Hotel companies can be super profitable if they’re managed correctly—for a few dollars in turnaround costs, dirty hotel rooms can be transformed into luxurious escapes that people will pay hundreds of dollars a night to relax in. When run incorrectly, hotels can find themselves in crippling situations where large, expensive buildings lay empty due to poor service, a bad location, or less-than-stellar online reviews.
That being said, the following five companies are doing something right. These hotel companies are huge, boasting millions of rooms in their properties worldwide. How can companies control so many properties and rooms? The same way McDonald’s (MCD) controls its restaurants: with franchise agreements.
Choice Hotels International
Choice Hotels International (CHH) has lower revenues than many of the other properties examined; however, with brands like Comfort Inn, Quality Inn, MainStay Suites, and Econo Lodge, the company generally isn’t pursuing a luxury, full-service business model. In 2018, the company had revenues of $1.06 billion and earnings per share of $1.11.
Choice Hotels International revenues in 2018.
While there are many other hotel companies which are larger in terms of revenue or profit, Choice Hotels boasts over 6,800 hotels in its portfolio and is one of the largest companies on this list by a number of properties.
Wyndham Worldwide Corporation
The top hotel company with the largest number of rooms is Wyndham Worldwide Corporation (WYN). This company has over 4,500 properties around the world but averages only 87 rooms per property, making it, much like Choice Hotels, a company of small hotels. Hotel brands in the Wyndham group are instantly recognizable: Ramada, Days Inn, Howard Johnson's, Super 8, La Quinta, and Travelodge being the most well known.
Wyndham Worldwide also earns revenue from its timeshare and vacation membership divisions. For the second quarter of 2018, the company had revenues of $887 million and an EPS of $1.25.
Moving into the higher-end hotels, there is the Marriott International (MAR), a company which owns and operates hotels that range from Fairfield Inn & Suites and the Residence Inn all the way up to the recently acquired Delta and the Ritz. With over 6,700 properties, Marriott International has over 800,000 rooms under its control. Like Wyndham, Marriott also makes money from its timeshare division.
Marriott delivered revenue of $22.89 billion in 2017 and earned a total of $1.37 billion for the full year.
Hilton Worldwide Holdings
Hilton Worldwide Holdings (HLT) is a company with 5,000 properties in 100 countries and territories. The company’s revenue stems from a familiar model in the hotel company world: some from timeshares, from franchise fees and royalties, from management fees, and, finally, some from actual ownership.
Hilton Worldwide had a total revenue of $3.4 billion in 2017 and of that huge income had earnings of $1.26 billion. It operates hotel brands like Hilton, Embassy Suites, Hampton Inn, and Waldorf Astoria.
InterContinental Hotel Group
InterContinental Hotels Group (IHG) is a British hotel company that has over 5.000 properties worldwide, with more than 800,000 rooms. InterContinental purchased Kimpton Hotels & Restaurants in 2014—a move that expanded the company’s holdings in the U.S.—and currently runs hotels that carry the Holiday Inn, Staybridge, and Crowne Plaza names.
IHG brought in a total of $1.78 billion in 2017 and increased profits more than 40% while earning $593 million for the year.
The Bottom Line
Franchising your name can earn big money in the hotel world. In each of these hotel companies, the margin difference between the owned hotels and the managed or franchised hotels is large enough that one wonders why they don’t all follow InterContinental’s lead and own a fraction of the hotels controlled.