Longtime industry veteran Keith Pierce, EVP, President of Franchise & Development with Sonesta + RLHC, weighs in on the increasing importance of brand standards in an age where everyone is a critic with an audience.
We live in an age of “democratized everything.” Thanks to the internet, public opinion has more sway in politics than ever before. In many areas of business, more actors have more access to data, corporate decision-making, and information dissemination than ever. It can feel like when a disgruntled consumer somewhere sneezes, big companies can catch a cold.
What are the implications of the “age of democratization” for hotel owners and operators? The answer seems to be the emergence of a new kind of owner-brand relationship, which one could call the franchise platform of the future.
WHERE THE INDUSTRY HAS BEEN
Let’s start with standards. Everyone can agree that compliance with a system of standards is an essential component of a franchised system. Standards define what a brand is, how it’s perceived by the consumer, and with whom it competes.
But where do standards come from? The answer, typically, has been the corporate boardroom. But in the era of modern hotel operations, the locus of standards formation has shifted: More than ever, guests are telling hoteliers what they want and need in hotels, and owners are listening. Think of the nearuniversal adoption of free WiFi, the expansion of public areas, and more sustainable cleaning practices on property.
At the same time, franchise owners have gotten closer to guests than the brands ever could. The days of anonymous comment cards collected and forwarded to a manager in the corporate office have long passed. The era of posting real-time reviews and complaints on Facebook, TripAdvisor, and Instagram are here to stay.
What this should tell hotel owners, large and small, is simple: The value chain begins with the consumer, extends through the franchisee, and ends with the corporate office. The smartest brands are listening carefully to the input of franchisees in formulating brandwide standards, relying heavily on the advice of franchise advisory boards and frequent surveys, formal and informal, of their customers’ needs.
The democratization of today’s hotel industry begins with the standards that govern it. And the formation of those standards should be a two-way street.
COMMUNICATE, COMMUNICATE, COMMUNICATE
If exchanging information is important, the lynchpin for doing so successfully is effective communication. This sounds like a trite observation, but it couldn’t be more true. The successful brand-owner relationship depends decisively on effective, two-way communication.
When was the last time a regional manager called to check in on your business or followed up to ensure that recently adopted protocols have proven successful? When was the last time you called an executive at the office of a franchised brand and got through on the first try? As there is no substitute for listening in a healthy marriage, there is no more critical component in a successful franchisee-franchisor relationship.
The franchise platform of the future is built on constant, open, and effective communication. It must be a continuous dialogue that shares best practices, iterates solutions to problems, and builds future successes together.
THE PROFIT FACTOR – THE ADDED FLEXIBILITY OF A FLAT FEE STRUCTURE
Let’s concede the obvious truth that profitability drives business. In hotel franchising, the traditional road to profitability ran through a gauntlet of fees – franchise fees, royalty fees, marketing fees – all based on a property’s gross revenue number.
This has become unacceptable to some franchise owners in the economy segment for quite some time, never more so than in today’s post-pandemic operating environment. With the spiraling cost of labor, materials, and other costs of doing business, who can afford a litany of fees? Is it prudent to sacrifice revenue at the altar of brand management? The answer is that it need – and should – not be.
A better path forward is a flat per-room, per-month fee, disclosed to the franchisee up front and based on unchanging operating metrics. Generally, such a formula enables a franchisee to retain more profits and operate a property’s finances more efficiently with a more predictable view of costs and profitability thresholds. Ultimately, this enables the franchisee to invest more in the property and guest service over time, which leads to a sounder and more profitable business.
The industry needs to recognize the mutual benefits of a flat per-room monthly fee in the economy segment and the time to do so is now.
QUALITY, SERVICE AND COMMITMENTS DELIVERED – THE BEST MARKETING TOOLS AROUND
The final element for franchise success in the future draws on the wisdom of the past. There simply is no substitute for running a clean, quiet, customer-focused property that offers the guest a clear value proposition and delivers on the promise, time after time.
This brings us back full circle to the question of standards. Quality, integrity, and service are foundational elements of hotel operations that cannot be compromised under any circumstance. Those are immutable standards. And they are the best marketing tools you can find. In marketing parlance, it’s called “CX,” which means producing the optimum customer experience.
Often, the best systemwide purveyors of that level of service have been in business the longest, operate a diverse collection of hotels across market segments, and, in the best of circumstances, have the financial wherewithal to tack and toggle with changing consumer preferences, adapting product to the needs of today’s fast-evolving consumer.
When considering a franchise partner, think about their history of service, to the community as well as guests, their commitment to training and maintaining the highest standards of excellence, and, as suggested above, their willingness to adapt standards and practices to the needs of today’s franchisees.
In partnership with that kind of franchisor, you will be participating in creating the more democratized, franchise platform of the future, for your own benefit and the benefit of your guests.