franchise fees
Guest Loyalty Programs Provide, But They Cost
Robert Mandelbaum, Christine Bang | September 5, 2023
By Robert Mandelbaum and Christine Bang Over the years, the fees hotel owners pay to franchise companies have typically grown at a pace greater than the rise in hotel rooms revenue. Most franchise-related fees are charged as a percent of rooms revenue, and therefore, by assessing the relative changes in rooms revenue and franchise fees we can make some assumptions. In 2021, acknowledging the financial stress hotel owners faced during the pandemic, the franchise companies were sympathetic and provided some reprieve. While rooms revenue increased by 55.4% in 2021, total franchise-related fees rose by just 45.9%. Equilibrium returned in ...
Magnuson: Big Hotel Brands Ignoring Calls for Fair Franchise Reform
Magnuson Hotels | February 17, 2023
Asian American Hotel Owners, who own more than 60% of total hotel rooms in the USA, say paying franchise corporations up to 20% of the room sales is not sustainable in today’s economy. The group, which employs 4.2 million US workers and is responsible for 1.7% of the US GDP, states that today’s generation of hotel owners cannot be profitable under the current US hotel franchise pricing and requirement structure, most of which was initiated in the 1990s. This week, Choice Hotels joined Marriott in dropping support of the Asian American Hotel Owners Association, distancing themselves from rising calls for hotel fra...
Hotel Franchising Gives Operators Support and Confidence in Tough Times, Finds HVS Study
HVS | October 21, 2022
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 independ...
Quantifying the Franchise Relationship During COVID-19
Robert Mandelbaum | August 8, 2022
By Robert Mandelbaum In 2020, the average hotel in CBRE’s annual Trends® in the Hotel Industry survey experienced a 108 percent decline in earnings before interest, taxes, depreciation and amortization (EBITDA), resulting in an EBITDA margin of -5.5 percent. For hotels, EBITDA represents the cash flows from operations that are used to fund debt service and provide returns to investors. This is by far the greatest decline in EBITDA since CBRE began tracking the performance of the U.S. lodging industry in the 1930s. Facing such traumatic declines in profitability and insolvency, hotel owners reached out to their lenders, investors...
Hospitality Financial Leadership: Hotel Franchise/Management Fees & 20 Years Is a Long, Long Time
David Lund | December 2, 2019
By David Lund Being a branded or franchised hotel is an expensive endeavor. Especially when you consider the average agreement is 20 years in duration and you’re on the hook for the fees outlined in your agreement plus anything else the management company throws at you. When I say on the hook, I mean they can literally charge you for whatever they want as long as they determine it is in your best interest. This is the basic concept that forms the meat of the management or franchise agreement. When you consider the cost of the fees there are some terms you will want to get familiar with. Terms that are part of your hotel management ...
Hotel Franchising in Europe 2019 – The Push Continues for New Ways to Expand
Stephen Collins | July 18, 2019
Hotel Franchising in Europe is an update of our previous report published in 2014. The report aims to assist owners in increasing their understanding and awareness of the franchise business model and current market trends. The fees outlined in this report apply solely to hotels operating in Europe. By Stephen Collins, Sophie Perret Introduction The slew of acquisitions and mergers in the hotel industry over the past few years has rapidly changed the landscape. The ‘big’ brands are larger than ever and must continue to drive growth, lest they fall behind their peers. Their coverage, loyalty programmes and distribution channels are ac...
New Year, New Franchise Partner?
Steve Belmonte | January 9, 2018
Owners should expect to get a lot more for a lot less from their franchise system in 2018 By Steve Belmonte Are you part of a great franchise? Because in today's environment, hotel companies need to be great to ensure a return on the owner's investment. What really makes a franchise great? To start with, a franchisor needs to understand the issues that hotel owners face daily and be understanding of their needs. A great franchise company has a strong infrastructure designed for one purpose — generating revenue and reservations for its owners and doing it at the lowest possible cost. Providing services such as full revenue manageme...
An Analysis of Franchise Fees
Robert Mandelbaum | September 20, 2017
By Robert Mandelbaum In the current market environment of modest growth in revenue, hotel owners and operators are paying extra attention to their operating expenses. Per the June 2017 edition of Hotel Horizons®, RevPAR growth in the U.S. is forecast to remain under 3.0 percent from 2018 through 2021. Therefore, it will be management's ability to control expenses that will enable profits to grow. One expense that management has less control over are franchise fees. Most of the fees charged by the franchising companies (brands) are assessed as a percent of a source of revenue. Therefore, owners and operators have mixed emotions when ...
