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Hotel franchises have been a very successful way for existing hotel brands to expand without acquiring new properties. Many extremely well know and long-standing hotel chains also have franchise operations as well.
The way it works is that a person with property, usually an existing hotel can sign up with a hotel franchise under a license agreement. By doing this the the hotel can benefit from use of the hotels brand, booking system and other support.
The hotel chain benefits from a new addition to its portfolio and the benefits of increased brand exposure and room availability.
How to choose the right hotel franchise for you
The hotel industry, not to be confused with the hospitality industry, deals with providing customers with short-term accommodation and other related services. It's a very competitive industry, so if you're considering owning a hotel business, you must be ready to put in the work. Additionally, you must think outside the box to minimise risk.
One way to manoeuvre this industry is to buy a hotel franchise rather than setting up your own business. Hotel franchises have a higher rate of success because you get instant brand recognition, a central reservation system, and business assistance from the franchisor. However, with so many hotel chains in the market, how do you ensure that you’re getting the best value for affiliation? Here is a quick guide on how to choose the right hotel franchise for sale.
1. Understand the brand image
What type of facility and quality do you want for your business? If you want to offer world-class rooms and facilities, then your options should be geared towards 5-star luxury hotels. However, if you want to offer something more affordable with budget-friendly rooms, consider 3-star hotel franchises.
2. Understand your potential customers
Before making any decision, take your time to research your potential customers. Where are they likely to originate from, what’s their demographic and what brings them to your hotel? Having this information will help you identify suitable hotel franchise businesses for your feeder market. If you're buying an existing hotel, ask if they have a repository of data on their existing customer base. However, because you will be re-branding, ensure that you also do your own market research.
3. Location, location, location
Your hotel is an extension of the location. Tourists and travellers choose a hotel more so because of the location and not the brand. Therefore, the location of the hotel should be a top consideration when choosing a franchise. A good location for a hotel is one that's close to conference centres, tourist sites or landmarks. It should also be accessible.
When picking a location for a hotel franchise opportunity, bear in mind that the more alluring the location, the more you’ll pay for the property.
4. Total cost of affiliation
A hotel franchise business is an expensive investment. You’ll need to plan for both the initial franchise fees as well as the initial operating costs. Enquire what is included in the initial fee because you may be required to pay additional costs for the reservation system and marketing fees.
In addition to the franchise fees, you will also have to incur the costs of building or buying and renovating a hotel, which can be hefty. When comparing the cost of one franchise with another, make sure to include all the expenses that will be incurred over the lifetime of the agreement.
The hotel industry is affected by the seasons. The lowest season consists of five months (November to March) while the peak season, which is mostly during summer, consists of four months. If your hotel is located in an area where travel is seasonal, you’ll have to think whether revenue from the peak season will be enough to carry you through the offseason. Also, enquire if your franchisor offers any support during the low season or if they can waive or reduce royalties and marketing contributions. A good franchise agreement should adequately account for this seasonality.
6. Intra-brand competition
Given that hotels tend to be geographically concentrated, competition for guests can be fierce. So, an important consideration when choosing the best hotel franchises to buy should be whether you can acquire territory exclusivity. Territorial exclusivity gives you control over a specific area or region, therefore protecting you from intra-brand competition in your designated area of operation.
One of the biggest advantages of investing in a hotel franchise for sale is the initial and ongoing support you receive from the parent company. This is especially important if you do not have prior knowledge in running a hotel. Speak to existing franchisees to determine what kind of support you will receive in terms of marketing, policies and procedures, employee training, etc. A good franchisor should offer robust training opportunities to help you stay ahead of the competition.
Interested in buying a hotel franchise?
To learn more about affordable hotel franchises and how to choose between the top hotel franchises for sale, browse our articles at Franchise UK. We have many articles covering the most profitable hotel franchises to buy based on your budget, location, and goals. You can also view a list of hotel franchises.
Statistics around the Hotel industry:
We hope these statistics we share below can help you get an idea of the hotel industry in the UK. Since before making any business decision its very important to do thorough and detailed market research so we hope these statistics can help give you a brief overview of the market size , employment and growth the hotel industry has seen in its recent years.
- The hotel industry has seen a growth of 1.6% from 2015 to 2020 which shows a promising consistent growth according to Ibisworld.
- Also the total market size of the hotel industry in the UK is worth a whopping £21 billion according to Ibisworld.
- Another great thing the hotel industry does not shy away from is providing job opportunities to a vast range of different people around the UK. Since according to Ibisworld the total industry employment in the UK for the hotel industry is over 370,000.
- Also there are many hotel franchises for sale currently operating in the UK. Since Ibisworld have said that there are over 13,000 hotel businesses currently operating in the UK.
Would a Hotel franchise be right for you?
With the hospitality industry being worth £143 billion to the UK economy and expected to continue to grow hotel franchise opportunities can offer an exceptional business for an existing or new entrepreneur.