Combining the Best of Both Worlds: The “Manchise” Model Explained

Written for ETHospitalityWorld from The Economic Times

"Manchise" is a unique business model, which is well-suited for hotel owners looking for more flexibility or independent hoteliers looking for the support and distribution of a well-known brand.

This model can offer an alternative solution for creating a more efficient relationship between owners and brands by combining a franchise agreement with the option of a management contract upheld by an experienced, independent third-party hotel operator.

Once in place, the third-party hotel operator oversees day-to-day operations that will ensure cost-saving to owners, while also bringing a wealth of local market knowledge and guest relations expertise to the position that will help the hotel to successfully operate.

For greenfield hotel projects, the process begins by aligning with the right hotel brand and for the third-party hotel operator to take full responsibility of ensuring all brand standards and technical specifications by the franchiser are met. This in turn allows owners the time and freedom to focus on further development plans.

As part of the franchise agreement included in the manchise model, hoteliers would pay a franchise fee to the franchiser for the use of brand name, logo, access and use of its technology including reservation systems, marketing and benefits of its referrals and loyalty programmes, as well as a host of other advantages.

Franchise fees typically include an initial fee with the franchise application, plus recurring fees paid periodically throughout the term of the agreement. A third-party hotel operator on the other hand is compensated for bringing the operational expertise to take care of the day-to-day operations and is paid a fee, which is a combination of a certain percentage of total revenue and gross operating profit (GOP), which the operator delivers to the owners.

While the manchise concept has been most utilised in the US, it is starting to pick up momentum in other markets around the world as well. It is proving to be an additional way of expanding brands, while offering owners potentially lower fees and greater say over hotel operations. The third-party hotel operator acts as a bridge in developing relationships between owners and international hotel brands as the owner familiarises themselves with the brand standards and operating requirements of that brand.

Wyndham recently signed a 10-year non-exclusive agreement with Nile Hospitality to develop hotels in India and Bhutan under a variety of its brands. These include Wyndham Garden, Ramada by Wyndham, Ramada Encore by Wyndham, Days Inn by Wyndham, Howard Johnson by Wyndham and Hawthorn Suites by Wyndham.

As per the agreement, Nile Hospitality will work with independent hotel owners to manage the day-to-day operations of these new properties. Franchise opportunities remain key for Wyndham’s business model but in India and the sub-continent we feel there is an opportunity for future growth with a combination of the two.

Manchise offers new opportunities for hoteliers and international hotel brands alike, as they look to expand and explore new markets.