The New Roles of Franchising

By Steven Belmonte CEO, Vimana Franchise Systems LLC | November 30, 1999

In today's trying economic times, all businesses are taking a hit - especially the lodging sector. As the environment gets more competitive, hotel executives are forced to become more creative business people. After making their mortgage payments, the next biggest expense hotel owners are dishing out are the fees to their franchise company. And that's causing them to take pause and reassess their business plans. In a play of a slight role reversal, the franchisees are now interviewing franchisors to decide which one has a better plan for their property.

This shift in focus has allowed emerging brands like the Lexington Hotels (full disclosure - I'm the President, CEO & Partner of this company) to take front and center stage in the minds of hoteliers because of our solid infrastructure, comprehensive resources, and lower franchising fees. In a nutshell, hoteliers are asking what measures they can implement during these hard economic times besides just reducing energy costs and payroll. They are re-evaluating their franchising contracts and looking to get involved with one that allows more freedom, has lower costs, have less binding contracts, and a Freestyle model.

In addition to the new hotel owner-friendly brands that are becoming more attractive to the staid and antiquated franchise model of yesteryear, the advent of new technologies and social networking sites has played a large role in franchising as well. Unlike a decade ago when size and name recognition really did matter in generating brand recognition that led to reservations - the Internet has offered a viable alternative to smaller brands and independent hotels - thus leveling the proverbial playing field for smaller and newer hotels. More importantly, the Internet has also created a shift in the booking habits of leisure and business travelers.

Nowadays smaller brands can create the same exposure and booking capabilities as the larger brands. When travelers go online to book accommodations they are no longer calling up the websites of a hotel chain but going instead to general booking sites like Travelocity, Expedia, HotWire, Orbitz, Priceline, and many others. The initial query is based on location and the second is for a price range. Once the online shopper has plugged in those two requests, they shop around and narrow down their choices by looking at property photos, customer reviews, and amenities offered. These are all tools that have allowed smaller brands to chip away at the dominance once held by the larger chains.

Changes are taking place inside the franchises' executive offices as well. Quickly disappearing are the days where the 'one size fits all' mentality was the norm in franchising. The standardized rulebook that each franchising company has been using across the board from New York City to Des Moines can no longer be justified. The amenities needed in New York City to be competitive in that very viable and fast-paced market are completely different from the ones needed in the Des Moines market to remain competitive. While it may be convenient for the franchisor to have one rulebook but it's unjust for the franchisee.

An example of the crazy inequity that has been happening over the years can be found in the loyalty programs. The basic premise of these programs was to build brand loyalty. Over the years, franchisors were trying to outdo the loyalty programs of other chains and eventually it got out of control, costing millions of dollars in liabilities and tens of thousands of dollars in program fees for franchisees. Sadly, the programs received lukewarm success, if any at all, as customers were growing frustrated at having accumulated points but unable to use them due to blackout dates. Interestingly enough, customers would have been loyal to the hotel even without a loyalty program because of the location and price.

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Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.