How to choose a hotel brand or operator for a new property?

Choosing the right hotel brand or operator for a new property involves a careful assessment of your project's characteristics and market conditions, followed by a thorough evaluation of potential partners. The decision will affect the property's long-term performance and market position. This article provides a framework for making an informed choice.

Assess your property and target market

Before approaching any brand or operator, you need a clear understanding of your property. Consider its physical attributes, such as location, size, number of rooms, and existing facilities. What kind of guest experience do you aim to offer? Is it a luxury resort, a boutique city hotel, an extended-stay property, or a budget-friendly option? Your property's unique selling points will guide your search. Next, analyse your target market. Who are your potential guests? What are their needs, preferences, and spending habits? Understanding the local demand generators, the competitive situation, and overall market trends will help you identify brands that resonate with your intended audience and can perform well in that specific environment.

Understand agreement types

There are generally two main types of agreements you will encounter: management agreements and franchise agreements. Each has different implications for control, operational responsibility, and financial returns.

• Management Agreement: Under a management agreement, the brand or operator takes full responsibility for the day-to-day operations of the hotel. They hire and manage staff, handle marketing and sales, implement operational standards, and manage finances. As the owner, you retain ownership of the asset but delegate operational control to the operator. This option is suitable if you prefer a hands-off approach and want to benefit from the operator's expertise and established systems.
• Franchise Agreement: With a franchise agreement, you, as the owner, retain operational control of the hotel. You operate the property under the brand's name, using their systems, standards, and marketing support. You are responsible for hiring staff, managing daily operations, and ensuring compliance with brand standards. This option offers more control but requires you to have or build the operational capabilities yourself. It is suitable for owners who have hospitality experience or prefer to be more involved in the property's management.

Some operators also offer hybrid models or white-label management, where they manage the property without imposing their brand name. This can be useful for independent hotels that want professional management while maintaining their unique identity.

Evaluate track record and reputation

When considering potential partners, look closely at their track record and reputation. Research their existing portfolio of properties. Do they have experience with hotels similar to yours in terms of size, market segment, and location? Examine their financial performance history across various properties. A strong brand or operator should demonstrate consistent revenue generation, efficient cost control, and satisfactory guest satisfaction scores. Look at their brand recognition and distribution capabilities. A well-known brand can attract more guests and command higher average daily rates. Consider their sales and marketing strategies, loyalty programmes, and technological infrastructure. Speak with other owners who work with the brands or operators you are considering to get their perspectives on the partnership experience.

Consider financial implications and negotiate terms

The financial aspects of any agreement are important. Brands and operators typically charge various fees. These can include initial affiliation fees, base management fees (often a percentage of gross revenue), incentive fees (a percentage of gross operating profit), marketing and reservations fees, and technical assistance fees during development. Understand the fee structure thoroughly and how it will impact your property's profitability. Beyond fees, consider the capital expenditure requirements. Brands often have strict brand standards that may necessitate significant investment in renovations or upgrades. Negotiating the key terms of the management or franchise agreement is a critical step. Pay close attention to the term length, termination clauses, performance clauses, reporting requirements, and the scope of services provided. Ensure that the agreement aligns with your long-term financial goals and operational expectations. Seek legal and financial advice to review all proposed terms before signing.

Making the right choice for your new property requires careful research and strategic thinking. DolceVita Hospitality can support your initial planning with a market assessment, available for €499 in five working days, or a preliminary feasibility study and full study, quoted per project.

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