The median franchise cost was 11.8% of rooms’ revenue, according to results from global hospitality consulting firm HVS’s 2014 U.S. Hotel Franchise Fee Guide, an annual survey of the fees charged by major hotel franchisors. A total of 65 hotel brands participated in the 2014 analysis.
For the first time, the 2014 guide utilizes brand-specific performance data to more accurately portray what sort of costs might realistically be expected. In years past, the pertinent data comparing franchise costs was derived by subjecting each brand’s unique fee structure to a uniform set of assumptions regarding performance levels, room count and other property-specific details.
Key findings of this year’s study include:
- 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 10 highest franchise costs represented a mix of chain scales and product types.
- The 10 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, HVS said 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, HVS added.