Franchise Prospector » International & Canada
Top Hotel Franchises: Who's Conquering the World?
Study the top luxury hotel franchises and find out why you might want to invest in a justly famous hotel franchise yourself.
If you've been researching hotel franchises then the top names are probably already on the tip of your tongue. But which franchises are out-performing the others? What does it take to get into a hotel franchise?
The Best in World-Class Hotel Brands
In the luxury hotel market Marriott's Ritz-Carlton has long held the world title, but was recently dethroned by Four Seasons Hotels and Resorts in Business Travel News' annual survey of U.S. hotel chains. While the amenities, comforts, and style of premium hotels have become increasingly spectacular, they are not the only considerations for the choosiest travelers. Four Seasons bested Ritz-Carlton partially because of its catering to corporate clientele. Though Four Seasons' corporate rates are higher than competitors in the same tier, Four Seasons is perceived as offering the most value for the price paid. Hilton's hotel brands have also done well over the years and in 2006 won awards in the U.S. for providing the best travel agent support. Hilton also received an "Extra Mile" award from Frommer's in 2006. Internationally, German Business Traveler honored Hilton with Best Hotel Chain Worldwide and Best Hotel Chain in Europe awards--for the sixth year in a row.
Top Hotel Costs
What does it cost to invest in a luxury brand like Four Seasons? You can expect to pay in the range of $90,000 to $150,000 in initial fees for a first-class hotel franchise like Hilton's Homewood Suites. Additional costs typically include royalty fees, reservation fees, marketing fees, frequent traveler fees, and miscellaneous charges for items like training or commissions. These numbers are calculated assuming a 300-room hotel with 60% occupancy for the first year, so actual costs can vary. Total costs over ten years can run as high as $10 million or more.
Top Franchise Profits
According to a study by Cornell's School of Hotel Administration, a positive relationship between a franchisee and the hotel parent company increases occupancy rates and customer satisfaction--and generates higher profits as well. Those with the best relationships with their franchisors reported gross operating profits per room (GOPAR) of $12,400, which translates to over $3.2 million per year in a 300 room hotel. Another study in branded hotel chains by the Ontario Ministry of Tourism and Recreation reported an average operating profit margin of 24%. There is money to be made in the best hotel franchises.
What's Holding You Back?
For many interested in the hospitality business the major hotel chains can be quite intimidating. Potential investors may think that top hotels are owned by corporate mega-giants and beyond their reach, when in fact the barriers to entry for a hotel franchise is quite similar to that of a fast food franchise--the luxury hotel business isn't an exclusive club that will turn you away at the door.
The biggest deterrent for most would-be investors is the cost. It takes a serious investment to get into the hotel business, but you should realize that the scope of the business opportunity means that you don't have to go it alone. You might be surprised to learn that there are a number of cities with aggressive campaigns to encourage economic growth, and these can be great programs for a hotel investment. Another important consideration is that investing in a hotel franchise is also an investment in real estate. With the right location you might find that getting investment help isn't as difficult as you think.
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