FIVE FRANCHISE TRENDS TO WATCH IN 2025

Hospitality News ME| FEB – APRIL 2025

The changes that will be driving future success for hotel franchising

The hospitality industry is navigating a rapidly changing landscape, driven by shifting preferences and demands for new business models from hotel owners, investors and brands. As we look toward 2025 and beyond, franchising emerges as a critical focal point for innovation and growth in hospitality. We have seen substantial changes in franchising initiatives recently, and both franchisors and franchisees alike should anticipate further changes which will affect their strategies and investments.

Below are five key franchise trends which I believe are worth highlighting, as they will quite likely be shaping the hospitality industry in 2025.

1. Franchising through independent management companies

The demand for independent management companies from both hotel owners, investors and brands will continue to grow. Independent management companies, also known as third-party operators, have become increasingly popular over the past few years as they provide a structured solution for not only the day-to-day operation of hotels, but also the franchising and branding of properties in the development phase or the takeover/turnaround phase.

In brand selection and franchising negotiations, the three-way partnership between the owner, hotel brand, and the management company has proven to be extremely beneficial for all parties, with the management company mediating between the brand’s focus on their own success and the interests of the asset owner.

I predict that we will see the third-party management model grow extensively in 2025 and beyond in the Middle East, particularly in Saudi Arabia and the United Arab Emirates.

2. Asset-light franchising is a growing trend

The notable shift towards asset-light strategies in hospitality is likely to continue. Leading hotel brands are increasingly adopting an approach which privileges franchising. Prioritising operations and brand licensing over property ownership and investments in physical assets, asset-light franchising has become a successful strategy for hotel brands.

This business model provides more benefits than traditional brick-and-mortar models, including market adaptability, capital efficiency, rapid expansion and emerging markets penetration by partnering with local developers and investors.

3. The rise of the manchising model

Manchising, a hybrid hotel management model, combines elements of management and franchise contracts to customise the balance of control and support. With shared responsibilities and benefits, this model allows an owner to initially operate the hotel under a management contract with a hotel brand, which can later transition to a franchise agreement once certain conditions are met.

The use of manchise agreements will become more widespread in the years to come, as it provides a balanced approach for hotel owners looking to benefit from the expertise of a reputable brand initially, while planning for greater control and autonomy in the future. I predict that this type of franchising will become the norm for new hotel developments where the owner seeks to stabilise operations before taking full control.

4. Expansion into secondary and tertiary locations

As urban cities are becoming saturated, we will see more and more hotel franchises turning their attention to secondary and tertiary locations, especially in emerging markets such as Saudi Arabia. These regions often have limited branded accommodations, and consequently offer significant growth potential in an untapped market, enabling franchisors to diversify their portfolios.

Midscale and economy hotels, especially, will thrive in these markets, offering affordable options to budget-conscious travellers. In addition, setting up franchises in secondary or tertiary locations open up collaborations with regional developers to establish cultural relevance and cost-effective operations.

5. Sustainability must be a priority in franchise agreements

In the future, hotel franchisees must ensure that a sustainability strategy is included in their franchise agreement to meet the demand of both travellers and government regulations. Standard practices in the near future will include environmentally conscious strategies to reduce food waste, to eliminate single-use plastics, to have a recycling programme in place, to use eco-friendly cleaning products, to promote locally sourced food products and to take action around corporate social responsibility.

Working towards obtaining legitimate “green” certifications and transparency around sustainability initiatives will become necessary, if not mandatory, at some point in the near future. Designs for new builds will be required to feature eco-friendly infrastructures such as energy-efficient systems, solar panels, and water conservation measures.

Franchises that embed sustainability into their brand identity not only attract environmentally aware guests but also align with global incentives and regulations which will most likely become more stringent in the future.

In conclusion, 2025 is shaping up to be a transformative year for hotel franchises. I believe that preparing for and adapting to these trends is not optional—it’s absolutely essential if hotel franchises are to thrive in a competitive market and be better positioned for success in the future.

FIVE FRANCHISE TRENDS TO WATCH IN 2025

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