Selecting a partner hotel by the chain

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Handbook of Hotel Chain Management
Chapter 18
Selecting a Partner Hotel by the Chain
To cite this article:
Blal, I., Hodari, D., & Turner, M. J. (2016). Selecting a partner hotel by the chain. In S.
Ivanov, M. Ivanova & V. P. Magnini (Eds.), The Routledge Handbook of Hotel Chain
Management (pp. 205-220). New York, NY: Routledge.
Inès Blal
Ecole hôtelière de Lausanne
Route de Cojonnex 18-CP 37
1000 Lausanne 25
SWITZERLAND
Phone: +41 21 785 14 54
Email: ines.blal@ehl.ch
Inès Blal (Ph.D., Virginia Polytechnic Institute and State University) is an Assistant-Professor
of Strategic Management at the Ecole hotelière de Lausanne, Switzerland. Dr. Blal specialises
in performance measures of lodging corporations and execution of expansion strategies. Her
research has been published in, among other journals, the International Journal of Hospitality
Management and the Cornell Hospitality Quarterly. Her work includes studies of the
development department within lodging corporations, the effect of online rating on
performance, the impact of the asset light strategy in the industry, methods for scanning the
environment, and the financing possibilities for small and medium hotels in Switzerland.
Demian Hodari
Ecole hôtelière de Lausanne
Route de Cojonnex 18-CP 37
1000 Lausanne 25
SWITZERLAND
Phone: +41 21 785 11 11

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Email: demian.hodari@ehl.ch
Demian Hodari (Ph.D., University of Surrey) is an Assistant Professor of Strategic
Management at the Ecole hôtelière de Lausanne, Switzerland. Dr. Hodari specialises in the
strategic partnerships between hotel owners, management companies and general managers,
and the ensuing performance implications. His research has been published in, among other
journals, the Cornell Hospitality Quarterly, the International Journal of Hospitality
Management, and the Journal of Hospitality Financial Management. He is a frequent speaker
at international hotel investment conferences and his practitioner-oriented research is
regularly published in industry trade publications.
Michael J. Turner
The University of Queensland
UQ Business School
St. Lucia, QLD 4072
AUSTRALIA
Phone: +61 7 3346 8071
Email: m.turner@business.uq.edu.au
Michael James Turner (Ph.D., Griffith University) is a Senior Lecturer in Accounting at The
University of Queensland, Brisbane, Australia. Dr. Turner specialises in focusing his
management accounting research on the hospitality industry and has developed a particular
interest in the management and governance challenges arising in hotels mediated by a
management contract. He has refereed publications in hospitality journals such as
International Journal of Hospitality Management, Journal of Hospitality and Tourism
Research, and Journal of Hospitality and Tourism Management and accounting journals such
as Accounting & Business Research, and Accounting & Finance.

