Hotel Management and Operations

Depending on the type of hotel to be built (based on the feasibility study), the developer recommends a franchise company to the hotel owner. A major consideration is the best franchise brand for the market segment to be served. Each franchise company has different franchise fees, royalty fees, and marketing/ miscellaneous fees as part of its agreement structure with the operating company. Consideration must also be given to the brands already represented in the target market that may be available for franchise. The franchise company is approached and a franchise is requested, with the feasibility study offered as backup for the request.

The next step is for the franchise com- pany to conduct an impact study of the mar- ket. This considers such matters as possible negative impact on existing hotels that carry the franchiser’s flag. If the impact is judged to be insignificant, a franchise is usually granted to the ownership entity for a one-time fee of about $400 per room, depending on the franchise selected, with continuing royalty and marketing, usually based on a percentage of hotel revenue.

HOTEL - SELECTING A FRANCHISE