The Industrialisation of Hospitality

Professionalisation, Brand Growth and Structural Change in the German Hotel Market

When entering a hotel in Germany in the year 2000, guests would often still meet the owner personally at the reception desk. Today, check-in is frequently completed digitally via smartphone – efficient, standardised and in some cases without any direct personal interaction.

 The development of the German hotel industry since the turn of the millennium is therefore not merely a story of growth, but above all an expression of profound structural change and the ongoing industrialisation of the accommodation business.

At the beginning of the 2000s, the German hotel market was predominantly characterised by privately operated hotels with comparatively small operating sizes. Family-run hotels dominated the market in many locations, while international brands were primarily present in the upscale segments of major cities. At the same time, competitive pressure from international hotel chains steadily increased and confronted many traditional hotels with new strategic challenges.

The economic development of the sector illustrates this transformation impressively:

Total revenue in the German hotel industry amounted to approximately EUR 15 billion in 2000. Ten years later, it had already reached around EUR 20 billion (+33%), approximately EUR 30 billion in 2019 and around EUR 35 billion in 2024.

At the same time, the number of overnight stays increased from around 200 million in 2000 to approximately 300 million in 2024. Revenue per overnight stay rose during the same period from around EUR 75 to approximately EUR 117 (+56%). This means that the increase in revenue per overnight stay largely corresponds to general price inflation (consumer price index). Consequently, the real growth of the industry essentially resulted from the significant increase in overnight stays.

Over the past 25 years, the German hotel industry has evolved from a strongly owner-driven sector into a professionalised, brand-oriented and increasingly standardised market. Today, digitalisation, economies of scale, branding and institutional capital shape competitive dynamics across many areas of the market.

The key question is:

How can the hotel industry combine industrial efficiency with authentic hospitality and emotional guest experiences? For the industry, this means asking: What will the hotel of the future look like and how will future growth be generated?

Demand growth largely occurred in parallel with the expansion of supply and was accompanied by increasing professionalisation within the hotel industry. Operating structures became more standardised, international brands gained importance and the diversity of offerings increased. In the 2000s, brands such as Steigenberger, Maritim as well as international brands like Hilton and Holiday Inn were initially dominant, while subsequent growth was primarily driven by midscale and economy brands, which were able to open up additional markets, particularly in secondary and tertiary cities.

Where Marriott, Hilton and Steigenberger were once partly considered the “leading hotel in town” in secondary markets, around 20 years later economy hotels have increasingly captured these markets in secondary and well-located tertiary cities. Overnight accommodation became more standardised and professionalised, while international investors discovered the market as an investment asset class. One example of this development was the sale of Astron Hotels, which had grown during the 1990s, to NH Hotels. The proceeds from this sale were used to establish the Motel One brand, initially with traditional suburban “motel” locations.

In 2014, Germany had around 20,000 hotels and hotels garnis; ten years later there were approximately 19,000 establishments. During the same period, the number of rooms increased from around 789,000 units to approximately 876,000, while the average property size rose from 39 to 46 rooms. This indicates a shift towards larger, standardised units and branded hotel systems. This development was made possible through the use of franchise models and the expansion of brand portfolios, enabling major hotel groups to increasingly expand into secondary and tertiary locations.

Alongside the increasing professionalisation of the hotel industry, a growing financialisation of the market also emerged. Capital and hotel operations became increasingly separated, while hotels were no longer viewed exclusively as hospitality businesses, but increasingly as scalable real estate and investment asset classes. Whereas economy hotels accounted for approximately 7% of total hotel investment volume in 2005, this share had fallen to around 5% ten years later. By 2025, however, the share of economy hotels in total investments had increased to around 11%. This underlines the growing importance of efficient, cost-oriented hotel concepts.

From around 2015 onwards, the economy and budget segment experienced a pronounced trend towards efficiency and lifestyle positioning. A distinction emerged between modern budget hotels (e.g. Motel One, Ibis, Holiday Inn Express, B&B), budget design hotels with small but high-quality rooms or strongly design-oriented public areas (e.g. 25hours, Prizeotel, Superbude), ultra-budget hotels with reduced service levels (e.g. easyHotels), as well as “hostellerie concepts” combining characteristics of hotels and hostels (e.g. Meininger, A&O).