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Introduction
Separation of ownership and operating activities constitutes one of the most important
changes the hotel industry has seen over the last two decades. A hotel corporation’s separation
of real-estate ownership from operating activities is referred to as an “asset light strategy”
(Blal & Graf, 2013; Sohn, Tang & Jang, 2013). The implementation of the asset light strategy
started to become feasible from the early 1990s onward after the debt market boomed.
Conditions became ever more favourable thereafter and into the 2000s as the performance of
investment into general equity markets declined amid lower interest rates and lower inflation
(Blal & Graf, 2013). As hotel investment became more attractive (Larkin & Lam, 2007), Real
Estate Investment Trusts (REITs) soon emerged as one of the predominate vehicles through
which new investors could obtain hotel ownership. Marriott, for example, started divesting
real-estate assets in October 1993 (Host Marriott and Marriott International 1994-1995 annual
reports), a move that was soon followed by most of the major international hotel corporations.
The asset light strategy has enabled lodging corporations to grow their portfolios primarily
through franchise and management contracts, and in certain regions, leases. In this setting,
most of the properties that a hotel corporation manages are owned by other entities. A general
absence of real estate ownership signifies that new imperatives drive the performance of hotel
corporations. Hotel corporations’ successful execution of an asset light strategy hinges to a
large extent on their ability to carefully select hotel partners who have specific characteristics
and who are willing to sign new franchise and management contracts. In other words, the
partnership hotel corporations (and their relevant chains) establish with hotel owners (i.e.,
partners) becomes an essential element of their successful expansion and performance.
Selection of a partner that will work hand-in-hand with a hotel corporation to ensure success
at the property level is a complex endeavour and entails balancing the interests of both the
partner and chain and aligning these to each property’s specificities. This fine balance defines
the performance and success of hotel chains’ pursuit of an asset light strategy. As such, the
key driver of success for hotel corporations is the ability to assess the potential of a
prospective partner’s property and evaluate the likelihood of a successful relationship with the
partner. Hotel chains put in place several mechanisms to manage such assessments, which
include reliance on brand standards, use of contractual clauses that secure equilibrium, and
ensuring that the fundamentals of tourism and hotel operations are well-established in the
hotel project itself. Each of these fundamental aspects is discussed in this chapter. The

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remainder of this chapter is structured as follows. There are two main sections. First, there is
an overview of operating models in which partner selection is critical, the focus being on
franchise and management contracts. The second section presents the selection process,
looking at the extent of partners’ alignment with brand, alignment with actions, and general
negotiation.
Operating Models
On an international basis, six major foreign market entry methods favoured by hotel
corporations include wholly-owned, joint venture, strategic alliance, licensing or franchising,
management contracts, or consortia (Athiyaman & Go, 2003). Hotel corporations’ adoption of
an asset light strategy has seen a growing trend toward use of non-equity modes,
predominantly the franchise and management contract (Clarke & Chen, 2007). Regional
differences are apparent regarding the popularity of these two entry modes, which can depend
on partner profiles and the state of the tourism industry. Franchise contracts, for example, are
more common in mature hotel markets, such as the U.S. In Europe, management contracts are
beginning to replace the more traditional leases, except in specific areas such as Germany and
the Nordic countries. In fact, differences in the type of contracts signed vary across partner
profiles. The objective and purpose of institutional partners such as insurance companies vary
from those of REITs or individual partners and this variability defines the nature of contracts
that a hotel chain signs (Turner & Guilding, 2014). Diversity in the profile and aspirations of
possible partners creates a complex setting for decision-making, whereby the selection and
negotiation process with the partner hotel becomes essential for the success of hotel chains.
Franchise
Hotel franchising is defined as an arrangement where:
“For a fee, an independent hotel adopts the franchiser's name and trademarks and
receives services in return, including the preparatory steps of feasibility, site selection,
financing, design, and planning” (Garcia-Falcon & Medina-Munoz, 1999, p. 106).
Franchising is a popular approach among previously independently-owned and operated
hotels because benefits of being part of a chain can be accessed through adoption of a hotel
corporation’s brand name, trademarks and services, yet partners are able to retain operational
control. The median franchise cost in the U.S. is 12% of room revenue (HVS, 2014). Despite
this relatively high cost, studies (e.g., Fladmoe-Lindquist & Laurent, 1995; Moon & Sharma,

