The Hotel Times - June 2008 - (Page 20) FRANCHISE UPDATE Accor Hotels is a big player in the franchise market in Australia and New Zealand. Its portfolio includes the Mercure property in South Wales, Australia. ª With so few new hotels being developed in Australia, there are fewer management contracts available. SIMON MCGRATH, V.P. AUSTRALIA, ACCOR º McGrath sees a high potential for increased franchising in Australia and New Zealand. ª More than 60 percent of hotels in the region are still unbranded, which reflects the potential of the market for companies who have strong branding and a distribution system that can deliver results,º he said. Franchise agreements in the United States are heavily legislated with very clear guidelines, but internationally that' s less often the case, Fitzgibbon said. ª Typically, what we' ve done is adopted a very similar approach. Contractually, our franchise agreements are broadly the same except where there' s a requirement to comply with specific local legislation,º he said. ª The rationale for that is that we want to protect the integrity of our brands.º Partnerships matter Representatives from Hilton Hotels say they enter into franchise agreements with partners or franchisees that can run the system correctly and have agreements in place that enable the brand to maintain its integrity. The opening of the Hilton Garden Inn Stuttgart NeckarPark in Germany launched the franchising of Hilton Family of Hotels outside the United States. Fitzgibbon said there is not a deep core of franchisees in Germany yet, but the concept may take off in popularity. Most recently, the opening of the Hilton Moscow Leningradskaya, operated by Interstate Hotels & Resorts under a franchise agreement, marked the first Hilton property in Russia. Hilton' s relationship with Interstate was a fundamental factor in the agreement. Currently, a strategic hotel development with Somerston Hotels UK Limited, a major franchisee, will result in 25 Hampton by Hilton properties in the UK within a five-year period. This significant first move of Hilton' s ª new kind of economy hotelº brand will bring 3,000 rooms across the UK. According to Fitzgibbon, franchisee fees follow what is considered a global hotel business model. ª Typically, our franchise fees are essentially the same market to market,º Fitzgibbon said. ª In new markets where we' re launching brands, we may choose to be a little more aggressive in terms of giving franchisees more favorable fees in the early years while we establish the brands in the marketplace.º Fitzgibbon said that in all markets, their royalty fee, which is 5 percent of revenue, will be paid by all hotels after a period of stabilization. ª We' re using the same fees generally across all markets and finding it' s very competitive in the respective marketplace,º he said. ACCOR hmm@questex.com 20 The Hotel Times June 2008 www.TheHotelTimes.com http://www.TheHotelTimes.com
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