Hotel franchising is a dynamic and evolving business model that’s gaining momentum in Australia. If you’ve ever asked, “How do hotel franchises work?” then we’re here to clear the air. Alternatively, you may be familiar with the ins and outs, but aren’t sure whether going into the hotel franchise business is a smart move. In this article, we’ll delve into what hotel franchising entails, why it’s becoming increasingly popular, and what the future holds for this innovative approach to hospitality.
What is Hotel Franchising?
Hotel franchising is a strategic partnership between a hotel owner and a franchisor, wherein the hotel owner licences the brand name, logo, and operational standards of a well-established hotel chain. This partnership allows the hotel owner to maintain independence in running the hotel while benefiting from the brand’s recognition and support.
In exchange, the hotel owner pays fees to the franchisor, granting them access to the brand’s marketing, distribution, and loyalty programs. It’s a collaborative approach that fosters growth and success for both parties.
Noteworthy Hotel Franchises in Australia
Australia’s hotel industry has witnessed the emergence of several major hotel franchises, each contributing to the growth and diversification of the hospitality landscape. Among them, some of the biggest hotel franchise groups in the country include well-known names such as AccorHotels, IHG (InterContinental Hotels Group), and Marriott International.
These global giants have made significant inroads into the Australian market, offering a wide range of brands and accommodation options to travellers.
With their vast networks, extensive experience, and commitment to quality, these major hotel franchises continue to play a pivotal role in shaping the future of hospitality in Australia, ensuring that travellers have access to world-class accommodations and experiences across the continent.
While it’s not always necessary to embark on your hotel franchise journey with sights of being one of the big guns, these key players can act as helpful roadmaps with which to guide your own process.
The Rise of Hotel Franchising
Hotel franchising has a rich history, dating back over 80 years in the United States, where it now dominates the hospitality landscape with over 90% of hotels operating under this model. Europe, while adopting it later, also boasts a significant share of franchised hotels, surpassing 50%.
In Australia, hotel franchising is a relatively new concept, but its popularity is skyrocketing as hotel owners and brands recognise the advantages it offers over traditional hotel management agreements (HMAs).
Key Factors Driving Hotel Franchising in Australia
If you’re interested in the hotel franchise industry, or perhaps you’re wondering how to get involved in the best hotel franchise in Australia, there are a few key factors to consider:
Growing Availability of Third-Party Management Companies
One of the driving forces behind the surge in hotel franchising in Australia is the increasing number of experienced third-party hotel management companies. These firms offer invaluable operational support to hotel owners under franchise agreements.
They provide options such as asset management and white-label management, wherein they operate the hotel under the franchised brand, eliminating their own branding. Further, they often commit to achieving key performance indicators (KPIs) related to financial returns, ensuring a win-win scenario for all parties involved.
Brand Management Companies’ Strategic Expansion
Brand management companies have strategically embraced hotel franchising as a means to enhance their distribution networks. Research from Cornell University reveals that these companies can secure superior returns from franchise contracts compared to HMA contracts.
This is due to reduced operating costs and more stable cash flows, enabling them to focus on brand development and marketing while delegating operational aspects to franchisees and partners.
Enhanced Owner Control and Flexibility
Hotel franchising empowers owners to exercise greater control over hotel operations, which can translate to higher returns. Under HMA agreements, owners often relinquish significant decision-making authority to the brand or management company, potentially misaligning with their interests.
In contrast, franchise agreements allow owners to implement customised strategies that cater to their specific market, property, and vision. This agility proves crucial in adapting to evolving customer needs, especially in times of crisis, such as the challenges posed by COVID-19.
Challenges and Risks of Hotel Franchising
While the hotel franchise industry presents numerous benefits, it’s not without its challenges and risks:
- Successful franchising hinges on strong alignment of values and expectations between franchisors and franchisees, along with clearly defined roles and responsibilities.
- Effective communication and trust are paramount, requiring ongoing monitoring and feedback mechanisms to maintain quality standards.
- Additionally, it’s crucial to note that hotel franchising may not be suitable for every property or market, as some may demand more direct involvement or guidance from the brand or management company.
If you’re unsure whether entering into the hotel franchise world is the right move for you, we recommend speaking to one of our experienced team members. We can assist you with navigating the process, evaluating your assets, and determining what kind of franchise would best suit your business goals.
The Future of Hotel Franchising in Australia
Given the current trends and opportunities in the Australian hotel industry, hotel franchising is poised for continued growth and success. It offers a flexible and cost-effective strategy for owners to leverage the reputation and reach of established brands while retaining control over their assets.
Simultaneously, it provides brands and management companies a means to expand their footprint without excessive capital investment.
Hotel franchising is a model that continues to evolve and adapt to meet the changing needs of hotel owners, operators, customers, and markets. It represents a smart and promising path toward better outcomes for all stakeholders in the hotel industry.
Speak To Us About Your Hotel Franchise Needs
In conclusion, the future of hotel franchising in Australia is bright. With its numerous benefits, including increased control for hotel owners and strategic growth opportunities for brands, it’s becoming the preferred choice in the hospitality sector.
If you’re interested in exploring hotel franchising or looking for the best hotel franchise options, consider partnering with Axsia HTL to gain access to leaders in the industry. Embrace the future of hospitality and embark on a journey toward success with the bright future of hotel franchising.