Globetrotters: Brands face challenges of international franchising
NATIONAL REPORT–International franchising growth doesn’t happen overnight. It’s a long-term investment for hotel companies, but is worth the wait, according to executives.
One major obstacle is that branding is less prevalent in many regions, said Tom Keltner, executive v.p., Hilton Hotels Corp. and c.e.o.-Americas and global brands.
“In the U.S., somewhere north of 70 percent of hotels carry a brand,” he said. “Outside the U.S. it’s sort of flip-flopped.”
This makes it more difficult to establish and support a brand overseas, he said, adding that managing on behalf of owners is sometimes the better option.
In the short term, Hilton Hotels Corp. will have most of its growth in the Americas and primarily in the U.S. over the next few years because of the time it takes to build and open hotels.
“Having said that, we believe we can open perhaps 1,000 hotels outside the Americas over the next 10 years,” he said, adding that the company has chosen 10 areas within Europe and Asia where it believes population size plus wealth equate to travel.
Reas Kondraschow, executive v.p., international development, Wyndham Hotel Group International, said educating owners and investors on franchising and brand benefits and the cost structure associated with franchising is the biggest challenge.
“We have to educate them on these systems, and the brands and the value of the brands—that there is a fee and they have to pay for that,” he said.
China, India, the Middle East and Europe are hot regions for Wyndham.
Markets such as China and Russia are long-term investments for InterContinental Hotels Group, where the company is working to build a culture of franchising.
“You have to grow your own talent in those markets,” said John Merkin, v.p., franchise operations. “For example, in China, you almost go through an apprenticeship-type model where you agree to manage their hotel for them, and over time build up their expertise for them to be able to take over operations down the road. You start building a base of people who can operate the hotels successfully within your business systems.”
The company has 56 hotels in China, which are primarily managed properties.
“China is going to be building more than [53,000 miles] worth of roads,” Merkin said. “It’s kind of like interstate expansion [was] here in the ’50s. We’re looking to duplicate how Holiday Inn grew up, which was basically by following the roads and making sure that we grew in logical places.”
Bruce Haase, division president, full-service market brands and international operations, Choice Hotels International, agreed that cultural acceptance of the business model is one of the top challenges.
“We have a number of markets where we operate directly and think the challenges of international franchising are less daunting: Mexico, Canada, Australia, New Zealand and Western Europe,” he said. “You just don’t see third-party franchising exist to any large extent in some countries. When we run into countries with those constraints, that’s when we look for a partner arrangement.”
By: Heather Gunter for Hotel & Motel Management
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