes it is precisely a franchised hotel.
I'm really loving this new peveat the WSJ is doing to other topics beside crazy politic, and cancel culture stuff.
Where does OYO hotels come into this?
Yes
Recently at a TX doubletree Hilton a little 12 year old died in the pool bc of an exposed pipe… this explains why the mom couldn’t sue the actual Hilton company… such a sad story of something that could’ve been prevented… and just sucks that this is how they work. I’ve noticed a decline in some of the chains we frequent for vacation.
there are a lot hampton inn in china, most of them are franchise hotels, which used to be a pretty bad builiding in aweful condition but the brand saved it from dying so the property owner owns the hotel but pay franchise money
Wow, the wall street journal actually doing some journalism for once.
So its like Airbnb but for hotels...
I think its an opportunity for those owners to build their own brands and cut out the franchisor (legacy hotel brands)
So like uber they charge same room at different rates per day of the week
Even though their expenses remain constant through out the week
In fact that many hotels are so difficult to bring the customers to enjoy the living of hotel. Hyatt isn't cheap hotel, luxury hotel
How about enforce property owners to respect brand guidelines, and elite benefits, instead of letting them run away without any repercussion? If you treat yourself as a glorified OTA, then us customers act like so. I only go out of my way to stay at Hyatt. Marriott and Hilton don’t get my loyalty.
Because the hotel can just switch brands with little business interruption. It's like amex demanding target to have lower prices if they want to accept amex cards. How well is that going to be received.
It's just like restaurants, franchises. Everyone's doing it. Some retail chains do it as well.
Why do they not mention about IHG at all in the video?
Do they run by different strategy?
Not really, probably chose two American based companies
IHG is a European company now… London based…
TheTake: IHG runs the same strategy. IHG is quite a bit smaller than Hilton and Marriott. Though bigger than Hyatt.
It is called sponsored news. If you want to be discussed neutrally or positively in a video masquerading as factual you have to pay. IHG doesn't use this sort of marketing.
@@condor7810 Big Four Market cap (USD):
Marriott 72.23B
Hilton 53.50B
IHG 16.79B
Hyatt 15.99B
Just to make this clear (the video seems to suggest otherwise towards the end): the hotel industry is highly fragmented. Most hotels are small! Even Marriott as the biggest chain only holds a relatively percentage of market share world-wide: “Based on lodging industry data, we have an approximately 16 percent share of the U.S. hotel market and a four percent share of the hotel market outside the U.S. (based on number of rooms).“ (from their 2023 annual report)
interesting!
This model does bring a lot of profit, but it only works because those big "hotel flags" are already established in the industry for a long time. They already have the data and experience for maximizing hotel performance, and they sell those data to the franchisees for a fee.
This model indirectly hampers the growth of independent hotels and leaving the hotel industry to be monopolized by few players.
Yes, if you are not staying in an actual Brand owned and operated hotel, you're getting a franchisee. Whoa, watch out! You can definitely tell the difference at every level of your stay.
super akka
Great content 💯
Hotels lately suck! They all worry about saving a buck, that the quality has sugfered! Id rather stay at independent hotel than a brand name if the service and quality are there. I think its time to start a hotel brand
I OWN MY BEACH RESORT! WE OPEN NEXT YEAR IN THE PHILIPPINES!
HOW NICE! GOOD LUCK!
@@erikgstewart Thank you! Hard work and dedication for several years! LETS GOOO!!!
I doubt they feel threatened by franchises flying their hotels under different banners. This is because most of Marriot's portfolio is specifically themed and stylized. Which would make it harder for franchisees to switch sides.
Hotels across brands have become too inconsistent, especially in North America. And it's unacceptable that many in the US are still serving room service in boxes which came about because of the pandemic and not returning to full tray service. It's these owners trying to squeeze every last dollar they can out of their properties.
Calling packet rolled oats and skim milk as break fast is just ridiculous
Or you’ll be fortunate enough to get $10 breakfast credit at restaurant. Marriott 😑. Where coffee is $7. A muffin is $5
Ok this makes sense, lower end hotels are not even necessary at attractive real estate locations.
