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Over the years, hotel franchising contracts have become a useful and flexible instrument for Italian hotel entrepreneurs. Through the franchising, independent hotels can receive commercial and marketing services, associating their own sign with a recognizable and differentiated commercial brand, in order to increase a more and more international customer retention and loyalty.

Franchise agreements are regulated through some standard circumstances that are repeated in each contract, in order to fully respect the standardization of procedures both of the affiliated hotel and the hotel franchisor.

In such contracts, franchisors supply commercial, marketing, management and operative support services. They provide a brand and a coordinated image in order to allow a range of services to the independent hotel that affiliates.

Services offered by the hotel franchisor are paid through different commissions or the so-called Franchising Fees. Such fees can be calculated according to the structure number of rooms and the hotel location. They include a fixed remuneration of contract plus a variable periodic payment, even depending on the turnover generated during the contract duration.

The advantages of adopting franchising agreements are mainly the commercial visibility earned through a commercial sign, reservations made in the franchisor’s booking centers and the possibility of entering a hotel network with a quite limited financial commitment, even at international level.

On the other hand, a hotel franchising contract, especially with an international brand, requires a quite long commitment – an average of 5 years – and often involves the asset renovation, so that it can be in line with the standards defined by the franchisor.

The franchise agreement negotiation can be based on the identification of all tangible elements that are offered by the hotel franchisor, considering that such contracts are quite equivalent, since they have similar features and characteristics.  On the contrary, it is more difficult to evaluate with precision the perspective beneficial effects that the independent hotel entrepreneur can enjoy through the contract. In this last case, professional support of a specialized company allows to formulate projections relating to the potential increases of operational results, subsequent to the adoption of a franchise contract.

The selection process of a franchise contract involves the following phases:

1. Identification of the selection objectives and the pursued benefits

2. Identification of the main brands that offer franchising formulas suitable to the hotel product 

3. Comparative analysis between the franchising formulas, including benefit analysis and financial projections related to the contract adoption 

4. Negotiation with the hotel franchisor to draft the contract term sheet

5. Contract drafting, signature and conclusion of the agreement.

Many hotel operators have recently revised their franchising contract formulas in the light of hotel industry changes and online reservation portals. Such changes concern both the services offered by independent hotels and the modalities to assign a brand and a coordinated image. These are still very important aspects for the differentiation of hotel products.

Feasibility studies support the whole process of real estate development, identifying realistic objectives in terms of performance of the new accommodation structure in the market.

Hotel feasibility studies are the result of a professional activity aimed at establishing if a hotel project has enough probability to be economically sustainable, according to current and perspective market conditions.

The process of hotel valuation is linked to the unique features of hotel, hospitality and tourist assets, identifying a monetary value to be attributed to a property in given market conditions.

The hotel valuation is generally carried out by qualified professionals and consists of drafting and issuing a written and signed Report, which also contains the definitions of value determined.

The Investment Memorandums or Information Memorandums represent a key tool to communicate the investment opportunity to the public.

This tool, deriving from the English world, allows a professional, transparent and punctual promotion of the sale and purchase opportunity, qualifying in a unique way the hospitality property offered to the market.

The professional search and selection service of a hotel operator aims at identifying, evaluating and choosing the hotel operator that best suits the hotel owner’s needs, considering his objectives and the hotel features.

The commonly adopted professional approach involves the presence of a professional appointed by the Client that can identify hotel operators interested in signing mainly long-term hotel contracts.

The process of negotiating a hotel contract is a complex professional activity requiring relevant legal and commercial experience, which has to be acquired within the hotel and accommodation industry.

The lease contract and the management agreement are the most common forms in hotel contracts.

It is useful to rely on qualified professionals who know how to draft and negotiate these contracts.

Through franchising, independent hotels can receive commercial and marketing services, associating their own name with a recognizable brand in order to increase customer retention and loyalty.

The franchise agreement negotiation is based on the identification of all elements that are offered by the hotel franchisor, evaluating the perspective benefits that independent hotel entrepreneurs can enjoy through the contract.

Recently, hotel architecture and design have experienced important changes aimed at improving the guests’ experience, in order to best respond to a need of identity and recognition towards the places and the surrounding environment.

Furthermore, for all kinds of accommodation structures there has been a functional innovation path, due to technology advancements and building automation.

Such elements reflect on the distribution of the different areas included in the architectural project.

Hotel due diligence investigations are undertaken by buyers and investors in the process of evaluating a hotel investment, tailored to the acquisition of the asset.

The whole process is often assigned to specialized professionals, whereof principle objective is to render as faithfully as possible the buyer’s vision on asset to current status, legally and physically, technically and fiscally.

Hotel, hospitality and tourist investment sales are experiencing remarkable development thanks to the presence of many international operators and investors who see Italy as a key tourist destination.

The sales process can be directly adopted by the owner or supported by companies and real estate advisors that manage the whole investment sale process towards the market.

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