Hotel Management and Franchisee Challenges

How have the hotel owners reacted to Covid?

Hotel owners, as it was during SARS, the first thing they worry about is the profits and costs. Management companies are expected to anticipate that. There have been different strategies to postpone the payment of fees, putting staff on furlough or on non-paid annual leave. I think that during those moments, the owners are really happy to have management companies who are supposed to know how to deal with those kind of things. Franchisees are a bit trickier, because they would get consultation and advisors and recommendations from the brands, but the implementation of those recommendations would lay with the owners. Depending on the capacity they have to react, I don’t think that the implementation of the recommendations are done as well as in the cases of management contract business models.

As far as independents are concerned, the first thing they do is that they close. Thousands of hotels have closed, in China, during the initial stages. It’s difficult to know how many have reopened and how many are still closed. I would say, the owners rely a lot on those experts, to tell them what to do.

In terms of the franchisees, do you think that they can’t react as quickly or efficiently as the large management companies? How does the relationship of the hotel owner of the franchisee hotel work with the franchisee? Do they push for the changes? How does that dynamic change?

I don’t know of any specific case, but knowing how it works, I would expect them to question, to challenge more. To take some recommendations and not others, which also, in the case of management contracts would happen, but the manager then can have the upper hand and implement what he knows he needs to implement, because there is a check and balance kind of structure. Whereas, in a franchise business scenario, the checks and balances are not there. The way things are actually implemented and which recommendations are followed or not, is pretty much up to the type of owner of the hotel.