According to CBRE’s 2025 Hotel Brand Performance report, in the evolving landscape of the hotel industry, the proliferation of brands has not necessarily equated to increased revenue per available room (RevPAR). Major hotel companies have expanded their brand portfolios at a 7% compound annual growth rate (CAGR) over the past decade. Despite this expansion, the anticipated boost in RevPAR has not materialized, with inflation eroding nominal gains. This article examines the impact of brand proliferation on RevPAR, the widening performance gap between brands, and the implications for hotel owners and developers.

Brand Proliferation and RevPAR

Over the past ten years, hotel companies have added brands and increased loyalty program memberships at a rapid pace. However, since 2019, the correlation between brand expansion and RevPAR growth has weakened. The fastest-growing brand family by number of brands, with a 15% CAGR, reported the slowest median RevPAR CAGR of just 0.3%. Inflation has further eroded RevPAR gains, with real RevPAR down 10.9% since 2019 in inflation-adjusted terms. This suggests that alternative lodging sources and increased hotel supply have offset demand recovery, reducing pricing power.

Widening Performance Gap

The performance gap between the best and worst-performing brands is widening. Between 2014 and 2019, 52% of brands exceeded the sample CAGR average of 1.6%. Since 2019, this figure has dropped to 28%. The spread between top- and bottom-performing luxury brands increased from 5 to nearly 7 percentage points between 2014 and 2024. This divergence has resulted in a 41% cumulative RevPAR premium for the strongest brands, compared to 29% in the earlier period.

Brand Family Impact

RevPAR performance varies significantly by brand family. The strongest brand family posted a 2.1% RevPAR CAGR from 2014 to 2024, while the weakest contracted by 0.2%. This 26% cumulative spread can significantly affect long-term investment returns. Factors influencing performance include loyalty program strength, marketing efficiencies, and leadership quality.

Implications for Owners and Developers

The analysis underscores the importance of thorough due diligence when selecting a brand or brand family. Brand affiliation offers access to loyalty programs and operational efficiencies, but individual brand performance can significantly affect asset value. As performance gaps widen and new brands emerge, assessing a brand’s positioning, fee structure, and customer mix is crucial for generating profits across cycles.

Winning Strategies

To navigate the current environment, hotel owners and developers should focus on proven performers within brand families and negotiate performance-based franchise terms. The era of 20-year flag commitments may be ending, and considering a soft brand affiliation could be beneficial. Soft brand room growth has outpaced traditional brands, growing by 42% in the past year alone.

Chain Scale Trends: Upper-Midscale Outperforms

The upper-midscale segment continues to demonstrate resilience, outperforming other segments during both pre- and post-pandemic periods. Upper-midscale brands posted the highest RevPAR CAGR of any chain scale, benefiting from strong brand recognition and simplified operations. Guests are attracted by the lack of resort fees and the flexibility to trade up or down in response to economic conditions. This segment offers more predictable returns in uncertain times.

Complimentary Breakfast and Guest Preferences

In the mid-tier segment, brands offering complimentary breakfast have higher occupancy rates and more than double the RevPAR growth over the past five and ten years. However, while consumers value complimentary breakfast, it is unclear if higher occupancies equate to higher gross operating profits, as guests who pay for breakfast drive higher ancillary revenues.

Midscale and Economy Chains: A Contrarian Opportunity

Midscale and economy chains face RevPAR declines and closures, posting the slowest growth between 2019 and 2024. However, these declines may lead to a balance between supply and demand as non-performing properties are razed or converted. This sets up newer, lean prototypes for improving topline and profitability.

Conclusion

The hotel industry’s current environment presents both challenges and opportunities. Brand proliferation has not led to the expected RevPAR growth, and the performance gap between brands is widening. Hotel owners and developers must conduct thorough due diligence and consider strategic brand alignment to navigate this complex landscape. Upper-midscale brands continue to outperform, offering a stable investment option in uncertain times.

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