As professionalisation increased across all hotel categories, the accommodation market entered a phase of consolidation and technologisation. This further increased the importance of professional distribution channels and broader brand diversity. While hotel CRS systems played a central role in distribution during the 2000s, loyalty programmes and global distribution systems of major hotel brands dominate today. As a result, the separation between capital and operations has become even more pronounced.

How can this strong increase in brand diversity be explained?

The increase in brand diversity is primarily the result of acquisitions of smaller regional or interregional brands as well as the integration of modern niche brands into existing portfolios. In many cases, this is less about the deliberate development of entirely new niche brands and more about growth-oriented strategies: acquiring an existing portfolio is economically more efficient and faster to implement than purely organic growth. As a result, new brands such as I Stay by NH, Series by Marriott, Select by Hilton, Noted Collection (IHG) or Hyatt Select are regularly emerging and expanding existing brand architectures.

Behind this expansion of brands lies the strategic question of integrating private hotels or private hotel portfolios into global distribution networks. For hotel companies, this represents an opportunity to increase system utilisation and realise economies of scale through a larger number of affiliated hotels. These effects increase profitability at corporate level. Globally operating hotel companies primarily generate long-term returns through growth and economies of scale, including the integration of smaller hotels or groups outside their original brand core.

Can guests actually understand this diversity?

Most guests are unable to clearly differentiate between the 20 to 45 brands within a hotel group. Instead, they focus on a limited number of familiar products and orient themselves towards habits and the umbrella brand. As a result, guests expecting full-service hospitality may either perceive selective or “lifestyle-oriented” concepts as a refreshing alternative or evaluate them critically when familiar amenities are missing.

The question of constantly emerging new brand names leads to another important aspect. Many of the newer concepts are less traditional hotel brands and more product names based on clear platform logic. They are technology-driven and often emerged from niche markets. Brands such as Limehome, Airbnb or Numa primarily use their technical platforms to standardise accommodation services and merely require a defined framework as an “accommodation product.” Their brand value is essentially measured by user numbers and overnight stay volumes, which in some cases results in higher company valuations than parts of the traditional operationally driven hotel industry.

Since the 2010s, the serviced apartment segment has also developed dynamically. Initially, local providers such as Derag Livinghotels dominated the market, before international brands increasingly entered the segment. At the same time, private short-term rental apartments and web-based direct distribution models created new platform-based business models. This established a technology-driven form of accommodation and further industrialised the product of “overnight stay”: service moved into the background, while standardised processes, limited personal interaction and high technological integration – as seen with operators such as Numa or Limehome – represent a current peak in the industrialisation of beds.

The industrialisation of the hotel industry is entering a new phase!!!

Today, the future of the hotel industry is increasingly determined less at the traditional reception desk and far more through technology, distribution, brand strength and scalability. Digitalisation was only the beginning. The real transformation of the industry still lies ahead.

The key question in the future will no longer simply be how hospitality is defined, but rather how artificial intelligence, automation and data-driven processes can be combined with genuine hospitality. Efficiency and emotionality can no longer be opposites; instead, they must be intelligently integrated.

At the same time, the understanding of hotel employees is also fundamentally changing. The traditional expectation of “having to be able to do everything in a hotel” will no longer be the decisive driver of profitability in the long term. Instead, specialisation, system support, technological enablement and standardised processes are becoming increasingly important.

In the coming years, hotel brands and larger platforms in particular will need to develop solutions that combine operational efficiency, labour shortages, quality standards and individual guest experiences.

The transformation of the next five years will sustainably shape the German hotel industry.

The hotels of the future will not emerge solely through new buildings, but above all through new systems, new processes and a new understanding of hospitality.

Christian Buer
Christian Buer is the Managing Partner at Horwath HTL Germany, with a specialisation in the analysis, acquisition and management of hospitality properties.
cbuer@horwathhtl.com

Source: View the original article at Horwath HTL.