SPECIAL REPORT : FRANCHISING the Marriott franchise team now works more often with above-property representatives with portfolio responsibilities across regions .
Euro crisis boosts franchising The ongoing Eurozone debt crisis that threatens to derail the global economic recovery nevertheless has a silver lining for Europe ’ s hotel franchising segment . More and more Eurozone lenders are demanding international branding to secure project financing , and independent hoteliers increasingly view a flag as insurance against the threat of a double-dip recession .
For Europe ’ s largest franchisor , Accor , interest among developers and existing independent hoteliers alike has never been higher , says Gilles Gonzalez , senior vice president for franchise . While Europe ’ s debt crisis is stifling development in most markets , the crisis is accelerating the region ’ s move toward branding . Independent hoteliers are finding relative economic security with Accor and other wellknown international franchisors .
The debt crisis is an opportunity for brands to penetrate Europe by presenting the chain concept as a win-win — hotels often get a more robust and predictable revenue stream despite the overriding economic instability , and both sides benefit from increased critical mass in traditionally brand-averse markets . “ We are doing even more deals every day with small groups of hotels ,” Gonzalez says .
Also driving independent hoteliers to brands is Europe ’ s complex regulatory environment , says Pierre-Frédéric Roulot , president of Louvre Hotels Group , Paris . Environmental and disabled-access laws , which can vary greatly across borders , have made it difficult for independent hoteliers . Smaller hotels are being forced to close , and those that can still afford to operate are seeking brands ’ expertise . “ In the past , you had a lot of ( unbranded ) hotels with 20 to 30 rooms ,” Roulot says . “ Now , the break-even point is 60 rooms to offset the costs .”
PIPs dusted off Although most large franchisors have contractual authority to force PIPs ,
Mercure Nottingham City Centre ,
United Kingdom too many franchisees have lacked the financial wherewithal over the past three years to make significant capital investments . As a result , most franchisors shelved large portions of existing PIPs during the downturn , whether officially or by simply turning a blind eye to enforcement . “ If you don ’ t have the cash , you don ’ t have the cash — you can push all you want , but at the end of the day , you ’ ll end up in a bad place ,” says Wyndham ’ s Pierce . “ Franchise companies became very willing to extend time periods and provide waivers . But now that we ’ re coming out of it , you dust those PIPs off and say , ‘ Let ’ s get at it .’”
Hilton ’ s Hampton brand is among those restarting delayed PIPs , having ordered its more than 1,800 properties to upgrade to the Perfect Mix lobby by the end of this year . Originally unveiled back in 2007 , the concept transitions Hampton ’ s cafeteria-style lobbies into a more socially engaging space . The brand also is asking franchisees to upgrade fitness centers and to install large flatscreen TVs . All told , the Hampton PIP will cost between US $ 150,000 and US $ 450,000 per property , and Cordell says the pushback from franchisees has been minimal .
About 70 % of the more than 2,500 hotels in Choice ’ s Comfort Inn and Comfort Suites portfolios are slated to complete PIPs by 2015 . Most franchisees agree the upgrades are needed , Joyce says , but he estimates about 20 % of franchisees lack the cash flow . As most franchisors did during the worst of the downturn , Choice is continuing with a policy of easing the timetable on PIPs on a case-by-case basis .
During the economy ’ s nadir in 2009 and into 2010 , some brands reduced franchise fees . Those brands have begun asking franchisees to invest dollars saved back into improvements for their properties . To get brand reinvestment initiatives moving without forcing too much of a burden , Marriott is attempting to reduce non-critical expenses as it adds back higher-priority PIPs . “ We ’ re trying to be conscious of giving a little more autonomy and to relax things like hours around concierge , within reason , if there are
www . hotelsmag . com June 2012 HOTELS 27