The hospitality industry is navigating a rapidly changing landscape, driven by shifting preferences and demands for new business models from hotel owners, investors and brands. As we look toward 2025 and beyond, franchising emerges as a critical focal point for innovation and growth in hospitality. We have seen substantial changes in franchising initiatives of late, with the result that franchisors and franchisees alike should anticipate further changes that will affect their strategies and investments. Following are five key franchising trends which are expected to shape the hospitality industry in 2025 and are therefore, I believe, well worth highlighting.
1. Franchising through independent management companies:
the demand for independent management companies from hotel owners, investors and brands will continue to grow. Independent management companies, also known as third-party operators, have become increasingly popular in recent years. One key reason is that they provide a structured solution for not only the day-to-day operation of hotels, but also the franchising and branding of properties in the development phase or the takeover/turnaround phase.
In brand selection and franchising negotiations, the three-way partnership between the owner, hotel brand and the management company has proven to be extremely beneficial for all parties, with the management company mediating between the brand’s focus on their own success and the interests of the asset owner. I predict that we will see the franchising trend of third-party management grow extensively in 2025 and beyond in the Middle East, particularly in Saudi Arabia and the UAE.
2. Asset-light franchising:
the notable shift toward asset-light strategies in hospitality is likely to continue. Leading hotel brands are increasingly adopting an approach which is weighted toward franchising. Prioritizing operations and brand licensing over property ownership and investments in physical assets, asset light franchising has become a successful strategy for hotel brands. This business model provides more benefits than traditional brick-and-mortar models, including market adaptability, capital efficiency, rapid expansion and emerging markets penetration, by partnering with local developers and investors.
3. The rise of the manchising model:
manchising, a hybrid hotel management model, combines elements of management and franchise contracts to customize the balance of control and support. With shared responsibilities and benefits, this model allows an owner to initially operate the hotel under a management contract with a hotel brand, which can later transition to a franchise agreement once certain conditions are met. The manchise agreement model will become more widespread in the coming years, since it provides a balanced approach for hotel owners looking to benefit from the expertise of a reputable brand initially, while planning for greater control and autonomy in the future. I predict that this franchising trend will become the norm for new hotel developments where the owner seeks to stabilize operations before taking full control.
4. Expansion into secondary and tertiary locations:
as urban cities become saturated, we will see a growing number of hotel franchises turning their attention to secondary and tertiary locations, especially in emerging markets, such as Saudi Arabia. These regions often have limited branded accommodations and consequently offer significant growth potential in an untapped market, enabling franchisors to diversify their portfolios. Midscale and economy hotels, especially, will thrive in these markets, offering affordable options to budget-conscious travelers. In addition, setting up franchises in secondary or tertiary locations provides openings for collaborations with regional developers to establish cultural relevance and cost effective operations.
5. Prioritizing sustainability:
looking to ensure that a sustainability strategy is included in their franchise agreement to meet the demands of travelers and government regulations. Environmentally conscious strategies to reduce food waste, eliminate single-use plastics and incorporate recycling programs, among other initiatives, are soon expected to form part of standard practices. Other practices likely to be part of standard operations range from the use of eco-friendly cleaning products to the promotion of locally sourced food products and a proactive approach to corporate social responsibility. Working toward obtaining legitimate ‘green’ certifications and transparency around sustainability initiatives will become necessary, if not mandatory, at some point in the near future. Designs for new builds will be required to feature eco-friendly infrastructures, such as energy-efficient systems, solar panels and water conservation measures. Franchises that embed sustainability into their brand identity not only attract environmentally aware guests, but are also aligning themselves with global incentives and regulations, which will most likely become more stringent in the future.
The year 2025 is undoubtedly shaping up to be a transformative one for hotel franchises. Preparing for and adapting to these franchising trends is essential – not optional – for hotel franchises looking to thrive in a competitive market and position themselves as strongly as possible for a successful future.
