Why Are Hotel Groups Constantly Creating New Brands? The NUG Race Behind Growth

Hotel investors now face not only the question of "which chain should I work with?" but also which brand within the same group to choose.

Accor has over 45, Hyatt 36, Marriott more than 30, Hilton 28, Wyndham 25, Choice 22, and IHG 21 brands. According to Skift's calculations, these seven major global groups alone have a portfolio of approximately 200 hotel brands.

Does the existence of so many brands really stem from guests needing 200 different accommodation experiences?

Rafat Ali, founder of Skift, highlights another explanation in his analysis published on August 14: net unit growth.

With major hotel companies shifting to an asset-light model, one of the key tools for growth is no longer owning more hotels, but connecting more rooms to their brand and distribution system.

This change also affects brand strategy.

What exactly does NUG measure?

Net unit growth simply refers to the net growth resulting from the number of new rooms entering a hotel group's system minus the effect of the rooms leaving the system.

Opening a new hotel alone is not enough.

If a chain adds 50,000 new rooms in a year but 30,000 rooms leave the brand, the actual system growth remains at 20,000 rooms.

Therefore, from an investor's perspective, the question is not just "how many hotels were opened?" but rather how much did the system actually grow?

One concrete example of this is IHG's change in its 2026 executive incentive system.

The company has changed its previously used room opening performance metric to make Net System Size Growth one of the performance criteria in the executives' annual incentive plan. IHG clearly states that this focuses managers not only on adding new rooms but also on keeping existing hotels within the system.

Thus, system size is no longer just a number in an investor presentation; it is a strategic metric that can extend down to management performance.

Why has the asset-light model made room count so important?

A significant portion of modern large hotel groups owns much less real estate compared to the past.

The model primarily operates through franchise and management contracts.

The construction, financing, and real estate risk of the hotel building often belong to the investor, while the brand owner provides the name, reservation system, loyalty program, technology, sales network, and operational standards.

In return, they receive various fees.

In this structure, the chain does not need to build each hotel with its own capital. When a new franchise hotel is added to the system, the brand company can generate new fee income with relatively low capital usage.

Hilton's 2026 investor presentation clearly illustrates this logic. The company defines its high-quality development pipeline as a mechanism for generating significant returns with "minimal capital investment."

Therefore, a new room is not just a new point on a larger map.

A new room is a revenue unit that can generate franchise, management, or other system fees over the years.

Hilton reported a 6.1% net growth in the second quarter

To see the current importance of NUG, looking at the 2026 financial results is sufficient.

Hilton added 24,100 rooms to its system in the second quarter. After accounting for exits, the net addition was 21,600 rooms, and the company's annual net unit growth rate was 6.1%.

As of June 30, the development pipeline also reached 541,300 rooms.

Hilton targets a net unit growth of between 6% and 7% for the entirety of 2026.

During the same period, the company's comparable RevPAR increase across the system was 3.9%.

These two indicators describe two different sources of growth in the hotel group's economic model.

While RevPAR shows the performance of existing hotels, NUG expands the size of the system from which the company can generate fees.

In other words, the chain is trying to create both more revenue from existing rooms and more fees from additional rooms.

Room growth is also a primary goal for Hyatt and Wyndham

This strategy is not unique to Hilton.

In Hyatt's second quarter results announced on July 30, the net room growth for the last 12 months was reported at 3.9%. Excluding rooms removed from the system after the Playa Hotels acquisition, the rate rises to 4.4%.

The company forecasts approximately 6% net room growth for the entirety of 2026. At the same time, the pipeline consisting of signed management and franchise contracts has reached approximately 154,000 rooms.

Wyndham's second quarter results also demonstrate a similar growth logic.

The company reported that the system size increased by 4% annually, excluding the impact of Revo Hospitality Group, and that the development pipeline reached a record level of approximately 261,000 rooms. The expectation for room growth in 2026 is between 4% and 4.5%.

Although the numbers differ, the common message is the same:

Net growth in room count is at the center of the investment narrative for large hotel companies.

So what does this have to do with new brands?

The issue is this: as a successful hotel group grows, it begins to compete with its own brands.

There may already be several brands from the same group in a city center. When a new investor wants to build a hotel in the same area, the protection areas in the existing franchise agreement or the market positioning can complicate the new project.

According to Skift's analysis, new brands can become a useful tool in overcoming these boundaries.

The same parent company can create new investment opportunities in the same market with a differently positioned sibling brand. Although the brands may appear different, the reservation infrastructure and loyalty ecosystem can remain common.

Therefore, the expansion of the brand portfolio should not only be interpreted in terms of consumer segmentation.

