Why should you consider investing in a hotel franchise?
Although you may not have realised it, many of the hotels you’ve stayed in over the years will have been franchises. Some of the biggest brands in the industry operate using the franchise model, with the flexibility and growth it allows helping to make many of these companies into household names. Franchises operate at all levels of the industry with opportunities available in everything from low-cost motel-style businesses to high-end resorts and luxury accommodation.
As well as a large number of franchise opportunities available in the sector, the hotel industry also offers entrepreneurs the chance to make a significant profit. At the moment the hospitality industry is the fourth largest in the UK and represents 10% of gross value added to GDP. That’s the equivalent of around £143 billion, demonstrating just how important it is to the country’s economy. By 2020, the industry is set to grow even further, with experts predicting that 100,000 jobs could be created in the sector in the next couple of years.
For entrepreneurs looking for a potentially lucrative investment, this makes hospitality a very attractive prospect. The range of franchising opportunities combined with increasing demand and rising profit make the industry the perfect choice for those who want to forge a new career in a vibrant market. If you’re one of the many people considering a move into hospitality, keep reading to find out if the industry is right for you.
The UK hospitality industry
As we’ve already seen, the hotel industry is an integral part of the UK’s economy. There are currently an estimated 45,000 hotels and 730,258 hotel rooms across the country, with the average hotel home to around 16 guest rooms. Every year, more and more establishments open in the UK with increasing demand helping to drive growth in the industry. Although many hoteliers are concerned about the impact of Brexit on the industry – many hotel workers come from EU countries – overall hospitality is still going strong and investors are feeling positive about the future of the sector.
In general 77% of the hotel rooms in the UK are occupied at any one time. The average amount paid for a room is £87.38. Although hotel owners have considerable overheads to factor in, there is still significant room for profit and growth in the industry, especially if the hotel is well positioned and well run.
The rise of staycations
Although Brexit may have a negative impact on the hotel industry in terms of employee availability, it’s likely to have a positive impact in terms of customers’ demand. In the first three months of 2017, as Brexit negotiations began to dominate the news and Article 50 was triggered, the number of Brits searching online for staycations soared. Figures were up by almost a quarter compared to 2016, with the falling value of the pound likely to have been a driving factor behind many Brits’ decision to holiday at home.
This increase in demand for rooms is likely to boost profits significantly within the hotel industry, making a hotel franchise an even more tempting investment for entrepreneurs. If the pound falls even more, the UK could well become a bargain destination for foreign holidaymakers looking to travel somewhere where their money will go that little bit further.
Types of hotel franchise
Although all hotels work on basically the same model, there is a surprising amount of variation within the industry. Hotels come in a huge variety of shapes and sizes, offering entrepreneurs a choice of options for their investment.
Budget hotels
When people are staying in hotels out of necessity, a budget option is often all they’re looking for. As long at the hotel is well situated, clean and comfortable, guests don’t put too much thought into extras like décor, views or facilities. When looking for a cheap room for the night, customers want to know that they’re going to get value for money. This is why many choose to stay in hotels whose name they recognise rather than taking a gamble on an independent establishment.
Budget hotels are big business in the UK, with low-cost room options now accounting for around 25% of the country’s total beds. In 2016 an incredible 8,000 new budget rooms were opened across Britain, showing just how much demand there is for good value accommodation.
For potential franchisees, budget hotels offer an attractive proposition because they are often cheaper to set up and to run. Entrepreneurs will need to spend less on decorating their establishment and in general won’t have to pay out for expensive extras like spa facilities, restaurants and swimming pools. With more and more people opting for low-cost rooms, consistent demand should help franchisees to turn a profit relatively quickly.
Business hotels
Many of the hotels in the UK are targeted towards business users. Whether they’re designed to offer comfortable and convenient accommodation close to business centres or conference facilities to companies who want to hold meetings and events, these specialist hotels are in demand across the country. As business hotels generally offer slightly more extensive facilities than budget options, they can be more expensive to set up and to run. However, with many companies using the same hotels year after year, these types of establishments should be able to build up a loyal and consistent client base.
High-end hotels
Some of the best-known names in high-end hotels are franchises. Customers who stay in these hotels know that they’re going to get a high-quality service whenever they book a room and franchisees benefit from the quality reputation of the brand they’re buying into. This is one of the main reasons that entrepreneurs choose to invest in a high-end hotel franchise rather than begin a new venture from the ground up. What’s more, at this level of the hotel industry many customers will deliberately choose to stay with a particular brand over other hotel choices. This gives the entrepreneur a guaranteed revenue stream and a solid customer base on which to build.
Why choose a hotel franchise?
Hotel franchises offer entrepreneurs several advantages over other business models. The brand recognition offered by a franchise can have a huge impact on a company’s chances of success, especially in the first few months of operations. Customers searching online for a room will be much more likely to choose a hotel whose name they recognise. Working with other hotels around the country can also help franchisees to drive business at their own premises and attract guests throughout the year.
Entrepreneurs considering investing in a hotel franchise need to be aware that many franchising brands ask for considerable investment from their franchisees. In some cases franchisees will need to build or convert premises for their hotel, which can cost a lot of money. Before making an investment it’s incredibly important to do your homework. Find out as much as you can about the brand, its hotels and its future plans. If possible, visit an existing hotel and speak to franchisees about their experience of running their hotel before you begin the application process.
Find out more about hotel franchise opportunities and franchises in general by taking a look around our site today.