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2014) demonstrate that in both developed and emerging markets, conditions favour hotels that
use franchising arrangements as opposed to wholly-owned and managed structures due to the
expert know-how of hotel chains and their expansive customer base. Hotel franchises are,
however, still relatively uncommon in parts of Asia, perhaps due to hotel corporations’
perceived fear of handing operational control to their partner amid somewhat uncertain legal
environments.
Requirements for selection of a successful franchise hotel partner
A successful franchise contract is one where both the hotel chain and the hotel partner each
achieve their expected financial benefits and relevant strategic objectives. For that purpose,
the selection process needs to include assessment of the degree of alignment between the
interests of the hotel chain and the hotel partner. The extensive use of franchising by hotel
chains stems largely from a wide and important range of benefits it provides to them, which
include: (1) less capital required for expansion relative to the owner-operator structure (Go &
Christensen, 1989); (2) access to the benefits of internationalisation with less risk than direct
investment (Aydin & Kacker, 1990); (3) the ability to expand throughout a large geographical
area without high parent company costs (Go & Pine, 1995); and (4) the provision of a more
stable cash flow compared to the management contract (Madanoglu & Olsen, 2005).
In order to maximise the benefits of franchising, hotel chains need to constantly strive to
increase the value of their brand as it is this value that franchisees largely seek access to,
along with operational and managerial support. Stemming from this is the main disadvantage
of the franchise arrangement, the incidence of agency issues because the day-to-day
operations of the hotel are largely delegated to the franchisee partner. As a result, hotel chains
must ensure that their partner respects trademarked standard operating procedures and is able
to execute the brand’s promise. If this does not occur, it can have a detrimental effect on the
chain’s brand value as it loses coherence and meaning for customers. To overcome such
problems, the hotel chain can implement careful governance mechanisms but these can
become expensive (Singh, Schmidgall, & Beals, 2004). Nevertheless, both the hotel chain and
the hotel partner need the brand to develop in order to support their objectives. It is therefore
vital that both parties protect the brand and its standards.
Hotel chains’ selection of hotel partners for franchising therefore can be reduced to two
fundamentals. First, partners (i.e., future franchisees) must present solid financial capabilities

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that allow them to support opening and ongoing operation of the hotel property including
periodic capital expenditure to maintain brand standards. This entails screening the partner’s
ability to either raise capital or to have liquid capital on-hand. It is similarly important that
maintenance of brand standards is outlined in a legally binding contractual form. Second, the
hotel chain needs to ensure that the partner has managerial and operational capabilities
suitable to operate the hotel. For that purpose, the hotel chain can either select partners with
experience in hotel operations, or propose a supporting network to assist franchisees in their
operations. In this case, hotel chains can offer training or headquarter processes to assist
management of the unit (e.g., accounting and reporting tools).
Management Contracts
The separation of ownership and management which results from use of a hotel management
contract is becoming more widespread and is one of the driving mechanisms for the rapid
internationalisation of the hotel industry (Slattery, 2012). A management contract is defined
as:
“.... a written agreement between the owner [i.e., partner] of a hotel and an
operator [i.e., hotel corporation through their hotel chain], by which the operator is
appointed to operate and manage the hotel in the name, on behalf of and for the
account of the owner and the operator is to receive a management fee in return.”
(Schlup, 2004, p. 23)
Much of the reason for the popularity of management contracts is that hotels are expensive to
build, are highly leveraged, and require an advanced level of knowledge and technology in
marketing and professional management to operate effectively. The expertise required to
operate a large hotel is more readily available in such an arrangement (deRoos, 2010).
Management contracts enable hotel owners to derive the benefits of owning a hotel without
the requirement of having to operate it. The proliferation of such contracts has seen the
establishment of many global hotel chains pursuing an asset light strategy and the
disappearance of some domestic local hotel chains (Cai & Perry-Hobson, 2004).
Requirements for selection of a successful management contract hotel partner
A hotel corporation’s objectives when signing a management contract are twofold. First, they
continually strive to increase the value of their brand(s) and the longevity of their
management contracts so that they can increase their ability to secure new management

