Hotel Flags Ranked by 2009 Property Earnings
LEXINGTON, Ky. —Franchisees who own an Intercontinental or a Marriott hotel will see some of the highest average earnings in the franchise industry, according to a 2009 survey. In the economy sector of hoteling, Econolodge and Super 8 have the lowest of the major brands.
That is according to a 2009 survey of the two hundred largest franchising brands by systemwide sales and properties published this month by Franchise Times magazine.
Florida-based Hospitality Solutions' CEO Steve Belmonte thinks that it is critical for prospective franchise owners to look and compare earnings between similar brands before buying a hotel. Belmonte emphasizes that investors should compare apples to apples between one hotel brand and another. "You don't want to compare an Econolodge next to an Intercontinental or Sheraton," he says.
The former CEO of Ramada Hotels says that he deals with 120 franchise agreements and terminations a year. Belmonte observes, "I say this regretfully, but it happens to be the truth, many of them would not use such a comparison tool even if it were readily available. They would make an impulse decision based on what they are promised by a franchisor sales guy, based on who will give the best fee structure, based on who will give the most minimal punch list. They will make a decision on what brand to buy based on all the wrong reasons rather than look at the top line number and say what can this brand bring to me in terms of revenue as compared to other competitive brands within the same segment."
Belmonte thinks that large hotel investors are able to discover and compare earnings in deciding which hotel brand to invest in. "Sophisticated buyers love to use this type of information and probably do in some format or another in deciding to invest in a Marriott, Sheraton, or an Intercontinental hotel. I'm not saying they do not care about the deal or the franchise agreement, the fees, or the structure. I'm saying these types of buyers are looking at the long term and are more apt to look at revenue for occupied rooms."
New York-based franchise and hotel consultant Stan Turkel agrees. "Potential franchisees typically make heavyweight decisions based on lightweight information provided by their brothers-in-law and by the franchising firm's salesperson." He argues that hotel owners and franchisees should invest time, money and effort in marketing research before buying a franchise.
Methodology: Franchise Times annually gathers voluntary sales figures from franchising firms as well as estimates from "publicly available data." It defines systemwide sales as total sales for both franchise and company units, representing "sales to customers, and not corporate sales to franchisees—such as royalty revenue or franchise fees."
A traditional way of measuring hotel earnings is RevPAR, or revenue per available room, since different sized properties can be compared. For example, in its franchise disclosure document, Choice Hotels declares that Quality Inn and Suites has a RevPAR in 2008 of $38.65. As of this writing, a published listing of RevPAR for all major hotel brands could not be found. However, publisher Robert Bond has just released his 10th edition of How Much Can I Make, which lists the average earnings (RevPAR) of several famous hotel brands.
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