Revenue Management in Franchised Hotels: Strategies for Maximizing Profitability
Franchising in hospitality is a powerful growth strategy, allowing hotel owners to scale their business, leverage brand recognition, and gain access to centralized marketing and distribution networks. But it’s not without challenges. Hoteliers in franchised hotels must balance brand standards, pricing restrictions, and local market dynamics while maximizing profitability.
So, how can franchise hoteliers navigate these complexities and optimize revenue? Let’s break it down.
Franchised vs. Independent Hotels: Key Revenue Management Differences
While both franchised and independent hotels rely on data-driven revenue management, their approach differs due to brand constraints, decision-making autonomy, and operational flexibility.
Factor | Franchised Hotels | Hôtels indépendants |
Pricing Control | Often dictated by the brand or follows strict guidelines. | Full flexibility to set and adjust pricing. |
Brand Standards | Must follow brand-approved strategies and tools. | Total autonomy in branding, marketing, and service. |
Revenue Management Tools | May be required to use brand-approved RMS. | Can choose any RMS based on individual property needs. |
Distribution Strategy | Centralized brand CRS & OTA agreements. | Independent control over OTA participation & direct sales. |
Loyalty Programs | Part of a larger brand-wide loyalty program. | Builds unique guest loyalty strategies. |
Decision-Making Speed | Requires approvals or adherence to brand standards. | Faster decision-making, agile pricing changes. |
During her speech at HSMAI’s ROC 2019, Sharon Paine, former Vice President of Revenue Management at IHG, explained:
“Revenue managers in a franchise environment juggle multiple hotels and brands. They need to be the best in the industry, with strong data skills, flexibility, and communication abilities.”
Simply put, franchised hotels must work within a brand’s framework while still optimizing for their specific market conditions. Independent hotels have more control but must rely entirely on their own expertise and technology for revenue optimization.
The Role of Revenue Managers in Franchised Hotels
Unlike independent hotels, where revenue managers have complete control, franchised hotel revenue managers operate within a multi-property environment. This presents unique challenges:
- Managing multiple properties across different brands and markets.
- Adapting strategies for hotels with varying demand drivers and rate opportunities.
- Switching between properties with different levels of competition—from high-density city markets to isolated regional areas.
- Balancing centralized revenue strategies with local pricing needs.
What Makes a Great Revenue Manager in a Franchise?
- Agility & adaptability: Managing different hotels means adjusting strategies daily based on local market demand.
- Data-driven decision making: They must analyze real-time booking trends, competitor rates, and demand signals—not just historical data.
- Strong communication skills: Revenue managers work remotely with hotel owners and general managers. They must explain pricing strategies clearly and build trust with multiple stakeholders.
- Relationship building: Since franchised hotels must follow brand standards, revenue managers must persuade owners that data-driven pricing decisions will drive profitability.
Understanding Franchise Agreements
Before diving into revenue management strategies, it’s important to understand how different franchising models impact pricing strategies.
1. Types of Franchise Agreements and Revenue Models
Franchise agreements vary in terms of pricing autonomy:
- Full brand control: Some franchises fully dictate pricing through centralized revenue management systems, leaving little room for property-level adjustments.
- Guidelines with flexibility: Others provide recommended pricing structures, allowing hoteliers to make slight adjustments based on local demand.
- Independent revenue management: Some agreements give hotels full control over pricing while requiring brand alignment on promotions or loyalty program rates.
Regardless of the contract type, hoteliers must find ways to optimize revenue within brand constraints while staying competitive in their local market.
2. Balancing Brand Standards with Local Pricing Strategies
Franchised hotels benefit from global marketing campaigns, extensive distribution networks, and loyalty programs. However, these advantages come with limitations:
- Set brand-approved pricing models
- Participation in centralized revenue management programs
- Restrictions on local promotions and direct booking incentives
What’s the solution? Even if the brand largely determines pricing, hoteliers can maximize revenue through strategic upselling, ancillary revenue, and optimized distribution management.
Revenue Management Strategies for Franchised Hotels
Franchised hoteliers don’t always have the same pricing flexibility as independent hotels, but they can still optimize revenue by using the right strategies.
1. Leverage Market Data for Competitive Pricing
Analyzing local demand, competitor pricing, and guest booking behaviors is critical.
“On nights where hotels are busy, they can use all their revenue management levers, but some hotels rarely sell out and have to dig deeper. With short booking windows and last-minute reservations, getting pricing right every single day is crucial.” — Sharon Paine.
Actionable Tip: If your franchise has strict pricing controls, focus on upselling, packaging, and ancillary revenue streams to boost profitability.
2. Optimize Distribution Channels for Maximum Revenue
Most franchise brands require participation in their central reservation system (CRS) and brand-negotiated OTA partnerships. While this increases visibility, it also leads to high commission fees.
Actionable Tip:
- Encourage direct bookings by offering exclusive perks for guests who book through your hotel’s website—like complimentary breakfast or early check-in.
- Adjust availability on high-commission OTAs during peak demand periods to prioritize direct bookings.
3. Use Guest Data for Pricing and Promotions
Franchise hotels collect large amounts of guest data, but it often sits unused in disconnected systems.
“The problem today is that many hotels lack a strategy for data utilization. Often, data sits in silos, not being shared between systems. A structured approach to data is crucial for personalization and guest engagement.” - Alexander Hausmann, Strive
Actionable Tip:
- Use guest segmentation to send targeted offers based on booking history, stay preferences, and spending behavior.
- Leverage automated marketing tools to fill occupancy gaps with dynamic email campaigns to past guests during slow periods.
Principaux points à retenir
- Understand your franchise agreement – Know your pricing autonomy and leverage dynamic pricing where possible.
- Maximize direct bookings – Reduce reliance on OTAs by offering exclusive website perks.
- Utilize guest data – Segment guests and send personalized offers to drive loyalty and repeat bookings.
- Use automation – Use revenue management system to adjust rates dynamically and maintain competitive positioning.
- Optimize ancillary revenue – If pricing is restricted, upsell strategically through bundled packages, upgrades, and add-ons.
Franchise hotels must strike the perfect balance between brand consistency and local market optimization. While franchise agreements may dictate certain pricing structures, distribution strategies, and operational standards, revenue-savvy hoteliers can still maximize profitability by leveraging data-driven pricing, guest segmentation, and automated revenue management tools.
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