Franchised vs managed: What’s the right model for you?

The travel industry is experiencing a robust resurgence, having successfully navigated the challenges of recent years marked by travel restrictions, lockdowns, and economic uncertainties. It is anticipated that hotel occupancy will increase by 2.5% and the average daily rate will grow by 4.9% globally over the next 12 months. Room demand is set to reach an all-time high, meaning there are ample opportunities for hoteliers to capitalise on.

This prospective boom in activity makes owning a hotel a more attractive proposition than at any time over the last few years, but one of the key decisions that a hotel owner faces once they have completed their purchase is choosing the most suitable operating model for running their business. Both the franchised and managed models have their benefits and challenges, but which route the owner goes down is entirely dependent on how much control they want on a day-to-day basis and how confident they are that they can hit the ground running and turn a profit.

Spot the differences

Both models are feasible and can lead to business success. However, there are clear differences that might work perfectly for one hotel owner but might be less appealing to another.

The franchise model works by providing an owner with a set of standards, guidelines and best practices in order to run their business. It helps them to manage their hotel in a way that suits them, giving them full control over key decisions and greater responsibilities when it comes to turning a profit. At Wyndham Hotels and Resorts, the majority of our hotels run on a franchise basis. This means owners can be seamlessly linked into a global organisation, with access to our loyalty programme – Wyndham Rewards – which connects to our distribution platforms, global business portals and sales teams and a wide array of online training and brand standards. But beyond this, owners have full autonomy over the day-to-day running of their hotel.

The managed model, however, is a 360-degree service, whereby an owner effectively takes a back seat and lets their management company handle everything. They are responsible for everything from top to bottom. This includes driving revenue for the owner on all levels, from rooms to F&B, to rentals and leases, and the spa and wellness centres, but also the responsibility to control all costs and structures to, ultimately, produce a healthy gross operating profit (GOP) for the owner.

Controlling the controllable

Naturally, the franchise model provides an owner with a greater sense of control and responsibility within the parameters established by the brand standards. They have complete freedom when it comes to the staffing structures, commercial policies and activities, while at the same time they need to ensure that they remain informed and use all franchise tools and support systems provided by the brand.

This heightened sense of control is very appealing to more experienced hotel owners, who have been successful in the past and are confident in their abilities to operate profitable hotels. Their skilled asset management teams can supervise and direct the hotel teams, whilst also having the support of being connected to a global network and the associated benefits that this entails.

The managed model, on the other hand, involves the management company taking full control of the owner’s business to ensure effective and efficient management. The owner will always approve the yearly operating budget, and the furniture fixtures and equipment (FF&E) budget, along with any required capital replacements as presented annually by the brand. The managed model is perfectly suited to owners that are new to the industry and those who invest in the industry but do not want to handle the day-to-day responsibilities of ensuring the hotel operation is successful.

In short, it’s all about controlling the controllable, and working via a model that aligns best with the owner’s needs, business priorities and vision.

Doing good for people and planet

Sustainability is, quite rightly, a hot topic for the industry and ensuring that hotels have structures and programmes in place to support their local communities and the planet is no longer a ‘nice-to-have’ – it is crucial.

Fortunately, hotel owners have a wealth of resources to advise them, regardless of whether they operate in a franchised or managed model. At Wyndham, we are incredibly proud of  our Wyndham Green programme, a multi-tiered certification that helps hotel owners implement sustainability strategies and then provides them with industry recognition, to reassure guests and help educate them during their stay. The programme is available to both our franchised and managed owners, and we are proud to say that across the Middle East and Africa 79% of our hotels presently hold a Wyndham Green certification.

To conclude, having flexibility and providing hotel owners with a choice when it comes to how hands-on they want to be with the day-to-day management of their operation is part of what makes our industry so appealing to many budding hoteliers. They have the choice to operate with more autonomy, yet they can also relinquish some control, all with the same objective of building a successful business and turning a profit.