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contracts and increase the number of rooms in their network (Beals & Denton, 2005). With
regard to the incentive to maximise their brand’s value, it is notable that a large proportion of
a typical hotel corporation’s assets are comprised of goodwill associated with their hotel
chain’s brand name(s) (Dev, Morgan, & Shoemaker, 1995). Second, a hotel corporation’s
operational remuneration is widely referred to as a ‘management fee’ and thus hotel chains
target a substantial level of cash-flow streams from each property through these management
fees.
Three basic management fee structures are found in practice: (1) a base fee only; (2) an
incentive fee only; or (3) a base fee combined with an incentive fee (Goddard & Standish-
Wilkinson, 2002). The combination of a base and incentive fee is the most common. Hotel
chains commonly face a trade-off between supporting the development of their brand versus
increasing the management fee collected. For example, within the context of the capital
expenditure decision-making process, a proposed expenditure may have a negative impact on
profit thereby potentially reducing the hotel chain’s management fee but the chain may still
support the expenditure if the benefit to their brand is perceived to outweigh any potential
management fee reduction (Turner & Guilding, 2010b).
An important advantage hotel chains derive from use of management contracts relative to
franchise contracts is the ability to gain control over the hotel’s day-to-day operations. As a
result, this eliminates any need for the hotel partner to have managerial and/or operational
capability suitable to operate a hotel. A much larger pool of potential hotel partners can
therefore be accessed. Nowadays, however, many partners realise that their own interests and
those of the hotel chain could diverge. Partners are therefore increasingly employing asset
managers to closely monitor the hotel chain’s management of their property (Armitstead,
2004). Hotel chains need to be mindful of this and ensure that they select a hotel partner who
will not resort to overly restrictive monitoring to the point that they can no longer make the
operational and capital expenditure decisions they feel are necessary. At the same time, and as
in the franchising arrangement, there is an important need for hotel chains to ensure that hotel
partners have solid financial resources so that brand standards can be upheld. Given the
predominant importance of ongoing capital expenditure in maintaining brand standards, as a
further safeguard the majority of management contracts require hotel partners to establish a
reserve for the replacement of furniture, fittings and equipment (FF&E) set at approximately
three percent of annual turnover (Turner & Guilding, 2010a). The hotel chain typically

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administers expenditure from this reserve account. Nevertheless, the FF&E reserve account is
about 40% underfunded (Turner & Guilding, 2010a) relative to the true cost of all capital
expenditure required to maintain brand standards so it is imperative that hotel chains sign with
a partner that understands and supports their brand strategy.
The Selection Process of Hotel Chains
A hotel chain’s selection of a hotel partner is a complex process that involves an intricate set
of tangible and intangible aspects (Altinay, 2006; Ivanonva & Ivanov, 2014). It involves an
assessment of the property’s financial projections as well as the human dynamics that will
take place over the length of the contract. In other words, it entails the evaluation of a set of
task-related criteria such as the location and the design of the building along with partner-
related criteria such as the financial abilities of the partner (Altinay, 2006; Geringer, 1991;
Ivanonva & Ivanova, 2014). Three fundamental components shape this multi-dimensional
process (Altinay, 2006; Ghorbal-Blal, 2011; Ivanonva & Ivanov, 2014), which have a bearing
on the extent to which the interests of both parties are aligned. Each, however, addresses these
issues from different perspectives. First, the partner’s property must align with the hotel
chain’s strategic imperatives for its brand, which includes the relative fit between location,
physical layout, employees, brand standards, and objectives. Second, it consists of estimating
trade-offs during the contract negotiation phase required to converge the interests of each
party. Finally, the selection process needs to consider the mechanisms of alignment of both
parties’ actions throughout the duration of the contract. Exhibit 18.1 illustrates this process
and each of the three issues are examined below.
INSERT EXHIBIT 1 ABOUT HERE
Alignment with the brand
Brand Standards
Hotel chains’ franchise and management contracts typically include a clause on brand
standards. This clause serves two objectives. First, it details the tangible elements that support
the implementation and delivery of the hotel chain’s brand promise to the hotel property’s
guests. Every hotel chain has a detailed description of how to execute its brand standards
which include specific criteria that the chain requires the partner to implement at the property
level. For example, an essential brand standard is the number of rooms the property must
have. Some brands revolve around the concept of intimacy or uniqueness and therefore need a

