Franchising Around The World
Lack of branded product in Europe and developing markets in Brazil, China and India offer opportunities.
By Derek Gale, Senior Editor -- Hotels, 9/30/2009 11:00:00 PM
In last year’s special report on franchising, we wrote that the international landscape provided a fertile opportunity for strong brands between conversion product and the potential for new-build unit growth.
A year later, the story is similar, but progress has been made. Take McLean, Virginia-based Hilton Hotels Corp., for example, which has spent significant time and effort—including developer and consumer focus groups—on taking its U.S. brands abroad.
The 88-room Hampton by Hilton Corby/Kettering, the brand’s first European property, is now open in the UK. In fact, owner/operator Hotel Solutions London Ltd. has committed to 20 new Hampton by Hiltons in Europe over the next several years.
In addition, the Hampton by Hilton Liverpool John Lennon Airport and a handful of others (including some conversions) are set to follow by the end of the year.
“We have an excellent pipeline in Europe, with at least six franchise hotels due to open before the end of the year, no less than seven in 2010 and six in 2011, across our family of hotel brands,” says Patrick Fitzgibbon, Hilton’s senior vice president for development in Europe and Africa. “The UK is certainly a key development market.”
Other important franchise development markets for the company include Italy (where there is a relatively new but significant interest in branding) and Germany, according to multiple Hilton executives.
“There’s a lot of catch-up work for Hilton to do internationally,” says Phil Cordell, global head of focused-service brands. “That is a major growth priority for us—there are great opportunities, especially in the mid-market category.”
Cordell notes that Hilton’s product may differ internationally to cater to developer challenges and consumer expectations. The new-build prototype for the Hampton by Hilton brand in Europe, for example, offers smaller guestrooms and adds a simple food and beverage component incorporated into the check-in area in the lobby.
Hilton Garden Inn is the company’s other key brand driving franchising opportunities in Europe, Fitzgibbon says.
Across the Atlantic, Hilton also sees South America as having great growth opportunity and is working to introduce its various brands throughout the region, according to Ted Middleton, Hilton’s senior vice president for managed development. He says the initial focus for franchising will be the Hampton by Hilton brand, which again features a specialized Latin America prototype. The prototype is more cost-effective to build and, as in Europe, provides a limited food and beverage offering.
Same Markets, Different Brands
London-based IHG also believes in South America, recently renewing eight franchise agreements for Holiday Inn and Holiday Inn Express hotels with Talbot S.A., a Chile-based hotel operator, through 2015.
And as with Hilton, Germany is a priority market for IHG—the company has a franchise agreement there with Foremost Hospitality GmbH to introduce 20 new Holiday Inn and Holiday Inn Express properties across the country’s key cities by 2016.
Silver Spring, Maryland-based Choice Hotels International, meanwhile, in August opened three franchised properties in Brazil—two Quality Hotels and a Comfort Hotel—and three franchised properties in Italy (the same mix of brands).
Golden Tulip Hospitality, Amsterdam, now part of Starwood Capital Group, late last year also signed five contracts for franchised properties in Brazil, with former president and CEO Hans Kennedie saying, “The next step will be to expand in other South American countries.”
Kennedie has since agreed to a role as an independent senior advisor with Starwood Capital, assisting with international franchise development, so it is entirely possible that South America will remain a target for franchise growth.
Starwood Capital COO for Europe Desmond Taljaard says he wants to grow the newly acquired Golden Tulip system 15% per year. “We hope to have a typical cycle of rollovers and renewals and improve upon it with a growth and action plan,” he says. “Some franchisees have already expressed how pleased they are with us and look forward to having the financial strength of Starwood [Capital].”
China, India Still Key
Outside of the United States and Canada, “our focus in our business plan has been to focus on China and India,” says Bill Hanley, partner and managing director of international development for Vantage Hospitality, Coral Springs, Florida.
In China, the company has opened its 10th China’s Best Value Inn, and Hanley expects to have 25 of those properties open by the end of 2010. “There is phenomenal growing demand for limited-service hotels,” he notes.
To succeed with this growth strategy, Vantage is restructuring its development operation in China, adding staff with real estate experience, Hanley says.
The main difference between Vantage’s international Value Inn properties and its U.S. properties, Hanley notes, is the availability of food and beverage service. “In the properties we have in China, every one has an F&B operation,” he says.
In India, the company is negotiating a deal to develop the Value Inn brand, and Hanley hopes to have that concluded by the end of the year.
In other India news, Choice Hotels over the summer added franchised Quality properties in Faridabad, Hyderabad and Gurgaon, and Starwood Hotels & Resorts’ Four Points by Sheraton brand recently opened its first property in India, the Four Points by Sheraton Navi Mumbai, Vashi. Starwood has another agreement to open the Four Points by Sheraton, Jaipur City Square, this month. Both hotels are franchised properties, and like Vantage’s international Value Inn properties, both will offer food and beverage services.
In addition, Starwood has other Four Points hotels under development in both India and China. “We look forward to continuing to grow this brand in key markets throughout India and Asia Pacific,” says Miguel Ko, president of Starwood Hotels & Resorts, Asia Pacific.
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