The Advent of the Megachain: A Case of the Emperor's New Clothes

Abstract

The appearance of increasing concentration in today's lodging industry is beliedby the industry's underlying structure and trends in franchise relationships, technology, and, potentially, the channels of distribution. The stability of franchise organizations has been undermined by increasing conversion franchising and the sale offranchise companies. Ownership in lodging is fragmented, and the industry is acyclical one, subject to innovation-led change as well. The technology of reservationsystems will soon make interconnection with a worldwide reservation networkpossible for independents and small chains. This in turn calls into question therelative value of high-cost franchise systems, especially in contrast to lower-costreferral systems. Accordingly, forecasts of dominance by a few chains are called intoquestion.KeyWords:franchise,industrystructure,impactoftechnology,channelsof distribution.