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smaller number of rooms. New boutique hotel concepts, for instance, usually require less than
200 rooms (Balekjian & Sarheim, 2011). Other brands cater to large tourism destinations and
can therefore host more guests such as hotels on the Las Vegas strip or large resorts in popular
destinations around the world. Brand standards often also include design and architectural
layouts with specific description of space required. They also stipulate the number of
restaurants or other outlets, the type of amenities that should be offered and other features that
will ensure coherence of the brand for hotel guests across the chain’s different properties. This
aspect of brand standards is enforced in the case of management contracts to ensure that the
owner will invest in these tangible elements, thus securing both the brand and hotel’s long-
term success. In the case of franchise agreements, the brand standard clause extends to
operating standards. These include components that ensure the day-to-day handling of the
brand and its operations. Brand standards are essential for hotel chains (franchisors) to ensure
consistency and quality of their brand across the network they serve the control for both task
and partner-related criteria.
Selecting the location
The hotel industry’s most recognisable quote “location, location, location” applies because
site selection is a primary criterion that a hotel chain considers when deciding upon a hotel
partner. It is a fundamental task-related criterion (Ivanova & Ivanov, 2014). Here, it is a
matter of selecting a partner with a property in a location that aligns with the needs of the
customer base of the brand(s) the hotel corporation is developing. A misfit between the brand
and the location of the property is a great risk for both the hotel chain and the partner because
it will likely hinder the property’s potential to attract the target market(s). The purpose of
“flagging” a property is to attract the brand’s customer base. Therefore, alignment between
the location and selected brand is a precondition in partner selection. In this step the chain’s
managers evaluate the hotel’s destination attractiveness to the brand’s customer base as well
as the degree of exposure of the brand(s) to its customer base. This assessment includes a first
study of proximity to economic activity, commercial synergies and the overall potential of the
tourism destination where the hotel is located. Estimates of the degree of brand
competitiveness and potential synergies among the chain’s existing brands in the targeted
destination are also considered in this first screening. Common practice in the industry when
selecting a hotel partner is to conduct feasibility studies for the future property (Hodari &
Samson, 2014). Whether conducted externally by an independent consultant, or internally
within the chain, these evaluations forecast the main operational drivers (i.e., rates,

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occupancy, F&B revenues, operating costs) in order to assess the potential fit between the
property and a specific brand, the brand and location, as well as to compare the hotel’s
expected return against the chain’s objectives for the brand. It also allows the chain to better
define the necessary infrastructure which would best support the brand in this particular
property and location.
Selecting the infrastructure
Brand standards stipulate components that comprise the hotel’s infrastructure. In particular,
they define the total number of rooms in the hotel/project, size of the plot, and room size for
the business’ lodging aspect. For the other part of the operations, the chain’s standards also
determine the number and size of restaurants and auxiliary service outlets (e.g., SPA, shop,
etc.). Once the chain has assessed the property’s location and infrastructure, the selection
process next consists of assessing the alignment between the partner’s view of these points
and its disposition to support the hotel chain in implementing them. In the case of a
management contract, the hotel chain focuses on ensuring that the physical layout will be
financed by the partner and maintained throughout the contract. In the context of a franchise
agreement, it will enforce these during the first stages and ensure that they are maintained
throughout the duration of the agreement.
Selecting the people
Estimating the costs associated with hiring and training staff in a location with adequate local
resources constitutes the third step for ensuring alignment between a partner’s property and
hotel chain’s brand (Fladmoe-Lindquist & Laurent, 1995). At this stage of the selection
process, both the hotel chain and its partner have access to local human resources which can
implement the brand’s standards. In this context, the level of experience in the destination of
either the hotel chain or the partner, as well as the knowledge of operations in the destination,
are valuable inputs in the contracting process. Any difficulty to recruit and employ personnel
presents a risk for the success of the property in terms of both the hotel chain and its partner.
Furthermore, when signing a franchise, the hotel chain needs to select a partner who not only
has the required entrepreneurial skills but also the necessary operational competencies
(Altinay, 2006). For the later requirement, the partner (franchisee) can hire a manager who
already has the necessary hotel know-how, or can rely on the hotel chain’s (franchisor)
support to develop their personal capabilities in this regard. In any case, the hotel chain needs
to ensure the partner’s commitment to operate the brand as it has been developed. In the case

