HTM400

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Types of Lodging Ownership

Franchise-Licensed Franchise agreements are contracts in which the franchisor (the brand owner) grants the franchisee (buyer) the right to use the franchisor’s name and proven method of doing business. Franchisees build the hotel, buy equipment required to run the business, and pay a number of fees (franchisee fee, advertising, fees, reservation fees, and royalty fees based on room revenues) Fees range from 4 to 8 percent of gross revenues..

Disadvantages -Franchisee have to pay large fees. Franchise fees range from 3 to 5 percent of gross room revenues in addition to marketing fees for reservation connectivity and processing costs. -Inflexibility - Dependence on the franchiser to make important decisions.Franchisor may impose changes in operations, higher quality standards, and new marketing requirements. -Investors will be disappointed by the lack power offered them under franchise agreement

Advantages - Franchises offer individuals the opportunity to buy an established brand name, along with its marketing concept, business format, and products for use in the franchisee’s facility - Franchisees face diminished risks when operating hotels because they can rely on -franchisor’s’ tested business practices.Franchising enables owner to benefit from a well-known name and reputation associated with large lodging chains. -Access to the franchisor’s central reservation system, business planning, market research, personnel training programs and site-selection expertise also provides franchised hotels with a competitive edge. -Franchising enables an owner to enjoy operating a motel while still benefiting from a well-known name and reputation associated with large lodging chains. -Access to the franchisor’s central reservation system, business planning, market research, personnel training programs and site-selection expertise also provides franchised hotels with a competitive edge. -Franchisees also may experience inflexibility, including dependence on the franchisor to make important decisions and changes in operation.

Franchiser provides: Operating instructions Personnel training programs Access to to a centralized reservation system Cooperative purchasing Advertising

Company-Owned And Operated Few Chains remain that are not franchisors or under management contract. Many Companies simply could not survive without franchising their brands or hiring management companies. Company-Owned and Operated share many of the advantages and disadvantages of independent ownership.

Chain Ownership Fall into 3 main groups 1. Parent company-owned and operated by the brand 2. Franchise licensed by investor and operated by management who contract to use the name and systems of a brand 3. Management contract owned by an investor or investors and operated on contract by the brand name.

Disadvantages -The need to establish brand loyalty among potential guest and to diversify property offerings. -Trying to be all things to all types of guests has put chains at a distinct disadvantage. -Chain imposed requirements for capital improvements may expensive

Advantage -The strong national brand identity shared by their hotels. -Advertising campaigns are financed by the chain company from the profits of each of the hotels. -Connected to the chain’s centralized reservation system. -Bulk purchasing power, centralized control and information system and personnel training programs. -Expertise of company

Independent Ownershiptopic An individual or company opened a hotel and managed it, taking complete responsibility for the hotel’s success or failure.

Advantages -Independent owners have complete control over every aspect of their business. -Operating freedom – to implement and test their own ideas, and make changes at any time. -The absence of franchise licensing fees and brand marketing overhead expenses. -No capital investment required to stay active in the brand.

Disadvantages -Their operating freedom and generally small scale, independents confront more difficult challenges than chain hotels. -Need to raise large amounts of capital, a very early profit, despite limited advertising and sales budgets. -Independent hotel companies develop all of their own operations system, success or failure are based on the success of these systems.

Elements in Marketing Method

Programs -Programs are tailor made offerings for groups sharing a special interest

PackaginPackaging -Defined as offering more than one product or service to the consumer for one total price. Often appeals to the value conscious guest

People -Using people element in their advertisement

Product -Emphasizes on services, ambiance, luxurious accommodation, amenities, facilities etc

Promotions - Activities which stimulate and create customer interest in a product or service (special events, offers, discounts -Promotion make use of advertising, sales and public relations

Promotions - Activities which stimulate and create customer interest in a product or service (special events, offers, discounts -Promotion make use of advertising , sales and public relations

Partnership -Requires the cooperative efforts of several industry groups

Place -The success of place marketing depends on the desirability of hotels location (near Disney World, Beach)