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Franchise Attack from Local Hotel Brands

In the last few years, local brands, which have been present in the market but have had slower growth compared to other foreign brands, have started to change the competition balance in the market by taking their place in the growth trend through franchise and management agreements.

Ethem Zagikyan, Chairman of the Board of Continent Worldwide Hotels - Continent Worldwide Hotels Group - Continent Hotel Management Services, which has been providing services in hotel branding and franchise for many years, evaluated these developments.

Buying a franchise and partnering with a brand...

In the past, investing in hotels in Turkey was seen as a prestige point for investors who wanted to own a hotel. Noticeably, most hotel owners have another primary business such as contracting, construction material sales, transportation, and other similar fields. When they start investing in a hotel, they choose one of two paths. The first is to create a hotel name using their primary brand name or surname. The second, as we all know, is to operate the facility according to the standards of a hotel brand by signing an agreement with them.

In Turkey, there is generally a perception that "an expensive product is of good quality". If something is expensive, it is considered good and of high quality, while cheap goods are viewed as low quality. When combined with a desire for showiness, investors naturally believed that paying high fees for a foreign hotel brand would give them good prestige in the area where they operate, and that opening a hotel with such a brand would result in a faster return on investment.

However, today we can see that this vision is starting to change. Firstly, there are now companies that open hotels specifically for the purpose of running a hotel business, rather than as a secondary business. These investors usually conduct thorough feasibility studies and carefully select both brand partners and consulting firms at the very beginning of the process. Additionally, investors who do not want to create a branded hotel generally find it beneficial to work with a management or consulting firm.

Brand is now a necessity... A must-have... But only if you're sure it's profitable...

There's a global transformation and shift in perspective... If you look back 30 years ago in America, you can observe that two-thirds of hotels were independent and not affiliated with any brand... This percentage dropped below 40% in recent years... Properties that don't form partnerships with major brands have started forming consortia to create their own groups... In the end, creating brand awareness is inevitable in a world where the internet dominates our lives so intensely, and it's impossible not to exist with brand power in online sales channels...

The important thing here is the benefits that the brand brings to you and the value it adds to your hotel, as well as the services it provides. Another important factor is the value it brings to you in the market, the room rate, and the price you are required to pay for these services in exchange for quality... If you're confident in your earnings and happy with the net profit you're making, then there's nothing wrong with this relationship.

However, if a hotel investor is experiencing a decrease in profit share compared to the value that the brand adds, then there is something wrong with the situation.

This issue is more relevant to middle and upper-middle segment hotel investments. If you have a 4-star hotel with a moderate number of rooms, and you're paying franchise entry fees and monthly revenue shares, and being a branded hotel is not allowing you to increase your room rates and occupancy rates by an average of 30% or more compared to an unbranded hotel in your region, then being branded is not giving you an advantage.

The rise of local brands...

With the increasing number of informed investors conducting research and entering into hotel investments, it was inevitable that local hotel brands would start to offer alternatives... In this context, a model that is more flexible and offers more support to the investor, but with pricing that is also more affordable than foreign brands, has begun to change the market dynamics.

Here, what is important is the variety of additional services that the franchising brand provides to the hotel investor. For example, support for interior design, operational support, support for setting up online sales channels, support for reservation engines to enable reservations to be taken from the hotel's own website, conceptual support for food and beverage locations, and so on...

Today, our local brands, which serve in many cities and continue to grow with their upcoming hotel openings, are announcing that they will sustain their existence through franchising and management. In addition to these brands, our boutique brands, which invest in multiple locations and operate their own hotels with their own conceptual brands, are also beginning to emerge, which are certain to gain momentum and grow in the coming years.

The concepts and brands we have developed as Continent Worldwide Hotels are attracting attention...

Since 2010, we have been actively working on hotel brand franchise development and promoting our brands abroad, and we are one of the first companies to start this business. Our brands, Continent Hotels & Resorts, AncyrA Hotels & Inns, Swiss Inn Hotels, and JOMO Hotels are highly popular both domestically and internationally... We also have other brands that we are developing concepts for. In addition, we serve our hotel investors who want to benefit from the advantages of a hotel group without losing their autonomy through our "by Continent Collection" soft brand.

We strive to make our franchise model as transparent and affordable as possible, with low entry and monthly licensing fees. We are the only company that offers almost all services provided by a management company to our franchisees under the franchise agreement.

Our philosophy is "affordable products do not mean low-quality products."

We market our products (brands) as accessible and valuable, prioritizing the earnings of our hotel investors. Hotels that sign franchise agreements with us receive free support from us on many issues, from web design to online reservation engines. At the end of the day, when the hotel is profitable, we are profitable too.

Currently, besides two hotels opened in the Middle East, we have more than 8 hotels that will open by April or will switch from other brands to our brands. There are also 6 hotels in Turkey that will open with our brands this year and next. These numbers are constantly changing due to the demands of our investors and the agreements we sign. Our closest openings are Swiss Inn Akdeniz Mersin and Swiss Inn Gemlik Bursa.



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