LH Lodging Hospitality Magazine - Don't Bite Off More Than You Can Chew....Franchise Fee Costs, How much can you handle?

Sep 17, 2009

Evaluating the Total Cost of a Franchise

This article talks about the importance of not only what the different franchise fees are but also how they are significant in picking a flag for your hotel. The selection of an appropriate franchise affiliation affects a property’s ability to do such things as: compete in the local market, generate profits, achieve a certain image and hopefully, benefit from referral business. The success of a hotel is based largely on the cash flows it generates, therefore the owners and lenders must weigh the benefits of an affiliation against the total cost of such a commitment. When choosing a franchise one of the most important aspects to look at is the structure and amount of the franchise fees. This is because franchise fees are one of the largest operating expenses for hotels. Fees are a form of compensation paid to the franchiser by the franchisee for such things as their logo, brand name, trademarks, and advertising. When affiliating with a brand and opening a new hotel you have to pay up front fees such as the initial fee and the affiliation fee. These are one time charge only fees. But there are other franchise fees that are on going, such as the Royalty Fee, Marketing Fee, Reservation Fee, Frequent Traveler Fee, as well as other miscellaneous fees. Franchise fees are no the only factor that needs to be examined when selecting a brand to affiliate with. Other components that should be looked are the potential reservation output, competition from nearby hotels operating under the same affiliation, quality standard and termination provisions. These other factors can make an expensive franchise highly desirable or an inexpensive franchise undesirable. Affiliating with the the wrong franchise can be a very costly mistake for owners and lenders.

I think that this article is very relevant to the lodging module project and the lodging industry as a whole. One of the assignments with in our project is to pick a hotel flag. As this article shows, picking a franchise to affiliate with is very crucial. It can make or break you depending on which one you choose. When choosing a franchise you need to be aware of all the costs you will be incurring, obviously, since the whole point of opening the hotel is to make a profit! This article reinforces the fact that in our groups we will have to put time and effort into researching the ins and out of franchises and the fees that come with them in order to pick the right one for the market segment we are trying to reach, as well as the area we have chosen to build our property in.

Source: lhonline.com

Link: http://lhonline.com/development/franchising/rushmore_franchise_fees_0909/index1.html

Lodging Magazine - "Loyalty, Loyalty, Loyalty"

2/24/2010

The Allure of Loyalty

As consumers count costs, loyalty program membership has accelerated. And hotels are getting creative to reel guests in

This article talks about the impact loyalty programs are having on the hotel industry, and how they are not only becoming more prevalent but also how they are luring customers in. Senior executives that are in charge of loyalty programs at major brands are in consensus that the loyalty programs have become even more meaningful over the past few years. This is because travelers seek to spend as little as possible on accommodations. They see there points earned as a form of currency for not only rooms and air travel but merchandise as well. Enrollment is up, percentage of business from members is also up, and redemption for free nights is up as well. Since consumers are more used to choice than ever hotels are creating programs with a wide range of flexibility. An example of this would be Starwood's Preferred Guest (SPG) program. They offer those members redemption on more than 350 airlines with no blackout dates. Although most hotels agree upon the importance of their loyalty programs they do differ on who they target these programs to. For example, some loyalty programs are focusing on infrequent leisure travelers, like Hilton. Where as others, such as IHG, are focusing on business travelers. IHG chooses to do so because those members also take vacations and want them to stay with them on those trips as well. Hotels are looking into new ways to lure customers into their programs such as, looking to social media avenues as a way to elevate the relationship they have with their members. The programs are moving quickly on mobile apps as well. Hotels such as Starwood and Hilton have created iPhone and iTouch applications for their loyalty members. These applications offer a “Request Upon Arrival” service that enables a traveler to place an order for room service and have a meal in the room on arrival to the hotel. It also offers “e-check-in,” a feature that allows a guest to remote check-in up to 48 hours in advance.

I think this article is very relevant to the hospitality industry as a whole. Due to the poor economy the hotel industry has taken a a real "beating" financially. It is in our best interest to try and promote and enhance any programs that will benefit us. In a world where customers are looking for the lowest prices, loyalty programs are essential. Customers like to know that they are not only receiving a good deal but that they can also get something in return for doing business with you. They see loyalty rewards and points as almost a "free" gift that they deserve for their repeat patronage at your business. By instilling these types of programs in our hospitality operations we can increase our customer base as well as maintain the one we already have. By creating applications for devices such as the iPhone we are connecting ourselves to our customers even more. We are simplifying processes for them and catering to their wants and needs. Loyalty programs are a step in the right direction for the hospitality industry to get back to being financially sound.

