A Fresh Start For Franchise Model?
By Dennis Nessler | June 30, 2021
The relationship between hotel franchisors and franchisees has long been considered somewhat contentious. This is not true across the board, of course, but there’s an inherent, unavoidable back and forth that takes place on a number of factors influencing the bottom line.
As a general rule of thumb hotel owners like the name recognition and credibility that the brand brings with it as well as its powerful reservation system and loyalty program, but they bemoan the exorbitant fees they have to pay, be they franchisee fees or marketing costs, and costly amenities.
To this point, earlier this week AAHOA’s newly named interim President/CEO Ken Greene issued a statement in response to several lawsuits recently filed by hoteliers against their respective brands.
The crux of the statement was that more communication is needed between both parties to avoid these types of disputes. AAHOA [Asian American Hotel Owners Association], of course, has long advocated on behalf of its owners in negotiating with the major brand companies as evidenced the release of its Points of Fair Franchising several years ago.
Specifically, Greene acknowledged that “further dialogue is needed around the topics of brand value proposition, brand mandates related to specific vendors, the opt-in/opt-out process, and raising awareness about the issues alleged in the lawsuits.”
Finally, Green specifically urged changes to the hotel franchise model on behalf of owners to maximize ROI.
The pandemic has done a lot of things to businesses, some good and some bad, but one thing is clear and that is it represents something of a reboot for many aspects of the industry. And while hotels owners and operators were on the front lines during this crisis trying to keep the lights on and their employees on the payroll, the major brands were in the process of laying off scores of development executives and support personnel.
I’m in no way suggesting that these layoffs were the fault of these brands, but rather just the economic reality of what happened when the world stopped, literally. But that reality hit many owners and operators hard. I heard first-hand from a lot of frustrated management CEOs about how when they went to many of the brands for relief or direction there was no one to answer the call.
Furthermore, the expectation from owners is also that the many of the mandates and amenities that were put on hold because of the pandemic, namely the traditional breakfast buffet, will be brought back sooner than later regardless of cost.
More than one of these executives have suggested the benefits of being independent have never been greater, particularly as consumers continue to seek authentic and unique experiences. We know the next generation of guests are far less brand loyal and as far as loyalty programs well the third-party intermediary sites have them now too.
Going forward, the brand companies are going to have to ‘read the room’ as they say to try and avoid more pushback, not to mention lawsuits, from franchisees and ensure continued success.
In early August, Hotel Interactive will be hosting its annual BITAC Independent event bringing together many of today’s top owner and operators at the JW Marriott in Marco Island, FL. If you’re interested in attending and being part of the event, which includes high-level panel discussions, feel free to reach out to me at DNessler@hotelinteractive.com.
