Outsourcing As You Sleep


You book a room on the website of a famous international hotel chain. As you arrive to check in, its reassuring brand name is above the door. Its logo is everywhere: on the staff uniforms, the stationery, the carpets. But the hotel is owned by someone else—often an individual or an investment fund—who has taken out a franchise on the brand. The owner may also be delegating the running of the hotel, either to the company that owns the brand or to another management firm altogether. The bricks-and-mortar may be leased from a property firm. In some cases, yet another company may be supplying most of the staff, and an outside caterer may run the restaurants. Welcome to the virtual hotel.

The franchising of hotels, like the franchising of fast-food restaurants, is half a century old. But it has received a further boost in the past few years, as the biggest international hotel chains, under pressure from shareholders to return capital, have put even their poshest properties up for sale. They are now mainly franchisers and managers, rather than owners. In return for the fees they charge the hotels’ owners, they provide a glossy brand name and a steady stream of bookings from their online reservations systems.

Among the keenest adopters of this virtual-hotel model, also called “asset-light”, is InterContinental, a British-based firm which in addition to its eponymous hotel chain owns the Holiday Inn and Crowne Plaza brands. InterContinental was formed from a demerger in 2003, just as the business emerged from the dotcom bust. Even then, it owned only around 200 of the 3,500 hotels that bore its brands. But during the recent boom it sold most of the remainder, while expanding worldwide through new franchising and management contracts with hotel developers. It now owns just 16 of the 4,186 hotels in its system.

Read on.

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