Why not rent your brand for those and concentrate your resources and management skills on the upper scale where the real money is
I just hope that this industry consolidation doesn't lead to consumer price gouging and getting nickel and dimed left and right, like what usually happens with corporate monopolies!
It’s like airbnb )
They licensed the name or franchise them, the analyst said it would unlock value.
I should’ve known this in April 2020 😢
Yes and your product has suffered because of it! I’ve stayed at Marriott hotels that were on par with Days Inn. It’s very inconsistent and very telling.
If people were more aware of this it would kill the brand name tho
Easy money for Hotel operators. Cleaning expense is like $5 per day. Smh. Utilities and supplies another $5. They charge $300 per night is crazy.
So they are like McDonalds, Popeyes etc etc
What about Rosewood ?
I need more information. How do these hotels make money and what are profits like for owners? Who is taking the risk?
They made themselves to be more like a credit card company than a hotel that you knew 25 years ago business model wise.
They make money of events that are multi figures .
@@TransConBrilliancegreat comparison to credit card companies. They have adopted an asset light model that allows them to make nice profits from their brand.
The big brands Marriott Hilton sell rights to use their (name) brand. It’s basically a licensing agreement.
The hotel owner makes a decent living by running a very efficient business. And they are incentivized to grow by owning different hotel brands under the Marriott family. For example the same entrepreneur person (or family) might own more than one of the 30 hotel brands under the Marriott umbrella
Hotel franchises put their reputation on the line while the actual hotel operator just laughs in the face of guests complaining about their falling quality and standards. This is the kind of business model that will make these premium brand slowly lose its association with luxury.
Didint know Valak had a part time job with Marriott.
That's why hotel reviews are more important than ever.
Why not mention IHG?
How do most independent hotels get bookings these days? Expedia?
Is it Mary-It or Mary-Ot?
In previous video hyatt ceo said they own 50 % an in this video you said 2
Most likely this video was created around the period when Hyatt made two significant acquisitions, notably expanding their portfolio of managed and franchised units compared to owned properties. These acquisitions were Lindner in Europe and the Apple Leisure Group, which specializes in all-inclusive resorts.
Same. I’m confused too. They even have excerpts of the interview with the CEO from the other video here but the 2% vs 50% numbers contradict each other.
Unfair prices
This makes a lot of sense now as to why even elite member service at Marriott is so awful and so incredibly awful at specific regions. Clearly, Marriott don't care enough to make sure their most loyal customers aren't getting shafted by not getting the benefits that they are supposed to. And this explains why so many specific hotels can get away with not offering breakfast to elite members or room upgrades. 2 prime reasons to even achieve platinum and up at Marriott. The worst part is that the 3 big chains appears to be colluding in prices in big cities like paris, London. They would just raise prices together and sometimes dynamically with the dollar. Meanwhile if you look at expedia for prices outside of those 3 you'll notice significantly lower prices. While I'll still retain my Hilton business I'm dropping Marriott permanently because I doubt anything will change with them in the next 5 years.
That is caused by a different issue. In US, nearly EVERYONE is an elite member, even gold is super common. They are so easy to get through Marriott credit cards. If you want to get room upgrades and special perks, you need to have higher tiers than most people (which is at least Platinum to Titanium in US). Elite member carries more value outside US.
As for London, the price is probably driven up by frequent business travelers. Because free points and free elite status. Why not!
@@erebuxynot only are u conflating the issues, but ur blaming the customer for the problem created by the (greedy and sleazy) seller. 🥱🙄
I guess Hilton owns a much higher percentage of their hotels since they weren’t listed with Marriott and Hyatt as owning only 1 to 2 percent of their hotels.
That's what I think too and the reason why my room upgrade chances with Hilton is 80% and with Marriott it's more like 30%. Except San Diego areas where both of them are 0% in the last 7 years and I go there often.
I’m a Hilton Loyalist
So..
Marriott & Hyatt r not more than tech companies now‼️ 🤷♀️
Why not add Taj Group
"We think we're the best... we ARE the largest..." 😂
Something was kind of rude to me recently as if i could not afford to sleep there if i wanted to... it was not hilton
Sundays are barley cheaper than any other day 😂