Managing the hospitality business is a challenging process especially given the current circumstances of a global pandemic. To remain a strong brand with promising revenue, hotels turn to various partnerships and affiliations that help them delegate responsibilities and enter mutually beneficial cooperation. Management contracts and franchising agreements stand out among the associations, as they are time-honored and beneficial. Yet, these contracts differ in functions, so they naturally bring different advantages to the foreground.
Several advantages determine the popularity of management contracts. The main one is that a long-term contract allows establishing beneficial relations between hotel owners and operators that gain profits percentage. In this regard, managers are motivated to develop hotel businesses to increase income. The operators could also expand to different markets, so management contracts are generally implemented in the hotel industry. They allow hotels to widen their assets and, subsequently, develop and strengthen their positions.
The hotel’s franchise affiliation is a specific agreement between a hospitality business and a franchisor brand that allows a hotel entity to operate under the franchisor brand. This affiliation is often practiced when a hospitality entity wants to expand to different markets and needs a well-known name and an excellent reputation to operate under. Contrary to management contracts, the franchising objective is to increase profit by not financial but PR innovations. Consequently, the main advantage of franchising is strengthening of brand footprint and further diversification of assets.
Undoubtedly, both management and franchising contracts benefit the hotel industry, as they allow hotels to enter new markets, implement innovations, and increase their profits. During the pandemic, affiliation agreements result in advanced resilience and flexibility of hotel industry. Yet, the contracts in question highlight different objectives and means of achieving those aims, so the preferred way of affiliation should be based on a separated hotel development strategy.