For decades, the international hotel operating business developed largely around two models, as operators moved away from property ownership: management and franchise. Together, this has been part of what the industry calls the asset-light transformation.
Under a management agreement, the hotel operator manages the property on behalf of the owner, bringing its brand, systems and operational expertise in return for management fees. Under a franchise agreement, the owner obtains the brand and access to its systems but remains responsible for operating the hotel, either directly or through a third-party manager.
What is becoming particularly interesting now is the growing role of franchising among operators with historically larger managed portfolios, including in markets where they traditionally relied much more heavily on management agreements, such as Asia.
In 2022, Marriott reported a franchise/licensed-to-managed ratio of around 75/25; by 2025, it was close to 80/20. Accor moved from around 57/43 to close to 62/38 over the same period. Some of the largest groups anticipated the franchise model years ago. Hilton and IHG already operated overwhelmingly through franchise by 2022 (especially in North America), and have since maintained (or slightly increased) that dominance.
A May 2025 HVS article points to earlier research on new signings and notes that in the Middle East, franchise agreements represented only 11% of the existing branded hotel base, but 20% of new signings, suggesting a growing preference for the franchise model in a region historically dominated by management agreements. HVS expected the trend to continue, with franchises reaching about 25% of hotel agreements by 2025 and even more thereafter.
The explanations often given for the continued use of both models are that it is probably wise not to put all one’s eggs in the same basket, and that some markets are not mature enough for franchise, especially where international brands are still developing their presence. A management model offers a better footprint and greater control over standards and helps set the right tone. The other explanation is that a managed property traditionally generated greater fees for the operator, with a percentage of total revenue and a percentage of GOP rather than primarily a percentage of gross room revenue under a franchise.
But there may be another economic force accelerating the transition. Management agreements require more infrastructure to support them. The COVID-19 pandemic brutally exposed the fixed-cost structures sitting behind international hotel groups. Accor, for example, responded in 2020 with a €200 million recurring cost-reduction programme designed to transform what it called an “asset-light business model” into an “asset-light company,” including the simplification and realignment of regional operating structures.
Five years later, Accor was explicitly reporting conversions of management contracts into franchise agreements and corresponding adjustments to its cost base. IHG provides an even clearer explanation of the economics: it says franchised hotels deliver greater flow-through from revenue to operating profit because limited additional resources are required to support each incremental hotel.
Franchising allows hotel groups to grow their networks, limit their liability exposure and generate recurring fee income without having to deploy the same operational infrastructure required to manage every hotel directly, even though, under a management model, they often rely significantly on the hotel GM and its team. Responsibility for the operation sits with the franchisee or its chosen manager, if any. The hotel group can concentrate increasingly on brands, distribution, loyalty, technology and other scalable services.
For owners, franchising can also be attractive. It can provide access to an international brand and distribution platform while preserving considerably greater operational control than under a traditional management agreement. As a matter of fact, some owners complain that their international operator is too little present or involved in the management of their hotel caught in a never ending expansion quest. The fee structure can also be advantageous, moving from the classic management model of around 2–3% of gross revenue plus an incentive fee based on GOP to a franchise fee based on gross room revenue (sometimes split between different components, including royalty fee).
But the transition is not without friction. Owners staying under a management model may complain about a lack of support from operators increasingly structured for a lighter franchise model. Moving from management to franchise also changes the relationship with the operator: they gain greater independence, but may receive considerably less day-to-day support. Some franchisors are reluctant to commit to a minimum level of support to clarify their standards on the paper, instead requiring franchisees simply to consult standards made available online.
At the same time, hotel groups face their own challenges. As they relinquish direct operational control, they remain understandably concerned about protecting brand consistency and the value of their networks. This can translate into increasingly prescriptive franchise agreements, extensive standards-compliance requirements, heavy approval processes, and tight provisions around matters such as the appointment of the general manager, revenue management, termination and transfer. Because they are no longer involved in day-to-day operations, some franchisors seek to limit their contractual obligations essentially to providing the brand and connecting the hotel to their systems once compliant. Some can even be reluctant to warrant that they hold the necessary rights in the brand or to commit to protecting it. Franchise agreements can be surprisingly one-sided and may raise questions under local regulations, including principles relating to fairness and franchisee independence.
The tension is understandable: operators want the lighter cost and risk structure of franchising while preserving sufficient control to protect their brands and the durability of contracts that are valuable assets for them; owners accept greater responsibility but expect the independence and practicality that should come with it.
Finding the right balance is therefore becoming one of the central issues in hotel franchise negotiations. A fair and balanced franchise agreement has a better chance of lasting (and of staying in the drawer) if fair and balanced.
