Hotel Franchise Model is Dead! Hoteliers Complain. By Patrick Landman Thursday, 26th November 2009
Many hoteliers that are part of a hotel franchise complain about their representation company.
The fees and costs are astronomically high, there are many rules to adhere to, and not enough freedom for own marketing initiatives. More and more hotels resort to outsourcing to experts in hotel distribution and marketing to fill their rooms and other alternatives, achieving astonishing results. Hence the franchise model as we know it is dead.
It’s astonishing, the last two days we talked to many hoteliers at WTM in London belonging to a hotel franchise or representation company, and we hear the same complaints over and over again. The fees, costs and commissions are too high, hurting the bottom line. There are many rules and restrictions. Freedom of own marketing initiatives is being limited.
Money is wasted on brochures and old fashioned style marketing. Management is out of touch with reality and requirements of today’s market place. The list goes on. But most importantly as a result hotels’ bottom line aren’t what they need them to be.
What strikes me most, is the fact that freedom of marketing initiatives by the individual hotels is being limited. Many franchise companies do not allow having their own website. I understand the need for a cohesive approach, but this goes quite far. Why not let hotels get creative, and inspire them to do more, to generate more bookings. Let them use your booking engine, and everyone benefits.
It almost seems like an old fashioned secondary school, where the teacher and the dean know best, and the pupils are to be quiet. From our experience, business thrives best when as a group everyone works together to achieve better results. Stimulating local marketing ideas and giving freedom to do so, only motivates the franchisees. And in the end the results will benefit everyone. In this day and age of social and professional networking we have to evolve our strategies. We need to change, if not your company will be extinct in the need future.
We spoke to a hotel investment company that has franchise and management contracts for their properties with several of the large hotel chains. They have a property in distress as occupancies have been declining from 40% 3 years ago to below 30% this year. Anyone would agree that a hotel would not be sustainable let alone profitable at this kind of occupancy levels.
So what is the added value of a brand or flag? They are supposed to bring in business. Bring new travelers or to your hotel. Not just bring guests from one property t the other. Because such a strategy, I am afraid in the times of internet and web 2.0 where brand loyalty is rapidly on decline or even disappearing, is like a dinosaur which belongs in a history museum.
We have put the client acquisition strength of the large franchises to the test by doing some research in Google. We have done research for many destinations in Europe and the USA for the different language versions of Google (.com, .co.uk, .fr, .de, .it. .es) to see on which page some of the larger franchise chain website are appearing.
And not surprisingly, almost never have we encountered them on the first page. Mostly they only come up once we pass page 4 of Google. The average page comes down to about 5.8. No wonder the franchise companies have such a hard time bringing business to hotels. Their online strategy is purely focused on their brand, not on acquisition.
So maybe it would be a better idea for hotels to remove the flag, become independent, and invest strategically in hotel website design and an effective hotel internet marketing strategy. You will be able to get a better ROI than paying the large franchise fees.
Another option would be to outsource you hotel revenue management. We will talk about this extensively next week.
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