Hotel ownership can be rewarding, but it is also tricky. It requires financial investment and commitment, leaving many owners vulnerable to annual operating costs. Many hotel franchisees are experiencing this vulnerability now more than ever. Recent cost trends have made it challenging to keep up with the growing expenses of running a hotel.
From Marriott and Hilton Homewood Suites to small locally-owned chains, hotel brands worldwide are facing a crisis. While their business models stayed the same, prices dropped by nearly 50 %, and occupancy rates remained low.
If you’re thinking about buying a Homewood hotel franchise, you need to consider whether it’s the right business for you. There are lots of reasons why owning a Homewood hotel franchise is not suitable for everyone.
We have thoroughly researched Hilton’s 13 brands, Homewood Suites profile, competitors, franchisee feedback, and their complaint forums to determine what can ever go wrong with this franchise.
Things you should know about the Homewood Hotels brand before you buy one.
The Homewood Suites by Hilton is unlike any other hotel. You have a good kitchen with a full-size refrigerator and separate living and sleeping areas. Typically, these suites are the best choice for families who want to stay in one place and share a
room — kids can play in the common area while parents get some much-needed entertainment in the bedroom.
It focuses on providing extended-stay options for business travelers or people who are on vacation. The company operates about 500 franchises in the United States and 23 ones outside the country.
The Homewood Suites by Hilton is a mid-scale hotel chain. With a franchise fee of up to $75,000, Homewood Suites by Hilton has a total initial investment range of $12,337,700 to $25,972,000.
Initial Franchise Fee -$75,000
Initial Investment -$17,707,945 – $26,344,868
Veteran Incentives – Varies Royalty Fee – 3.5-5.5% A
d Royalty Fee -3.5%
Term of Agreement -22 years Is the franchise term renewable?-Yes
7 Reasons Not To Buy A Homewood Hotels Franchise
Certain aspects of this business may not be so attractive, and it is good to know about them before you get involved. These seven reasons can be an eye-opener before buying Homewood Suites by Hilton franchise or any other franchise.
#1 You might not be cut out for the hotel industry
With extensive experience in hotel management, operations, and the hospitality industry, Homewood Suites is well known for its ability to deliver quality accommodations along with excellent customer service. Each property has a
dedicated staff of approximately 25 employees, ensuring that each guest receives the attention they need. As a Hilton’s Homewood franchisee, you will be able to leverage the company’s established brand recognition to draw potential customers while working your way up to your property management.
#2 Hotel Property Improvement Plans Can Be Pretty Burdensome.
The property improvement plan(PIP) stipulates that the franchisees must make all necessary repairs, renovations, alterations, improvements, replacements, and additions to any real property within a certain period. Hotel owners often face costly upgrades to keep up with industry trends and abide by the franchisor’s regulations. Whereas the penalty of failing to conform with a franchisee’s operations manual can be severe: failing to adjust signage and advertisements for changing laws and ordinances can also lead to penalties and fines. Ignoring procedures can even get a franchisee expelled from the program, thus ending their relationship with the brand altogether.
#3 Neglected Homewood Suites Response to COVID-19 Hotel Franchisees Issues
We surveyed franchisees’ reports and complaints from the hotel industry and found that only 4% of franchisees give their franchisor high marks for relief efforts against covid-19 repercussions. The majority of respondents rated its hotels poorly concerning relief efforts.
While Homewood Suites franchises are struggling to deal with the COVID-19 pandemic, other brands have taken different approaches to the situation. Some have temporarily suspended brand standards, while others have offered franchise fee discounts. While these forms of temporary relief will help hotels get through the pandemic, it is ultimately up to individual brands to help their owners through this
difficult time. These types of gestures will be long-lasting and ultimately benefit both parties.
# 4 The Oversaturation Of Hotel Brands Has Led To Rising Competition.
The hospitality industry has seen explosive growth in the number of brands available to consumers through franchising. However, this growth raises a question: can the industry sustain all of these brands and variations? When there is no limit to the number of hotel brands available — and each new brand requires an investment — it can be difficult for franchisees to maintain their brands’ reputation and profitability.
Brands should consolidate their offerings to reduce brand confusion and to overbuild in global markets.
The fierce competition among brands and services has forced hotels to add a loyalty program that rewards frequent customers. This has decreased the revenues of hotels, as the program drives customers to lower-priced alternatives. Hoteliers must develop a new business model to retain more profits in their pockets.
#5 The Hidden Cost of Hotel Booking Add To Franchisee Cost
Hotels have hidden costs that most prospective guests aren’t aware of before booking. A hotel has to pay a commission or a service fee on every booking made through a third-party website like OTA or GDS, usually 11%. This amount is then deducted from the room’s price, lowering the cost for guests. But not only are the hotels losing money with each booking, but they are also losing potential customers who can’t find available rooms in their preferred destination.
Franchisees may suffer in the future due to the present fee model preventing them from capitalizing on their investment. It would be best if you had a robust solution to lessen hotel franchising issues, most notably with payment options that allow for better transparency and flexibility.
#6 Self-Commission Fees A New Way To Add Cost for Franchisee
Commission fees are an essential part of any business model. Recent examples have shown that some brands are charging franchise owners ridiculous amounts of money for commissions generated on their websites. As a result, the business generated on the brand’s website is made ‘too expensive’ for the franchisee, causing revenue loss for both parties.
#7 Uncertainty Is Always There For Franchise Owners
When Disaster Strikes, Franchising Fears Increase. The CARE Act was an excellent first step, but it’s only a temporary solution to the multifaceted problem plaguing franchisors and franchisees alike.
Despite emergency loans from the CARE Act and Economic Stabilization, hotel franchising issues are dire. To change this, brands must begin building a sustainable model in which retail owners can anticipate a future in which higher costs and a stagnant economy may prevent quick recovery.
Conclusion
Like most industries, hotel franchising has been affected by the ubiquity of technology. With the increasing availability of apps, websites, social media pages, online booking engines, and other tools, hotel guests can make reservations independently without ever needing to contact a hotel. This has caused occupancy rates to drop along with revenue for many small business owners.
However, anyone who is thinking of investing in a Homewood Suites franchise should go about it carefully. Buying a Suite franchise isn’t for everyone, and it can be even trickier than simply buying into any other hotel franchise.
Sources
https://www.hilton.com/en/corporate/wp-content/uploads/2019/04/Franchise-Disclosure-Document-Homewood-Suites-1.pdf https://www.lexology.com/library/detail.aspx?g=ea9f8cc3-5943-436c-bc0d-e426f957c1ef https://lodgingmagazine.com/what-hotel-owners-and-operators-need-to-know-about-the-cares-act/ https://thehill.com/blogs/congress-blog/labor/236764-one-government-lawyers-war-on-the-franchising-business?rl=1 https://millionmilesecrets.com/guides/do-you-know-the-difference-between-hilton-hotel-brands/ https://fairfranchising.org/news-posts/top-hotel-franchising-issues-and-post-covid-recovery/ https://www.wealthmanagement.com/lodging-hotel/navigating-today-s-hotel-property-improvement-plans