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The hotel franchise industry has experienced significant growth over recent years. A substantial portion of branded hotels, around 70%, operated as franchise operations, but this figure increased to approximately 80%, according to research by JLL.1
Most brands are recognizable names. Travelodge, Motel 6, Super 8, and Red Roof Inn may come to mind. But did you know that hotel franchises also include premier names like Marriott, Hilton, and Wyndham? Just imagine your future. As a franchisee, you could become the owner of a hotel with a sign emblazoned with the logo of one of the biggest hotel brands in the industry.
In this article, we cover the best hotel franchise choices for individuals thinking about buying a franchise. At the end, we also include helpful pointers for how to choose a hotel franchise in light of current trends.
Criteria for Choosing the Best Hotel Franchise for Small Business Owners: Our Methodology
Choosing the right hotel franchise can significantly impact your business. Below are the essential criteria to evaluate, along with their importance rated on a scale of 1 to 5, where 5 represents the highest level of importance:
Brand Reputation (5/5): The reputation of the hotel brand is crucial. A well-known and respected brand can attract more guests and boost your business.
Location (5/5): The location of your hotel can significantly impact its success. Consider factors like proximity to tourist attractions, business districts, and accessibility.
Franchise Support (4/5): Evaluate the level of support the franchise provides, including training, marketing assistance, and ongoing guidance.
Costs and Fees (4/5): Analyze the initial investment, franchise fees, and ongoing royalty costs. Ensure they align with your budget and revenue expectations.
Quality and Standards (5/5): Maintaining consistent quality is essential in the hotel industry. Ensure the franchise has strict quality standards and regular inspections.
Market Research (3/5): Conduct thorough market research to understand the demand for your chosen franchise in the area. Market saturation can affect your success.
Flexibility (3/5): Assess the level of flexibility the franchise offers in terms of room customization, pricing, and management style.
Brand Loyalty (4/5): Investigate customer loyalty to the brand. A strong, loyal customer base can lead to repeat business and positive reviews.
Local Competition (4/5): Analyze the competition in the local market. A franchise with less local competition may have a better chance of thriving.
Ownership Terms (3/5): Review the franchise agreement carefully, especially regarding the length of the contract and exit options.
Technology Integration (3/5): In the current digital era, a hotel franchise that provides contemporary technology solutions for booking and guest services can gain a considerable competitive edge.
Customer Reviews (4/5): Read customer reviews of existing franchises under the same brand to gauge customer satisfaction and identify potential issues.
Best Full-Service Hotel Franchises
A full-service hotel is one that provides a variety of guest services and amenities, either included in the price or carrying an additional price tag per service. Services include things like restaurants, room service, a daily newspaper, conference rooms, turn-down service, and more. Other terms for these properties can include upscale, midscale, and luxury or premier brands. Boutique hotels may fit in this definition. Here are the top full-service hotel franchises:
Hilton
Hilton is a well-known brand in the hotel industry and a prominent player in the hotel franchise sector. The company operates offices, hotels, and resorts across North America, South America, Europe, Africa, the Middle East, and Asia Pacific. Hilton has been involved in franchising since 1965. Franchisees receive support with design and construction, management, and sales. Additionally, the brand offers a comprehensive rewards program to encourage repeat business.
The franchise fee for this hotel franchise is $75,000. And the total upfront investment ranges from $29,162,700 to $111,963,150.
Wyndham
Wyndham is a hotel brand that boasts over 9,000 hotels in more than 80 countries. The company provides an innovative technology platform designed to streamline operations for franchisees and their teams. Additionally, they offer marketing support, tailored assistance, and a variety of hotel franchise models to select from. The Wyndham Hotel Group also features more than 20 hotel brands for interested parties.
The fee for Wyndham brand franchises is $150,500. And the initial investment ranges from $42,112,580 to $69,188,897.
Marriott
Marriott International Inc. is a worldwide franchisor of hotels and lodging. It is also a premier name in the hotel business. There are more than 7,400 properties throughout 135 countries. And the loyalty program has more than 140 million members. The company takes an owner-centric approach to its franchise program. So they customize opportunities to each franchise. And it’s not just the Marriott brand. The Marriott Group offers more than 30 hotel franchise models, from the Ritz-Carlton to Courtyard.
The franchise fee for Marriott resorts is $120,000. And the startup investment for new resorts range from $74,129,490 to $117,209,490.
Hyatt
Hyatt specializes in fully personalized and collaborative relationships with franchisees. The company has been operating since 1957 and has about 700 hotel franchise locations across 56 countries. In addition to the Hyatt brand, the company operates a variety of specialized properties, including Grand Hyatt, Hyatt Place, and Miraval. The brand has a team of development experts to work closely with each new franchise operator as they get new hotel locations up and running.
The franchise fee for new hotels ranges from $60,000 to $100,000. And the initial investment ranges from $13,645,000 to $153,723,000.
