As international hotel chains look to expand their portfolios throughout the globe, the Scandinavian market has remained largely elusive, with regional operators dominating the landscape and domestic travelers staying loyal to homegrown brands.
The usually strong American chains, for example, have a rather weak representation in Scandinavia. Hilton Worldwide numbers only four hotel properties in the region, Marriott International has three, while Starwood Hotels & Resorts Worldwide and InterContinental Hotels Group each have one. Scandinavian countries include of Denmark, Norway and Sweden.
Even Accor, which counts 28 hotels in Sweden, according to its website, has lost ground. The Paris-based franchisor used to have six hotels in Denmark in early 2000, but it pulled out of the country in 2005.
Granted, there are several non-Scandinavian hotel chains that have a resilient presence, such as Best Western International and The Rezidor Hotel Group, with its Radisson Blu and Park Inn brands. But regional operators mainly drive the hotel market, and their strength is quite obvious. To illustrate this point, the tables below provide an overview of the main operators in Scandinavia (Denmark, Norway, Sweden) as well as the different regional operators in Copenhagen.
The results reiterate that international hotel chains are not well represented in Copenhagen or in Scandinavia, for that matter. The two main operators in Copenhagen are First Hotels and Arp Hansen Hotel Group. The former is a Norwegian hotel operator with 60 properties throughout Scandinavia, and the latter is a Danish hotel operator with properties in the Greater Region of Copenhagen.
An interesting aspect of Scandinavian hotel operators is that their portfolios typically encompass a variety of product under the same brand umbrella. Arp Hansen, for example, features properties that range from budget (Wakeup Copenhagen) to upscale (Phoenix Copenhagen) and everywhere in between.
Loyalty and demand
Scandinavians tend to remain loyal to Scandinavian hotel chains. However, as these countries attract more and more international guests, should international hotel chains be ignored? One might argue that non-Scandinavian guests lean towards hotel chains they know and can relate to.
In Copenhagen, for example, international demand comprises approximately 65% of total demand. While the demand emanating from Sweden and Norway is important, the city also receives significant demand from Germany, the United Kingdom and the United States.
International demand in Copenhagen has risen by 21.2% since 2005. Moreover, there was a 20% growth in cruise passengers in Copenhagen in 2011, bringing the total international cruise visitors to 800,000—a large proportion of those visitors being Americans.
Would the proportion of the international demand increase with additional international brands? It might be the case, especially with renowned hotel chains with impeccable reputations.
International chains are eager to add Scandinavian hotel properties to their portfolio. Accor is looking to enter the Danish market once again. Hilton also is following a similar pattern, as the company wishes to expand its midscale brand Garden Inn by Hilton as well as its economy brand Hampton Inn. Other active players with sights set on Scandinavia include Louvre Hotels, Steigenberger Hotels, NH Hoteles and Grand City Hotels.
So why is it difficult for international brands to penetrate the Scandinavian market? The strength of the regional operators? Yes, but the issue is more complex than that. The Scandinavian hotel market is mainly lease-driven whereas international hotel chains operate mostly under management and franchise agreements. The international hotel chains’ brand requirements also play a significant role in the entry barriers.
The key is for international hotel chains to become more flexible in regards to their contract type and product. They have the potential to not only increase value to the market and drive demand but also increase their exposure in virtually untapped markets.
So, will they or won’t they? Will international hotel chains increase their presence in Scandinavia or will regional operators keep their solid position in regards to market share? It will be very interesting to keep track of hotel developments in Scandinavia in the next few years and see how many international chains have decided to jump feet first in these challenging yet rewarding hotel markets.
Karine Bourget holds a MSc in International Hotel & Tourism Management with a Major in Finances from Oxford Brookes University. She has gained several years of hotel operational experience having worked in different hotel chains in Canada. She currently works as a Hotel & Leisure Consultant within the Investment Advisory division of Nordic Hotel Consulting. She can be reached at email@example.com.
NHC is the leading hotel consulting firm with a focus on Scandinavia and has offices in Copenhagen, Århus, Oslo and Stockholm. The NHC Group offers a wide range of services and is separated in three distinct divisions: consulting, investment advisory and asset management. NHC has carried out some of the largest and most prestigious hotel projects in the Nordics and in Europe and serves as an advisor to some of the industry's leading players. We represent primarily developers, investors and banks.
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