21 October 2022, London: The pandemic has prompted many hoteliers, both independent and chain operators, to recognise the value of brand affiliation prompting a growing interest in hotel franchising across Europe, says a new report from global hotel consultancy HVS.
“The past few years has opened the eyes of many operators to the benefits of having strong support and communication in tough times, as well as the importance of maintaining consumer confidence. Large brands have been major instigators in negotiating with industry associations and local governments to provide support to their franchisees and this has persuaded many independent hoteliers to consider franchising, or existing franchisors to switch brands,” said report co-author Charles Carpentier, an associate with HVS London.
“Brands have been trying to cut operating expenses and have found the shift to franchising more cost-effective compared with the support required for managed hotels. Going forward, it’s likely that branded operators will continue to restructure with franchising playing a key role,” he added.
The HVS report, Hotel Franchising in Europe, outlines the variety of fee structures found in franchised businesses whether it be fees based on room revenues, or for less well-known brands lower fees or royalty fees based on room revenues of those sold through direct channels, or from central reservation.
“As soft brands are often suitable for existing hotels that already have a strong name locally or a history behind them, this provides some comfort to the owner that the agreement is fair and that they are not paying franchise fees on bookings they may have received regardless of their branding,” said report co-author Stephen Collins, an associate director with HVS London.
According to the report, hotel franchising has become more established across Europe prompted by the consolidation and acquisition of chains, which often rely on franchises to achieve their desired growth and to remain ahead of their competition.
The report also outlines hybrid arrangements such as ‘manchising‘, whereby hotel owners engage a hotel operating company for an initial period, after which the contract transfers to a franchise, or short-term or flexible franchise contract, used by brands for existing hotels that don’t yet meet brand requirements.
“These two emerging operating models could attract independent hoteliers on their way to branding their properties, which should strengthen hotel franchising as a result,” commented Collins.
“Owners have more brands than ever to choose from, which increases the likelihood of finding a brand and chain that is a good fit for any property. It also means that owners must truly do their research and understand the cost and commitment of their choices,” the report concluded.