Sheraton
Sheraton is a hotel franchise that is currently part of the Marriott Group. It is a recognizable brand that even has its own offshoots, like Four Points by Sheraton. The franchisor has been established for many decades, building plenty of brand recognition over time. There are nearly 450 properties in 74 countries around the world. The brand is part of the luxury tier of resorts, especially popular with international travelers.
The fee for new franchises ranges from $85,000 to $150,000. And startup investment ranges from $53,521,090 to $82,627,590.
Best Economy Hotel Franchise Choices
Economy hotels bring you basic accommodations at budget room rates. You get no-frills rooms and suites to accommodate families. Expect hotel rooms to be clean and comfortable but not luxurious. Also known as limited-service hotels or budget motels, they keep costs low by cutting back on services and keeping the properties smaller. For example, there may be no restaurant, or just a coffee shop or continental breakfast in the morning. Here are the best economy hotel franchises and motel franchises:
Hampton by Hilton
Hampton by Hilton operates both Hampton Inn and Hampton Inn and Suites. The latter is a slightly more upscale option. But both are generally great for budget conscious travelers. Part of the Hilton Hotels family, the hotel franchise focuses on basic amenities like cleanliness and free wifi. It’s also popular with practical minded travelers. The hotel chain has been around since 1983 and has more than 2,000 locations around the world.
The fee for new Hampton by Hilton franchises is $75,000. And upfront costs range from $7,662,800 to $14,821,500.
Holiday Inn
Holiday Inn is part of the Intercontinental Hotels Group. Holiday Inn has more than 740 open locations in the Americas. There are also Holiday Inn Express, Club Vacations, and Resorts that offer slightly different experiences. The locations are built to be efficient and comfortable. But many also offer extras like restaurants. And since the Intercontinental Hotels Group is one of the largest hotel groups around the world, franchisees also get access to plenty of resources like a popular loyalty program and robust tech platform.
The franchise fee is $50,000. And the total initial investment ranges from $7,544,298 to $24,836,120.
Note: The Intercontinental Hotels Group (IHG) is also the parent of several other hotel brands that may be worth checking out for franchises. Those include: Crowne Plaza, Staybridge Suites, and a boutique hotel called Hotel Indigo.
Motel 6
Motel 6 is recognized as one of the leading brands in the budget lodging industry. This hotel franchise has been operating for over 55 years and boasts one of the most dynamic advertising campaigns nationwide. Currently, Motel 6 has target markets open for development throughout the United States, as well as select hotel franchises available in various locations worldwide.
The fee for new Motel 6 franchises is $35,000. And the initial investment ranges from $2,617,700 to $3,868,600.
Super 8
Super 8 is a budget lodging brand owned by the Wyndham Hotels Group. Known for being authentic and dependable, Super 8 operates more than 2,900 hotel franchise locations across four continents. This makes it one of the largest hotel chains in the economy sector. In addition to rooms and suites, many of these locations also offer meeting rooms and breakfast options.
The franchise fee starts at $25,000. And the startup costs range from $169,270 to $3,572,460.
Days Inn
Days Inn is a well-known brand within the Wyndham portfolio. The Days Inn hotel franchise is dedicated to offering clean and comfortable accommodations. With nearly 1,700 locations worldwide, its rising sun logo is among the most recognizable in the hotel industry. The company boasts over 40 years of franchising experience, equipping new franchisees with extensive training and resources to ensure their successful launch.
The fee for a new Days Inn hotel franchise is $36,000. And the total initial investment ranges from $292,634 to $8,281,441.
Econo Lodge
Econo Lodge is part of the Choice Hotels International brand. It has more than 890 hotel franchise locations open or under development around the world, with most of those located in the United States. This makes it one of the most prominent economy lodging options in the country, with plenty of room for growth internationally. The hotel franchise chain has been in operation for more than 30 years and franchising for more than 20. The company has an extensive tech and reservations platform to make operations easy on new franchise operators, along with personalized training and support.
The fee for new franchises is $25,000. And the total initial investment ranges from $126,150 to $767,599.
La Quinta
La Quinta is a hotel franchise chain owned and operated by Wyndham Resorts. It’s part of the midscale hotels sector. So it offers a few more amenities than some economy hotels on the list. The franchise business offers both new construction options and conversions of existing hotels and resorts. With more than 50 years in business, the hotel chain has more than 900 hotels across the United States, Canada, and Latin America. It’s popular with both business and leisure travelers.
The franchise fee for La Quinta Resorts is about $55,000. And the initial investment for new hotel franchise locations ranges from $452,400 to $11,052,800.
How Do You Choose Hotel Franchise Opportunities?
As an aspiring business owner, start by reading how a franchise works and the pros and cons of franchising. Research individual hotel franchises in more depth using the hotel brand links above. Get a feel for each hotel chain and what it offers.
Once you’ve narrowed it down to a few choices, next request and receive a hotel franchise disclosure document (FDD) for each; read over the FDD carefully, as it could be hundreds of pages long. You will find details about what a prospective franchise owner needs.