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of a management contract, the challenge resides in the capacity of the hotel chain to select,
hire, and train employees in the location as they are responsible for executing the brand under
their own control.
Alignment of actions
Pre-opening procedures
Just as a hotel chain can sign a management contract or franchise agreement for a new hotel,
they often also sign these with existing properties. In mature markets such as the U.S.,
“reflagging” or signing contracts for new brands with an already existing property is in fact
the most common practice (Lomano, 2006). In either case, alignment of interests between the
partner and the hotel chain needs to occur during the period before re-flagging or the first
opening of the hotel. Any modification to the settled pre-opening procedures of the
corporation affects the hotel’s likelihood for success. At this stage, it is a matter of assessing
the level of effort (or costs) that their company will engage in during the pre-opening stage to
align the hotel project with the hotel chain’s requirements. In particular, the number of
months prior to opening, but most importantly the degree of advancement of the project or
works to adapt to the new brand standard is an essential estimate. The earlier a hotel
corporation intervenes in the construction of the hotel, the higher the degree of compliance
that the hotel project will achieve with one of the chains’ brands and thus the lower the
control efforts will need to be. Similarly, the closer the compliance of an existing property’s
brand standards with the new brand’s standards, the easier the transition between brands will
be for the hotel. Finally, if the pre-opening procedure allows the necessary time to hire the
local expertise to operate the hotel, or gain knowledge of the destination, it will increase the
likelihood that the collaboration would succeed. In any case, the selection needs to include an
assessment of the partner’s level of expertise and past experience. Similarly, the willingness
of the partner to comply with the brand standards is assessed at this stage. This is a subjective
element in the process that requires the ability to assess human potential and manage
interpersonal dynamics (Altinay, 2005, 2006; Ghorbal-Blal, 2011). In the case of a
management contract, the hotel chain needs to ensure that the owner will provide the
sufficient financial and structural support for the hotel chain to operate the property. In
franchise agreements, this implies that hotel chains need to focus on selecting partners who
will manage and protect their brand standards.

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Shared responsibility between the hotel chain and hotel partner
As important as due diligence or estimation of future revenues generated by the property,
agreement between the chain and partner regarding roles and responsibilities is essential in a
chains’ selection of a hotel partner. This choice is intangible and consists of an evaluation of
convergence between the chain’s expectations and those of the partner. For instance, the
discussion about alignment of interests and responsibility in terms of numbers (i.e., expected
return, forecasted margins) and time line (i.e., short-term or long-term focus) for each partner
are tangible elements that constitute part of the selection process. Intangibles such as
estimation of a partner’s commitment to the agreement and their willingness to comply with
responsibilities stipulated in the contract when needed are associated with interpersonal and
human competency. The greater the divergence between the chain and partner’s objectives,
the more likely will be that additional efforts will be required to ensure the contract’s success.
The vast variety of owner types and personalities exacerbate this step’s subjective and
intangible aspects. Each partner presents a different profile, personality, history and set of
objectives (Turner & Guilding, 2014). Any divergence between the interests and the views of
the hotel chain and its partner can have an effect on capital spending decisions, which have a
profound impact on the performance of the brand and the individual property. This aspect
adds a new complexity to the selection process since the individuality of each partner property
and its potential as a hotel need to be taken into consideration along with the individual
dynamics.
The negotiation
The signed franchise, lease, or management contract is a reflection of the relative bargaining
power between the hotel chain and its partner. A balanced contract, whether management,
franchise or lease, reflects an alignment of interests and commitment of both parties to the
property’s successful management. Uneven clauses favouring one party over the other will
affect the relationship and hotel performance. There are nevertheless several contractual
elements that a hotel chain needs to negotiate in order to mitigate expansion risk and secure
successful implementation of an asset light strategy. Below is a short selection of the
contractual elements that help balance a partnership during the negotiation stage of the
selection process.
Impact and areas of protection
A clause defining where and when the hotel chain can open a new hotel is usually included in
management and franchise contracts. Such a clause covers the impact issue, which occurs

