Hospitality Financial Leadership: Hotel Franchise/Management Fees & 20 Years Is a Long, Long Time

/Hospitality Financial Leadership: Hotel Franchise/Management Fees & 20 Years Is a Long, Long Time

Hospitality Financial Leadership: Hotel Franchise/Management Fees & 20 Years Is a Long, Long Time

|2019-12-04T17:16:17-05:00December 2nd, 2019|

By David Lund

Being a branded or franchised hotel is an expensive endeavor. Especially when you consider the average agreement is 20 years in duration and you’re on the hook for the fees outlined in your agreement plus anything else the management company throws at you.

When I say on the hook, I mean they can literally charge you for whatever they want as long as they determine it is in your best interest. This is the basic concept that forms the meat of the management or franchise agreement.

When you consider the cost of the fees there are some terms you will want to get familiar with. Terms that are part of your hotel management agreement or franchise/license agreement. Terms like “standard,” “budget,” “discretion,” “from time to time.” These all point to one reality and that’s this: Your agreement allows them to charge you for whatever the flavor of the day is, for whatever the new-fangled thing is. For whatever they want.

Let’s face it 20 years is a long time, especially in today’s fast paced Internet of all thing’s world. The company will tell you that the latest fee for such and such benefits you and they may be right. But look out because for the brand one-size-fits-all. You might not be the one who really needs the latest marketing twist that ends up benefiting other brand members.

But, guess what? You must pay

I spoke with a hotel owner recently who read one of my other articles on this topic. He had just received an invoice for a new feature that his brand had added and guess what. It was for thousands of dollars and he didn’t know a thing about it. He had never received any prior warning or any information on the service. He was not even aware of what it was that this service was supposed to accomplish. When he inquired the word was it was a new feature to help search engine optimization that was added a year earlier. This hotel is a bit unique and aren’t they all? Its reservations are still largely received by phone. So, did he get a break on the invoice? No.

The invoice was the “catch up.” So, not only for the new service that he was not aware of, but the management company was also behind in their billings. When he called, he got the usual mumbo jumbo from the billing department that explained absolutely nothing. He was then asked to speak to the marketing people who told him to contact the revenue management group. All of this is designed not quite by accident to wear you down, to break your annoyance level. And it works.

A 20-year agreement is a big commitment and over the life of it you’re going to experience some new surprises and the one thing you can count on is the cost is going up. Never down. Management companies and franchisers constantly need new sources of service revenue especially when your hotel revenues are flat or backwards to the prior year. They also need to stay ahead of their competition and that means new products and features for you at a cost.

I’m not saying they are bad people or they have predatory practices, but you must realize what you are getting into. Namely a long-term agreement that is going to be more costly in the future.

We don’t know what’s next in the hotel world and how business will change and evolve but one thing is for certain: You will be receiving new items on your monthly corporate invoice from time to time, and you will have to pay for them whether you like it or not. Full stop.

About David Lund

David Lund is The Hotel Financial Coach, an international hospitality financial leadership pioneer. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with Fairmont Hotels for over 30 years.

He authored an award-winning workshop on Hospitality Financial Leadership and has delivered it to hundreds of hotel managers and leaders. David coach’s hospitality executives and delivers his Financial Leadership Workshops throughout the world, helping hotels, owners and brands increase profits and build financially engaged leadership teams.

David speaks at hospitality company meetings, associations and he has had several financial leadership articles published in hotel trade magazines and he is the author of two books on Hospitality Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach with CTI.

For a complimentary copy of my guidebook on creating a finically engaged team in your hotel head over to my website, www.hotelfinancialcoach.com and don’t forget to email me [email protected] for any of my free hospitality financial spreadsheets.

Contact: David Lund

[email protected]/(415) 696-9593

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