Globally, a significant chunk of the portfolio of hotel chains is under franchising arrangements. Amid signs of a maturing market, and better owner credentials, brands are now warming up to the franchise model in India.
Even Indian chains are exploring franchising opportunities, industry insiders said.
Amith Khanna,head of franchise for India, the Middle East and Africa at IHG Hotels & Resorts, said over 80% of IHG’s global portfolio is franchised and this has proven to be a beneficial model for both IHG and owners. “The franchise model specifically caters to mature markets where owners have strong capacity and credentials in managing hotels and brands to the highest standards. Globally, it’s above 80%. In India, the Middle East and Africa, it’s 30% franchised, and our ambition is to expand in India,”he added.
Lemon Tree Hotels has a new division specifically for franchising, said president Vikramjit Singh. “This is in line with our asset-light strategy through which we plan to expand through the management and franchise routes. We have been signing and opening managed properties for over 10 years now, and are now actively targeting franchise contracts as well,” he said.
Nikhil Sharma, managing director for Eurasia at Wyndham Hotels & Resorts, the world’s largest hotel franchising company, said as more hotel chains expand their presence in tier-1, 2 and 3 cities, it gradually becomes more challenging for independent and small hotel owners to run their businesses smoothly in a competitive environment.
“Here, franchising can support independent hotels in various aspects (from training to resources) to map their growth,” Sharma said. “Another positive aspect of franchising is an affiliation with a hotel chain can significantly enhance the visibility via sales and marketing network, consumer awareness and authenticity of the brand.” Wyndham has 57 hotels with more than 5,000 rooms operational in India.
In India’s hospitality sector, the franchising model has picked up significantly in the last two years, said Deepak Jain, founder of MayFair Consultants. “Owners get great flexibility in how the hotel is to be operated with lower fee out pay and, secondly, with the rise of third-party management companies, international and domestic brands are now more open to franchising discussions, as it safeguards their brand standards and customer experience,” he said.
Zubin Saxena, managing director and area senior VP, South Asia, at Radisson Hotel Group, said that in India, the chain is open to “selective franchising” for its mid-market brands with experienced partners who are equipped in managing branded, world-class properties.
A few years back, most branded hotels were in metro cities and state capitals, but they are everywhere now, be it hill stations or other leisure locations, said Randhir Narayan, founder and CEO of AM Hotel Kollection, a third party hotel management company. “It is here that brand franchise and professional hotel management comes into play. Because of the topography and domestic demand, hotel chains are open to smaller key counts and have the option of franchising, if professionally managed. More owners are accepting the three way arrangment,” he added.
Narayan said within franchising, AM Hotel Kollection is already operating hotels for three Indian brands and more contracts with international and Indian brands are in the process of getting finalised.