Source: Lodging Magazine (Marketing)

Link: http://www.lodgingmagazine.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=752C46ABC87F4935B254C2BC1FDCFEFF

10 Weirdest Hotels in the World

Stumbled across this while browsing the web, thought you might be interested in it

http://matadortrips.com/igloos-castles-sewage-pipes-and-survival-pods-the-worlds-10-weirdest-hotels/

SmartBrief #2 - Hotels Save More "Green" by Going Green

January 25 2010

Hotels: Relax with a clear conscience

This article talks about how hotel's are cutting back on their water costs by implementing environmentally friendly procedures in their day-to-day hotel water sources. Hotels are encouraging their guests to participate in green friendly processes such as towel re-usage and also forgoing the demand of fresh bed linen every day. InterContinental Hotels and Marriott Hotels both use the towel re-usage system. Intercontinental calculates that its towel re-use programme saves 199m litres of water a year in the US alone. Marriott International reckons its linen re-use programme saves 11-17 per cent on its water and water treatment costs. Lower water use can have a domino effect by cutting energy used to power washers and dryers, as well as reducing the quantity of detergents needed. Some newer hotels are leaving bath tubs out of the bathroom and only installing showers in order to save water costs and help the environment. De Vere Venues, De Vere hotel group's conference arm, is trialling devices installed in the pipework to showers in its rooms to add air to the water. Water use is reduced, but the strength of the flow is maintained. They are also introducing these devices called “liquid pool covers” in their swimming pools. They are unnoticeable to the swimmer. The pool covers take affect when the water surface is still. The stillness of the water allows the molecules to form an invisible surface on the pool that retains heat and prevents evaporation. Water issues can do more than influence a hotels premises appeal to it's guests, it can also determine the hotel’s survival. THis would apply to hotels in developing countries. So it is very important to try and implement as many water saving procedures as possible.

I think this article is very relevant to the Hospitality industry for many reasons. One being that our resources are limited and we need to take precautions in order to make sure we don't deplete them entirely, and in turn destroy our chances of keeping our operations "alive". The second being it can save us a lot of money on our utility bills, which will decrease our total expenses and generate more profit. The third being that "Going Green" is in right now. Guests like to know that the establishments they are going to are not only doing their part to help save the environment, but also keeping up with the trends. As I stated before water reduction can help decrease expenses, this is because water accounts for 15 per cent of the total utility bill of many hotels. Water is used in so many operations in a hotel from laundry to decor such as fountains. It is our duty as an industry and as citizens of the world to try and take all the necessary precautions to help the environment and our industry as a whole.

Source: FT.com (Financial Times)

Link:http://www.ft.com/cms/s/0/68c23a26-0953-11df-ba88-00144feabdc0.html?nclick_check=1

SmartBrief #1 - Lending, Risky or Not?

February 17, 2010

Risky or Not, Lenders Slowly Opening Vaults to CRE Lending Again

This article addressed the issues with loaning over the past year and how banks over the past few months have started lending again for the purpose of loan renewals and commercial real estate (CRE) lending. The total new CRE commitments increased 157% in December from the previous month. According to findings from the annual 2010 Lenders' Production Expectations Survey, which is produced by Jones Lang LaSalle, bankers are predicting that loan production will increase in 2010. Lenders are saying they'll be giving borrowers 24+ month extensions in order to avoid foreclosure on well-located, high quality assets. This is because about $1 Trillion worth of CRE's are going to reach maturity between now and 2013. There is also going to be a shift in the number of lenders willing to lend greater sums toward single-asset acquisitions. At the conclusion of the article it stated that the bid-ask spread between buyer and seller is narrowing, and in many cases might reach equilibrium. This balance between the buyer and the seller should be just what the lenders need to bring large and small business loans to the market.

I think the news from this article is very significant for the hospitality industry as a whole. Previous hospitality business's who have received CRE's have had to foreclose on their loan because of the poor state the economy has been in over the past year. The fact that banks are getting back in to loan renewals and CRE lending is good news. Hospitality people who want to apply for a loan to open a new business will have a better chance of being able to do so. Also business's who have already received loans will be able to not only extend the loan but restructure it in order to avoid foreclosure. I think this is a step in the right direction towards helping our economy pick up and keep the hospitality business's that are already around afloat.

Source: CoStar.com

Link: http://www.costar.com/News/Article.aspx?id=86244EDB15CB2953AA8CE44CA71D3821

LodMod!

Hello fellow LodMod kiddies and Dr. Miller! I figured I'd start by writing a pre-blog to the first Smartbrief blog. I can't believe it's junior year already! I feel as though it was just yesterday I was a freshmen roaming around campus with a map in hand trying to figure out where the heck my next class was. I switched into the HRIM program last spring semester and it was by far the best decision I've made since I started out here at UD. I know this semester is going to be really hectic, and as cheesy as this might sound, I'm really looking forward to making new friends and learning new things.

Best of Luck through out the semester!

Bporter