If you own a hotel but don’t have an internal system to manage the situation that’s hindering your growth, you should know that you can hire an outside consultant. The truth is, it’s difficult to invest in purchasing a hotel franchise, new capabilities, and strategies on your own—even when you know you need to improve certain areas of your business.
It’s common to ask yourself, “Where do I start?”
Unfortunately, every time you fail to make a decision, your business suffers because the market is changing faster than you are. The good news is that a hotel consulting and management service like IHCS Hotel Consulting can help you find and negotiate with a company to manage your hotel. After all, your goal is to add value to the hotel over the long term.
Finding the right model is essential if you want to see substantial improvement in the near future. Here at IHCS Hotel Consulting, we have identified several key considerations for hotel owners looking to improve profitability.
Table of Contents
Main Types of Hotel Business Models
To make a hotel more attractive to investors and add value for guests, there are three very interesting types of business models:
- Lease: a contract in which a company transfers the use of land, property, and services for a specified period, usually in exchange for periodic payments
- A Hotel Management Agreement (HMA): A brand or management company acquires the business operations of a property from the owner in exchange for a fee. The owner bears all risks, including employee contracts, while the operator manages all administrative matters.
- Franchise: A franchisee has the right to use the brand, distribution channels, and other franchise know-how. The franchisee bears all the business risk but retains control over the operation of the business.
If you’re not sure which type of hotel model is right for you, contact International Hotel Consulting Services —they have the experience and expertise to help you find the best solution for your business.
Leasing: Pros and Cons
Pros |
Cons |
|
| Owner | ● Limited experience
● Low risk ● Short term ● Easy to predict profits |
● Little interest from brands
● No control over hotel ownership or operations ● No scalability in the business |
| Tenant | ● Control over the quality of the business
● Brand growth ● Potential to increase profits |
● High costs
● Rent payments ● Terminating the lease can be difficult |
Hotel Management Agreement (HMA): Pros and Cons
Pros |
Cons |
|
| Owner | ● Limited experience required
● No administrative work ● Access to company-sponsored training |
● No control over hotel operations
● No control over the brand’s reputation ● High risks |
| Company | ● Brand expansion with low investment
● Limited market exposure ● Profit opportunity |
● Income limited to payments
● Payment incentives depend on taking greater risks ● Potential brand exposure |
Franchising: Pros and Cons
Pros |
Cons |
|
| Owner | ● Full control of the business
● High profits ● Brand support to boost growth |
● Significant risks are taken
● No control over brand exposure ● An experienced team is needed |
| Company Name | ● Brand growth with low investment
● Low operational risk ● With little investment and minimal effort, brand revenue increases |
● No control over:
○ Customer and employee satisfaction ○ Brand image ○ Quality of services ● Fees limited to franchise payments ● No contribution to business growth |
When considering the pros and cons of the models listed above, you should note that most hotels operate as franchises.
The five most prominent hotel chains (IHG, Accor, Marriott, Hilton, and Starwood) currently hold 30 percent of the global hotel market. This shows that the global market is moving away from independently operated hotels.
As hotel chains expand their presence, independent hotels are finding it increasingly difficult to compete. However, this also creates new business opportunities.
Things you should check before buying a hotel franchise
If you’re thinking about acquiring a hotel franchise, IHCS has identified six elements you should consider before making a decision.
1. Brand
One of the most important factors to consider is deciding what kind of amenities and quality you want. For example, the Hilton is known for its top-notch amenities, while the Holiday Inn is more affordable for budget-conscious travelers.
You can see that each of these brands targets different types of markets. You should choose a brand that fits your segment.
2. Consumer Profile
You should consider where your customers are from. For example, if most of your customers are from Spain, joining an American hotel chain may not be the best option.
Joining a popular chain in the target market would be a smarter decision for increasing brand awareness.
3. Fees and Costs
You should understand that fees are only a fraction of the cost of joining a hotel chain. There are many fees and expenses you’ll have to pay, such as those listed below:
- An upfront fee for joining the network
- An annual fee for the reservation system
- Advertising programs
- A cancellation fee if you wish to terminate your membership before the term ends
It’s essential that you add up all the expenses you’ll have to pay over the course of the contract to see if it’s a good fit for you.
4. The franchisor
Before making a decision, you need to research the franchisor. Keep in mind that your success depends heavily on the franchisor’s actions. It’s an excellent strategy to talk to other hotel owners who have franchises to see how their experience with the contract has been.
If possible, try to find out if there are any active legal disputes between the franchisor and hotel owners that might indicate the kinds of problems you could face in the future.
5
. Profits
The main reason you’re considering a franchise business model is to generate more profits by increasing occupancy.
The franchisor must prove that it has a competitive advantage in the market. Don’t be afraid to ask about current operating results to see if the business can be successful for both parties.
6. Understand the term of the contract
Hotel franchises typically last 20 years, which is a long-term business relationship. During the term of the contract, the franchisor will have complete control over the brand’s image. It is important to understand that during this time, your hotel will be subject to inspections.
If the hotel fails to meet the brand’s management standards during the inspection, the contract may be terminated. Before making a decision, you should consider:
- What is the brand’s advertising plan?
- How much money does the network spend on technology?
How to buy the right hotel franchise?
To select the right hotel franchise, you need to carefully analyze your options and understand the elements involved in the transaction.
IHCS Hotel Consulting is an international firm that is a leader in hotel management. It has the skills and expertise to help you achieve the success your business deserves.
How can IHCS help you buy a hotel franchise?
If you’re new to the world of franchising, IHCS can help reduce the uncertainty involved in the business. These professionals serve as experts, drawing on their experience to guide you through the challenges and opportunities that franchising offers.
When you work with IHCS, you have the expertise of an experienced professional right at your fingertips. They have the knowledge to anticipate common problems and will devote their time to strengthening your business.
As an entrepreneur, it can be difficult to negotiate with the franchise industry. A hotel consultant can help you navigate the system like a pro.
IHCS Hotel Consulting will help you identify potential issues with each franchise to help you decide which is the best option. In addition, it will help you identify your business goals. With so many options available, IHCS Hotel Consulting will help you evaluate your business, identify goals, and develop a plan to achieve them—including determining which franchisor is best suited to your circumstances.
One of the biggest advantages of working with IHCS Hotel Consulting is that it allows you to tailor your consultation to fit your needs, market, and communication style. You have the power to decide which areas of your business you want to have reviewed.
After all, a hotel consultant should be someone you feel comfortable with and can trust. This means you can be confident that you’re making the best decision for your business. The expertise of the consultants at International Hotel Consultant Service can help make your business more efficient and profitable.
With 24 years of experience in the global hospitality industry and hundreds of satisfied clients, you can be sure we’ll find the solution you’re looking for.
Finally, IHCS will represent you in negotiations with these brand companies and investors to negotiate contracts. They have the experience and skills to negotiate the best terms for your business.
Contact IHCS today and request your free initial consultation. Remember, IHCS offers its hotel consulting services worldwide, so you can achieve your goals, improve your reputation, and increase your profits.