Each new brand can also serve as a means to include a previously inaccessible property, investor, or conversion project into the system.

You don't have to build a new building either

One of the critical areas in the NUG race is conversion, meaning the transformation of an existing independent hotel or one affiliated with another brand into a new brand.

Building a new hotel can take years.

Land, financing, permits, construction costs, and development time create significant barriers for investors.

Transforming an existing hotel, however, can add rooms to the system more quickly under the right conditions.

Hilton's investor data shows the scale of this trend. Approximately half of the company's gross room openings in 2025 will come from conversions when strategic partnerships are included. Even excluding strategic partnership hotels, the share of conversions was around 33%.

This is one of the factors explaining why collection, soft brand, and conversion-friendly brands have proliferated in recent years.

Investors want to enter a large distribution system without completely changing their building.

The hotel group wants to add rooms to the system without waiting for new construction.

The interests of both parties can converge at the same point.

But what does 30 brands mean for guests?

While the logic of growth is understandable from the company's perspective, another problem arises on the consumer side: brand differentiation.

When there are several brands in a portfolio, the position of each can be more easily understood.

However, when the number of brands exceeds 20, 30, or 40, it becomes debatable whether consumers can truly perceive the differences among them.

This is at the center of Skift's criticism.

According to the analysis, the approximately 200 brands in large groups reflect the companies' need for growth rather than the 200 separate accommodation categories demanded by consumers.

However, the counterargument is also significant.

Hotel groups argue that they target not only price levels with different brands but also long stays, lifestyle, extended stay, resorts, luxury, conversions, and various real estate needs.

Thus, evaluating each new brand solely as financial engineering oversimplifies the picture.

The real question is whether the new brand creates a real product difference.

What does the increase in the number of brands change from an investor's perspective?

For a hotel investor, more brands initially mean more options.

However, the decision-making process also becomes more complex.

If two brands from the same group appeal to a similar customer base, the investor needs to compare not only the brand name but also the economic structure of the contract.

What is the franchise fee?

What is the size of the PIP investment?

What is the cost of the loyalty program?

How much does the reservation system contribute?

Could other brands from the same group open in the nearby market?

What are the exit conditions of the brand?

If the new brand has low consumer awareness, how much of the demand will come from the parent group's distribution system?

While NUG creates growth from the group company's perspective, it does not automatically mean better returns for the investor.

The strategic importance of a brand for the chain and its economic viability for a single hotel owner are two separate issues.

The growth of the brand owner and the profitability of the hotel owner are not the same thing

This may be the most critical tension in the asset-light system.

When a hotel group signs a new franchise agreement, the system grows.

However, the one financing the building, employing the staff, paying the energy costs, renovating, and bearing the daily operational risk is mostly the hotel investor.

Therefore, the NUG target of the brand company may not always align with the investor's return on investment.

A new brand may help the chain enter a specific market; however, the investor's question is more concrete:

Will this brand increase the ADR?

Will it contribute to occupancy?

Will it reduce distribution costs?

How will GOP and cash flow change after the franchise fee?

The value of brand selection should be measured not by increasing room count but by improving the investor's hotel economics.

Why is this important for Turkey?

As the growth of international chains accelerates in Turkey, we are starting to see different brands from the same group in more cities.

While finding the right land for a new luxury hotel becomes challenging in mature markets like Istanbul and Antalya, select-service, midscale, and conversion models create different growth opportunities in Anatolian cities.

In this environment, the arrival of new brands by international groups in Turkey should not be interpreted merely as "a new hotel concept is coming."

There may also be a strategy for system growth behind the scenes.

The critical point for investors in Turkey is not which brand the global chain wants to grow, but rather what demand that brand will actually capture in the local market.

The rapid growth of the brand worldwide does not necessarily mean it is the right investment in a specific location in Turkey.

Stafflink's view

Explaining the increase in the number of brands in the hotel sector solely as "offering more options to guests" is no longer sufficient.

In the asset-light model, rooms carry long-term fee-generating capacity from the perspective of the brand company. Therefore, it is not surprising that NUG has become a performance indicator closely monitored by investors and managers.

However, we believe that hotel investors need to approach brand presentations more critically for this very reason.

When the chain says, "this brand is growing rapidly," it is not a positive indicator for the investor on its own.

The real questions are different:

Why should this brand be in this location? What guest will it attract differently from its competitors? Will the additional revenue brought by the distribution system cover the franchise and system costs? What will happen when another brand from the same group enters the same market a few years later?

Net unit growth can measure the success of the hotel company.

However, the success of the hotel owner is still determined by the cash flow generated by the property.