Warning to franchisees: Switching flags not the silver bullet to occupancy woes

IN AN ECONOMIC DOWNTURN, hotels have to be vigilant to discover what needs to be changed or maintained to attract guests. For franchisees, substituting one flag for another won't necessarily translate into more revenue per available room (RevPAR), explains Fred Schwartz, president of the Atlanta-based Asian American Hotel Owners Association (AAHOA).

Schwartz warns franchisees not to switch brands just because a franchise salesperson claims a new brand will offer better occupancy. Instead, he recommends that AAHOA franchisees make an informed decision on whether changing brands would offer benefits for each particular property.

The economic downturn also heats ups the competition between franchises. “Over the last few years, a lot of old competitors and new competitors have come into the market to sell franchises,” says Mike Leven, CEO and president of U.S. Franchise Systems Inc. (USFS) in Atlanta. “There are more franchises chasing fewer opportunities as new developments are drying up.”

Leven says that the competition has become so fierce that one of his franchisees received a fax on his home fax line soliciting him to change brands. USFS brands such as Hawthorn Suites are being pursued by other franchises with offers to help pay the costs of breaking existing contracts.

“It's not ethical to offer franchisees incentives to get out of a contract,” Leven says. In order to keep franchisees aboard, USFS has made adjustments and provided concessions, he says. “These kinds of tactics reduce the profitability for all parties,” he adds.

First African American-owned convention center hotel to open in Miami this May

DEVELOPER R. DONAHUE PEEBLES plans to open the 422-room Royal Palm Crowne Plaza Resort in Miami Beach on May 15. The resort will be the first African American-owned convention center hotel in the United States.

The $84 million hotel is a replica of the original 1937 Royal Palm hotel. Constructing an African-American owned hotel in Miami Beach was part of the 20-point plan that ended a 1,000-day black tourist boycott in 1993.

The boycott began when local officials slighted South African President Nelson Mandela.

The hotel has some major events booked on its calendar, including the 2003 NAACP convention, a spring event held by the Congressional Black Caucus. Also scheduled is the African American Film Festival.

PricewaterhouseCoopers: Demand drop for lodging is due to soft economy

A PRICEWATERHOUSECOOPERS HOSPITALITY and Leisure Practice analysis reveals that 83% of the downturn in lodging demand is related to the economy rather than apprehension about traveling. This is encouraging news, considering the recent data that revealed that GDP grew in the fourth quarter of 2001, says Bjorn Hanson, the global practice leader of the New York-based hospitality and leisure division.

Lodging demand decreased by 6.5% in the fourth quarter of 2001, according to the report. Of that decrease in demand, 5.4% is directly attributed to the economy while only 1.2% is due to non-economic worries, such as fear of travel and flying.

This is in contrast with the third quarter of 2001, when lodging demand decreased by 6%. According to PricewaterhouseCoopers, only 2.2% of the total decline was due to economic reasons. The remaining 3.8% was due to non-economic factors such as travel concerns.