Thinking of running a hotel and considering having an international brand to manage your property? These are some things that you should consider before making that decision.
Revenue Generation vs. Cost
You want a brand that can help you make money. One of the first questions that you should be asking them is 'How much can you help me drive revenue?'. What channels do they have to help you with bookings? How much can you leverage from their loyalty program? Importantly, you also need to ask whether or not, and if so, how you get charged for using those channels?
You need to weigh the pros and cons between the revenue that a brand can help you generate, and the cost that you will need to pay back into that brand.
If you want to build something that will be a legacy with your name on it, then going with an already known brand name may not be the right option for you. However, if building a hotel is purely for investment purposes, then you need to be sure that you are comfortable with having someone else controlling you and your decisions.
These controls aren't necessarily bad. Sometimes the safety and security of international brands are good for guests and are indeed there to also help protect the guests. It is a very delicate line however and when speaking to some owners, some international brands have been known to go overboard implementing standards that are not relevant or out of touch with the local market and culture. It's imperative that the brand you go with has a good understanding of the local implementation of their brand, and have enough flexibility to make it work in your market. Localization is key.
"The brand recognition both in the location of your property and in the feeder markets is critical. brand recognition will be one of the key factors that drive revenue and permanence.", said Dr.James Mabey, MD Asia & Middle East and Chief International Business Officer at Standard International
It is wise to do your due diligence on the brand that you're using, and in particular, study the feasibility and brand recognition and association of the brand you are deciding on, in the market that it will be operating in. How well perceived is it perceived in your location? How do your feeder markets view the brand?
If you are unsure, Hotelintel.co offers a brand audit where we can help you gather intelligence about your brand before you start building your hotel.
Attention vs. Platform
What's more important - leveraging from the brand's platform, or drawing individual attention to your property? Do you want to be 1 of 1,000 or would you rather be the only one? This is a risk or opportunity that you have to consider.
Being a property under a small management company's umbrella, you get attention, and will most likely have the CEO's own personal phone number. Being with one of the big brands however, you get the platform. When you need a new GM there are hundreds to choose from within the company's network. When you need suppliers, you can get them at a good price. When you use OTAs, they will most likely have negotiated a much lower rate of commission paid to the OTA. Put simply, you have economies of scale through the network. On top of that, they have all their SOP's for all types of properties. They have the experience and the documentation. They also have the IT systems and back-end that you need along with the know-how, so you don't have to learn as you go.
Fees / Cost
You need to know that there are fees and costs that might be ... hidden!
Sometimes these 'hidden' fees come in the form of reimbursements, or participation and or enrollment charges.
These fees / costs can also pop up in Sales & Marketing activities. Reservations & /or Distribution. Usually these fees are the contributions that come due to be paid by the owner to the operator when the operator is able to generate direct bookings.
Other fees might come from being able to access a particular system that is the intellectual property / service of that brand. This might be a central reservations system, or other technology that belongs to, or is managed by the Operator
"It's important to have a clear definition of the channels that are subject to these fees. Only booking from certain channels should be subject to these fees - make sure that is made clear in advance", said Frederic Garnier,Executive Vice President of Nova Asset Management
Also, when it comes to IT, most brands have their own preferred Property Management Systems (PMS) that you must use and pay for. Remember that some of these software applications need to be connected to other software to be able to function correctly, and the connectivity fees are incurred by you.
"This can be a very complex topic, nonetheless it is a very important one as all systems need to be connected, some operators have decided to take on that burden, and charge a technology fee (which might in fact sound very high sometimes, but if you understand all that such a fee entails, and compare it to what it would provide you as an owner and the cost that you might incur otherwise, the price might actually then be quite reasonable ... You need to be sharp with your understanding about the systems that it includes to be able to negotiate such fees.", Frederic commented.
Another fee that might come as a surprise for owners is the training fee which could be up to 1000 hours!
Now that you know some of the basics of what to consider and ask of a potential operator for your property, we hope that you will be able to walk into your next meeting with them that little bit more confident and 'armed'. If you still have questions, email us and we will point you in the right direction of who you should call.