Don’t stop at the documents. Ask franchisors probing questions for more information. Start looking into franchise financing options to know how much money you can raise.
If the hospitality company invites you to franchise discovery day and you attend it, you’re very close to becoming a new franchisee in hotel ownership. When you reach the contract stage, seek help from an attorney to protect your rights in the hotel franchise agreement.
What Factors Should You Consider for a Hotel Franchise?
Consider the following special features which are specifically relevant to motel or hotel franchises:
Strong Financials – Choose a hotel group that demonstrates solid financial performance. Operating hotels requires significant capital investment. Franchisees must allocate more funds than in many other franchise types to achieve success. Consider the investments in real estate, furniture, linens, fixtures, and more. Safeguard your investment and enhance profits by partnering with a reputable and strong hotel franchise.
Quality of Stay – People are more sensitive to their experiences with a hotel than many other types of franchises. Be sure to stay in the hotels you are considering. Book a room and not just for a single night — stay a few days in each hotel. Eat in the restaurant. Use facilities like the business center. Experience the management practices first hand. Ask yourself: would you love to stay in that hotel? Would you choose it versus a competitor chain?
Cleanliness – Opt for a brand that prioritizes sanitization. Maintaining clean guest rooms will be crucial for guests in the near future. Is cleanliness a focus in the franchisor’s national marketing strategy? Does the hotel’s design include furnishings and floor coverings that facilitate easy cleaning? If you are updating an existing older property, is it possible to achieve a pristine condition without incurring excessive costs?
Support and Technology – Find franchisors that offer excellent support to franchisees and add value with technology. For example, evaluate the quality of the national reservations phone line and booking system. A strong loyalty and newsletter program can give the hotel a memorable personality and drive new business.
Site Location Support – How good is the franchisor at helping choose locations? How much site selection assistance can you expect? Is site location one of the hotel’s strengths? Access to airports, interstates or nearby destinations can make or break a property. Safety and security of the area are also important, especially for women travelers.
| Factors to Consider for a Hotel Franchise | Description/Considerations |
|---|---|
| Strong Financials | - Assess the financial stability and performance of the hotel group. Ensure they have the necessary capital for support. - Consider the capital-intensive nature of the hotel industry and the investment required by franchisees. - Evaluate the protection of your investment and the potential for profit alignment with the franchisor. |
| Quality of Stay | - Personally experience the hotels under consideration by staying for an extended period. - Assess the guest experience by dining at the restaurant, using facilities, and observing management practices. - Ask yourself if you would prefer staying at the franchise hotel over competitors in the area. |
| Cleanliness | - Choose a brand that emphasizes cleanliness and sanitization, especially in light of current guest expectations. - Examine if the franchisor's marketing highlights cleanliness as a selling point. - Consider the ease of maintaining cleanliness in terms of furnishings and floor coverings. - Evaluate the cost and feasibility of renovating an older property to meet cleanliness standards. |
| Support and Technology | - Evaluate the level of support provided by the franchisor to franchisees, including technology support. - Assess the quality of the national reservations phone line and booking system. - Consider loyalty programs and newsletter initiatives that can enhance the hotel's identity and attract new business. |
| Site Location Support | - Determine how effective the franchisor is at assisting with site selection for your hotel. - Assess the level of site location support available to franchisees. - Consider factors such as proximity to airports, interstates, and popular destinations, which can significantly impact the success of the property. - Evaluate the safety and security of the chosen area, especially for the safety of travelers, including women. |
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How Has Covid-19 Affected Hotel Franchises?
The COVID-19 pandemic significantly impacted the hospitality industry as people reduced travel and conferences. However, downturns are great times to snap up bargains and take advantage of trends.
Aspiring hotel owners need to thoughtfully evaluate the future. It’s essential to identify when circumstances are improving and signaling a potential upswing. As we return to normalcy, there are opportunities to capitalize on the pent-up demand from leisure travelers, business professionals, and conference attendees. Given the impact of the pandemic and the subsequent economic conditions, making informed decisions is more crucial than ever:
- Identify the best-performing business model. Economy and extended-stay hotels seemed to have weathered the impact better, according to a recent survey by JLL. Urban hotels are struggling the most, according to a report by the American Hotel and Lodging Association. 2
- Evaluate financial support. Find franchisors willing to offer discounts or go the extra mile to address temporary financial pressures. Were they willing to allow franchisees to temporarily relax brand standards, such as cutting back on amenities or switching to carryout food versus sit-down restaurants? What other aid did the franchising team give?
- Anticipate trends. Recovery depends on the willingness of guests to travel and why they travel, says Daniel Fenton, Director of Global Tourism and Destination Development Services, Hotels & Hospitality Group, JLL. “The first round of leisure travelers will be inclined to drive rather than fly. After that, individual business travel will start to grow, followed by group business travel. It will take longer for group leisure travel.” 3
Bottom line: the opportunity for a franchise can be found even during the most difficult of times, if you are smart.
Sources:
1 JLL, Why More Hotels are Owned by Franchisees
Image: Depositphotos.com