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when a hotel chain opens a new property that competes with the existing one and takes away
its business. Areas of protection can help the partner from cannibalisation from other units of
the hotel chain. But if they are too restrictive, they can prevent the growth of the brand, which
in turn can harm both the chain and the partner.
Technical and pre-opening fees
This aspect of the negotiation is specific to management contracts, which typically include a
“technical and pre-opening fees” clause. This pertains to the level of support that the hotel
chain will provide to the partner when aligning the property to brand standards. A hotel
chain’s bargaining power in the deal often determines technical fees attached to the contract.
When the power of a hotel chain is low, particularly when chains are in the early stages of
development (typically, in the case of a new market), this effort is often assumed by the chain.
Financial commitment
Concession of equity or assets or any form of investment by a hotel corporation in a deal is
rare in an industry where companies seek to adopt an asset light strategy. Nevertheless, if the
hotel project scores highly in terms of requiring a low level of effort to include it in the
network and it conforms to the chain’s set of objectives for the particular destination, then the
corporation may concede some form of financial commitment. In the case of a franchise
agreement, if the contract involves, for instance, a master franchise which sustains expansion
goals of the chain, financial commitment can be considered. These special cases require
involvement and approval of senior managers at the hotel chain’s corporate parent. Financial
concession of this kind also implies further effort in terms of control of operations by the
hotel chain. This practice is often applied in primary markets which are highly sought-after by
most hotel chains due to their strategic importance.
Termination
Management contracts often include performance guarantee clauses to ensure that the hotel
chain operates the hotel at the highest possible performance level. Such guarantees can
increase the alignment of the hotel chain’s interests and goals with those of the hotel partner
under a management contract. In these cases, partner’s priority clauses or some other sort of
earning guarantees are conceded by the hotel chain to the partner to ensure convergence of
their efforts and actions. In the case of franchise contracts, termination is attached in
connection with the partner’s respect of brand standards. But like any other clause within a
franchise or a management contract, this tangible element is not the panacea for a successful

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partnership (Turner & Guilding, 2010b) as unplanned difficulties due to misfit of cultures and
personalities must also be managed.
Conclusion
The selection of hotel partner is a complex process for hotel chain executives as each property
pertains to a different context with unique challenges. It consists of balancing the operating
and strategic imperatives of the hotel chain with the unique profile of the property and
partner(s). It thus requires a mix of hotel operating expertise and skills in managing human
dynamics. At the heart of this balance are brand standards that ensure execution of expansion
strategies of hotel chains through its agreements with its partners.

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EXHIBIT 18.1: Hotel chain selection of a hotel partner
Source: Blal (2013).
Table 18.1: Hotel chain selection criteria of a hotel partner
Task-related criteria
Partner-related criteria
 Location of the property
 Accessibility
 Characteristics and conditions of
building facilities
 Possibility of adaptation to Chain’s
brand standards
 Experience of employees
 Qualification of managers
 Property’s past financial performance
 Property’s track record in the local community
 Ownership of the property and land
 Financial stability of the partner
 Feasibility study
Source: Adapted from Altinay (2006); Blal (2013); Ivanova & Ivanov (2014).
The right spot
The right
infrastructure
The right
people
Pre-opening procedures
Track record
Shared responsibility
Technical fees
Financial commitment
Guarantee clauses
1. Stick to the basics
2. Estimate the effort
3. Ease the deal
The keys to selecting a good hotel project