The purpose of the HVS U.S. Hotel Franchise Fee Guide is to provide a comparative review of various hotel franchise brands based on the applicable franchise fees. The selection of an appropriate franchise affiliation affects a property’s ability to compete in the local market, generate profits, and achieve a certain image or market orientation. Since the success of a hotel is based primarily on the cash flow generated, owners and lenders must weigh the benefits of a brand affiliation against the total cost of such a commitment. Please note that our study results may not be indicative of the impact an individual brand can have on a hotel’s overall profitability because only the costs and not the benefits of the franchise affiliations have been analyzed. Furthermore, our study does not reflect, nor does it claim to address, operating results of any one particular brand, or any one brand affiliation with any single property. This 2014 U.S. Franchise Fee Guide is meant to illustrate a basic comparison among franchise fees charged by participants.
Summary of Findings
- Franchise fees for Full-Service brands were mostly above the median franchise cost, while Extended- Stay brands were largely below the median.
- The median franchise cost was 11.8% of rooms revenue.
- The ten highest franchise costs represented a mix of chain scales and product types.
- The ten lowest cost franchises were primarily economy properties. The Best Western brands were the lowest because they don’t charge any royalty or marketing fees.
- In general, most of the franchise fees paid by a hotel are based on rooms revenue and are highly variable. However, since reservation fees vary by channel, a change in the source of reservations may have a significant impact on the ratio of franchise fees as a percentage of rooms revenue. Focusing on the origins of one’s hotel reservations is the most productive way to reduce one’s franchise costs.
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