HVS International releases 2001 guide for hotel/motel fees

Real Estate Weekly, April 18, 2001

Stephen Rushmore, president and founder of HVS International, the hospitality consulting and hotel appraisal firm, has recently published the 2001 Franchise Fees Analysis Guide -- a survey of the fees charged by major hotel franchisors in the economy, mid-rate, and first- class market segments. This guide enables hotel owners to compare the total cost of one hotel franchise with another.

"The purpose of the hotel franchise fees guide is to provide a comparative analysis of various hotel franchise companies, based on the fees they charge," said Rushmore. "The selection of an appropriate franchise affiliation affects a property's ability to compete in the local market, generate profits, achieve a certain image or market orientation, and benefit from referral business. Because the success of a hotel is primarily based on the cash flow it generates, owners and lenders must weigh the benefits and services of a national affiliation against the total cost of such a commitment."

A total of 83 franchise groups, including 29 economy, 31 mid-rate, and 23 first-class, participated in the analysis. The trend toward continued franchise expansion and segmentation was exhibited by an 11.4% increase in the number of study participants from 1998 to 2000.

The Best Western organization led this year's analysis, with only 2.1% of its projected ten-year revenue going toward expenses related to franchise fees. Other organizations achieving low percentages included Master Host Inns at 4.4%, Guesthouse Inns at 5.3%, and Key West Inns at 5.4%. Study results showed that room revenues ranged from 5.3% to 10.4% in the economy category, 2.1% to 10.5% in the mid-rate category, and 6.8% to 11.3% in the first-class category. Guesthouse Inns, Best Western, and Omni were the respective category leaders in low percentage, at 5.3%, 2.1 %, and 6.8%, respectively. The overall range was a low of 2.1% to a high of 11.3%, with a median of 8.3%.