Franchise benefits
According to FRANdata, as of 2018 there were 32,818 hotels in the US in 2018, of which 30,650 or 93 percent were franchised. This because, for most hoteliers, a franchise has significant benefits.
Howard Johnson and Holiday Inn were the first franchised hotels, starting in 1954. They offered standardized hotel rooms with reliable systems for things like cleanliness – which was a big change from the mom and pop motels available then. They also created marketing programs and reservations systems which simplified finding and booking hotels for guests. Franchises offer more now and are more complex to meet current market demands, but the basic concepts of reliable product and combined forces for marketing are still at the core of hotel franchising.
Brand is one of the most consequential decisions a hotel owner makes. To be successful, your hotel needs the right brand for its market and that brand must be available to you. When those criteria are satisfied, other considerations come into play. Your quest for a brand for your hotel will start with research so you understand your market and the brands that you believe will be most valuable. You will talk to brand representatives, hoteliers or consultants, and you will study information about possible brands in the process. You will also present yourself as a qualified prospective franchisee to have access to the brand you prefer.
Recognition is the fundamental value offered by a brand. In a franchise relationship, you are paying royalties for the right to use that brand and its trademarks. You benefit from a brand that has strong recognition in the markets you are targeting.
In addition, when you join a franchise, you are buying into a tested business model. This reduces the learning curve for new owners, which shortens the time to market and should reduce overall costs. Although you don’t need to “reinvent the wheel”, as a franchisee, you can have a franchised hotel and still bring your own touches to your hotel and business operation.
Hotel franchise business models – and their financial results - differ from one brand to another. It is up to you study the brands to determine which has the most upside for your market and situation. Overall, however, brands are expected to reduce the risk of business failure. For this reason, lenders are generally more interested in financing franchised hotels.
