The Hotel Times - June 2008 - (Page 19) FRANCHISE UPDATE The opening of the Hilton Moscow Leningradskaya, operated by Interstate Hotels & Resorts under a franchise agreement, marked the first Hilton property in Russia. ª HILTON HOTELS CORP. Much of our franchising activity is focused around our new brands that have been traditionally very successful in the United States. PATRICK FITZGIBBON, SENIOR V.P., DEVELOPMENT, EUROPE AND AFRICA, HILTON HOTELS GROUP º world tend to be institutional investors,º Chhatwal said. These investors typically require lease contracts that create an opportunity for local operating companies to enter into a lease by providing a comfort zone from brand affiliation. An institutional investor may also buy from a distress sale and then take on a franchise and try to add value. Rezidor has absorbed the international market with five brands that range from economy to luxury: Radisson SAS, Park Inn, Regent, Hotel Missoni and Country Inn. The company is experiencing a robust pipeline in Russia, evidenced by the signing of the Park Inn Kazan, scheduled to open second quarter, 2011. The company has a full development, technical, marketing and operations office in Russia. Additionally, Rezidor has three new Radisson SAS hotels under development in Moscow. These new agreements mean a new record for the group' s rapid growth in Eastern Europe with the operation and development of 60 hotels and a little over 14,600 rooms. Down south In the southern hemisphere, Accor Hotels is a big player in the franchise market in Australia and New Zealand. The main business of Accor Asia Pacific is owned and managed hotels, but in the past year the company has added about 20 franchised hotels. Simon McGrath, v.p. Australia for Accor, said the reasons for the growth in Accor' s franchising business is in part a result of placing a greater emphasis on selling its franchise credentials to the industry. ª With so few new hotels being developed in Australia, there are fewer management contracts available,º he said. ª The hotel industry is beginning to understand the benefits of aligning themselves with a major hotel operator to take advantage of their branding, sales, marketing and distribution systems.º The franchise model in Australia and New Zealand started out in the motel sector but now includes hotels ranging in rating from 3 to 4 stars. McGrath said the more the industry understands precisely what franchise contracts can provide for property owners and how they differ from other contracts, such as leases and management contracts, more franchise agreements will be signed. Education and evolution The potential for a misunderstanding of the franchise model in the international market always exists. ª This is a matter of education and evolution,º McGrath said. Franchises have to be sold as being very different from existing management agreements. New owners must understand that if they take on a well-recognized brand, they have the obligation to ensure that brand standards are fully adopted. Access to customer loyalty programs and other sales and marketing initiatives gives franchisees a competitive advantage over their unbranded rivals. McGrath said that while it takes some time for new properties to fully understand the commission system, after a while they appreciate that this is a normal cost of growing their business and elevating the status of their property beyond their competitors. www.TheHotelTimes.com June 2008 The Hotel Times 19 http://www.TheHotelTimes.com
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