Starting your own hotel is, without a doubt, a major challenge. This is because this business involves so many factors to consider—from location and facilities to the hotel’s theme, the services offered, and your sales strategy.
There are three main ways to open your own hotel: build a hotel from scratch under your own brand, operate an existing hotel, or purchase a franchise. The latter is a particularly appealing option, but how much does a hotel franchise cost? What factors influence its price, and what does it include? We’ll tell you all about it here!
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What is a franchise?
A franchise is a business model in which a company (franchisor) allows a franchisee (an individual or organization) to operate under its brand, processes, standards, etc. This is in exchange for an initial payment, as well as recurring, typically monthly, royalty payments.
For example, in the hotel industry, the franchise fee is the payment for operating your hotel under a certain brand while following its processes, standards, and expertise, among other things. The franchise fee allows you to use the brand’s logos, colors, and furnishings, as well as to take advantage of its partnerships with suppliers, travel agencies, airlines, and others.
What does purchasing a franchise entail?
Each hotel chain offers its own benefits when purchasing a franchise, as not all of them provide the same things. In addition, the cost of a hotel franchise can influence what you receive. According to experts, here are some examples of what you might receive when you pay for a hotel franchise:
- Rights to use the hotel’s brand, logo, name, and colors.
- Manuals on processes and standards for hotel operations.
- Training and support from the franchisor.
- Support in marketing and sales, as well as access to advertising materials.
- Consulting services for the construction or renovation of the hotel property.
- Furniture and equipment provided under a lease or at a preferential price.
- Access to strategic partnerships with suppliers, travel agencies, etc.
- Brand licensing agreement with options to renew it.
- Systems and software for managing reservations, sales, accounting, and more.
It’s important to note that some brands even offer assistance with matters such as finding properties or land for hotel construction. However, the responsibility for the building generally falls on the franchisee, not the franchisor.
How much does a popular hotel franchise cost?
Not all companies and hotel chains operate under a franchise model, so you should start by finding out which ones sell franchises. Next, we’ll tell you how much a hotel franchise from the world’s most popular chains costs.
- City Express: $60,000 on average.
- Hilton Hotels and Resorts: $85,000 on average.
- Hilton Garden Inn: $120,000 on average.
- Wyndham Group: $40,000 to $300,000 on average.
- Best Western: $40,000 on average.
- Crowne Plaza: $75,000 on average.
- Four Points by Sheraton: $60,000 on average.
- Hyatt: $120,000 on average.
- Intercontinental Hotels Group (IHG): $75,000 on average.
What factors influence the cost of a hotel franchise?
It is very important to keep in mind that there are several factors that influence the cost of a hotel franchise. For example, the brand’s reputation and its market positioning are perhaps the most decisive factors. A well-known hotel like Hyatt will cost more than a hotel that operates only locally.
In addition to the brand’s reputation, the type of hotel also plays a major role. A franchise for a 5-star or higher resort will not cost the same as one for a budget or business hotel. Similarly, what the franchisor offers will also influence the cost of a hotel franchise. The more you get, the higher the cost.
Finally, it’s important to keep in mind that location also plays a role in how much a hotel franchise costs. It’s more expensive to own a hotel in a tourist destination than in a small town.
What should I consider when buying a hotel franchise?
Before making a decision, consider a few things to know before buying a hotel franchise according to our experts:
The Market
Consider the size of the market you want to target to ensure there is enough guest traffic to make your hotel sustainable. Unless there is growth potential, a small market may not generate enough revenue.
The Location
The hotel’s location is crucial because it will influence the market, the cost of a hotel franchise, and the brand you can acquire. In addition, many franchises impose restrictions on the distance between hotels to prevent them from competing with one another.
What the franchisor offers
It’s important to evaluate what the brand offers in exchange for the franchise fee—whether they just provide the brand name, whether they also include real estate, whether they charge royalties, and so on. This way, you’ll be able to get much more value and benefits from your investment.
Your Budget
Your budget is very important when determining how much a hotel franchise costs, as it will help you decide which one to invest in. You should also keep in mind that you’ll often have to make additional investments or incur extra expenses beyond the purchase of the hotel franchise.
The agreement
Finally, an important factor in determining how much a hotel franchise costs is the agreement. It details everything about the franchise, from rights and obligations to payments, royalties, benefits, and so on. That’s why you should review it thoroughly and carefully.
A hotel franchise or my own brand?
This is one of the most frequently asked questions—and also one of the most complex to address. The decision between a hotel franchise and your own brand depends on several factors. Everything from your budget, the destination, and the target market to your business and personal goals influences the decision.
At IHCS, our experts will help you decide on the best path to take when starting your own hotel. Together, we’ll decide whether it’s worth investing in an established franchise or whether we should focus on creating a plan to launch your own hotel.
