Small, family-owned hotels are still numerous throughout the European hospitality market, but recent investment data suggests the existing status quo is unlikely to last.
According to 2023 research by Booking.com and Statista, with acknowledgments to CoStar’s hospitality data, approximately 77% of European hotels are independently owned.
In terms of deals, approximately two-thirds of investments in the European hotel sector involve a hotel brand. The report added that four hotel firms are responsible for opening “half of Europe’s new hotels.”
Markus Gratzer, secretary general of Österreichische Hoteliervereinigung, or the Austrian Hotelier Association, acknowledged the looming “chain-ification” of Europe's hotel industry.
“Indeed, a significant portion of investment in the European hospitality sector comes from larger hotel chains, which pose a competitive threat to independent and family-owned hotels to a certain extent,” Gratzer said.
The next step will be market consolidation, which will potentially marginalize the industry’s smaller players, he added.
The trend will likely see hotels with higher average room counts, said Tobias Warnecke, managing director of the Hotelverband Deutschland IHA, or German Hotel Association.
Smaller, mainly family-owned establishments are increasingly leaving the market, particularly in the small inn, bed-and-breakfast and guesthouse segments, Warnecke said.
“Even during the pandemic, international hotel companies, mainly focused on limited-service hotel concepts that focus on the core service — overnight stays — were increasingly entering the German market,” he said.
Warnecke said the current lending environment provides advantages to the larger players in the hotel industry.
Vladimir Aret is the CEO of Narva Hotels, which has one hotel, the 50-room Narva Hotel in the city of Narva, which overlooks Russia from the Estonian side of the Narva River. Aret said financing has been a challenge for a smaller hotel company like his.
“To develop services at hotels, we had to look for financing opportunities for a long time. Credit institutions are reluctant to provide loans to small businesses,” Aret said.
Consolidation is common among smaller hospitality businesses as future generations of families wish to exit hotels, Warnecke said.
“The vacant properties are increasingly being taken over by hotel chains or larger hotel operators,” he said.
According to 2023 data from the German Hotel Association, branded hotel firms managed 3,794 hotels and other accommodations establishments out of a total of 28,858 in Germany, a 13.1% share, Warnecke said. When room capacity is the main data point, the picture is different, with branded hotel firms accounting for 464,246 rooms (46.6%) of the total number of 996,102.
Aces in the Hole
The dominance of global hotel brands presents challenges for family-owned hotels, including competing for market share, brand recognition and access to capital, said Jessica Jahns, head of hotels and hospitality for Europe, Middle East and Africa at JLL.
She said strategies such as focusing on unique guest experiences, personalized services and niche markets can help family-owned hotels carve out a space in the industry.
“While large hotel chains have expanded their presence, smaller hotels continue to be resilient,” Jahns said.
Anna-Catharina Heller, marketing specialist at Nuremberg, Germany-based family office Neighborhood Hotels, which runs the Melter Hotel & Apartments and the Hotel Karl August in Nuremberg, said these advantages are very useful ones.
“While the dominance of hotel chains in the European hospitality sector is indeed a noteworthy trend, we approach the future with confidence rather than fear,” she said. “As owner-managed establishments, we leverage our individuality to our advantage. We believe that our personalized approach to hospitality, coupled with our deep connection to the local community, sets us apart,” she added.
Heller said hoteliers in family-owned businesses must learn to transform these challenges into opportunities.
“Rather than viewing the growth of big hotel chains as a threat, we see it as an opportunity to further distinguish ourselves and cater to discerning travelers seeking authenticity and meaningful experiences,” Heller said.
The personal approach is a key competitive advantage for independent and small-chain hotels, Warnecke said.
“The owner and family win through their presence alone. Regular customers and their wishes are known and are fulfilled without having to ask. Packages tailored to the guests can be put together individually and are still attractively priced,” he said.
Other advantages include the ability to make decisions more quickly, to create trust and sustainability initiatives, and to make better personal contacts with both guests and staff, he said. This results in higher levels of return bookings and staff retention.
Oases of Safety
Some European markets are safer from "chain-ification" that others, Gratzer said. He pointed to the Alpine regions in Austria as an example.
“Family-owned small to medium businesses are the norm rather than the exception as opposed to other European countries,” he said.
Family-owned hotels in both popular and off-the-beaten-path destinations also might benefit from local guests looking for authentic experiences closer to home, Jahns said.
“Travelers are seeking unique and personalized experiences now, rather than a standard hotel stay. Therefore, those hotels known for their personalized service and character are well-positioned to cater to this demand and offer memorable experiences,” she said.
Local partnerships aimed at enhancing guest experiences and adopting cutting-edge IT also can be advantageous to small hotels, she added.
“Embracing technology, such as online booking systems, digital marketing and guest communication platforms, can enhance the efficiency and visibility of family-owned hotels,” she said.