Franchisees: active, passive or participatory managers?
By Georges Panayotis, President & CEO - MKG Group
The spread of asset light policies has accelerated the shift of many skills and areas of expertise from hotel brands to franchisees. Having become the true artisans of hotel development, they appropriated tools for financing land and real estate investment, building and design techniques, revenue management and pricing policies. By simply assuming their status as investor-operator, they no longer intend to play the role of managers that obey the dictates of corporate chains.
inclinations of franchisees that are set on automatic pilot – have given way to more animated discussions where justifications and concessions come into play. Field operators also want to feel they are in control by sitting in the co-pilot's seat. Franchisees have hardened to the task. But just as you can't make an omelet with hard- boiled eggs, you can't federate hardened partners around a strategy that is not fully shared.
At the same time, distribution through third parties has grown considerably and dealt anew hand. Franchisees that relied on the brand to feed their planning and get them out of the OTAs' trap are now wondering what the brand brings: does it offer enough? Is it an efficient shield against the online agencies? They are waiting for answers and the tension risks increasing if these are not clear enough. Particularly since individual franchisees give way to more structured operator groups, which are much more comfortable with a slide rule and less affected by the emotional attachment that had been a trademark of brand-franchisee relationships for a long time. Loyalty is no longer a given and the diversification of competing brands within the same operator group is becoming widespread by choice or by opportunities.
The truth is that a new trio is now in place dealing with clients: operators, whether theyare franchisees or employees of groups, are in direct contact and are in charge of valorizing the primary zone; the brands, which bring value and notoriety, must maximize their sales and marketing tools; and finally online distributors catch a large share of Internet traffic and are selling their work as middlemen at higher and higher prices. Each of these "partners" has a commercial logic and diverging economic interests. Two scenarios are now possible: permanent rivalry loaded with tension to win over clientele; or a new alliance in which each has a role to play in delivering the service, satisfying the client, building a strong brand that is recognized and appreciated, and distribution through all channels at the right price and right cost.
Is this win-win-win partnership illusory? If a certain amount of harmony does not enterinto play, then strength will decide. In the United States, owner-franchisee associations have already acquired such strength that hotel groups have shifted into seduction mode. Commitments are reciprocal and brand management is participatory. The intelligence of hotel industry players may also be counted on in the face of the threat of all the new commercial accommodations options. Sterile face-offs would widen the gap left by the lack of hotel development, the lack of concept renewal, the absence of personalized CRMs and the suicidal costs of distribution. Nature and customers abhor vacuums, so other players will fill in the gap.