Franchising model for expansion of the international travel business
-
DOIhttp://dx.doi.org/10.21511/ppm.15(4-1).2017.07
-
Article InfoVolume 15 2017, Issue #4, pp. 230-242
- 1231 Views
-
533 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The hotel sector of the travel industry is the leader according to the indicator of economic growth, which is observed in both developed and developing countries. Even under the economic instability and global natural disasters, the industry has seen growth in recent years. The franchising model for expanding activities is central to all successful hotel chains.
The article deals with the franchising model for the travel business expansion and the economic performance of hotel chains such as Marriott International, Wyndham Hotels, and Hilton. They hold a prominent place in the global hotel business, have a steady tendency to expand their business, hold high positions in the ranking of the best franchises in the world and have been recognized by experts.
The main risks for the franchisor and franchisee are determined when making a decision on the expansion of the international travel business, which must be taken into account when developing new markets for hotel chains. The main advantages of the franchising model of expansion, which promote understanding between the parties of the franchise agreement, dynamicize hotel chains expansion and allow for reducing their expenses and increasing incomes.
It was found that the growth of net profit and total income in the indicated hotel chains was due to the increase in the number of rooms in franchising and the positive dynamics of franchise income. A more dynamic pace occurred after the crisis growth in revenues from the franchisee compared with the managerial model. A closer relationship between revenues and key financial indicators has been proved when using a franchising model.
- Keywords
-
JEL Classification (Paper profile tab)L83, M21, Z3
-
References41
-
Tables3
-
Figures6
-
- Figure 1. Dynamics of hotel chains’ total income, USD mln
- Figure 2. Dynamics of net income of hotel chains, USD mln
- Figure 3. Changes in main hotel KPI’s at Marriott International Inc. in 2008–2016, %
- Figure 4. Dynamics of income from franchise payment in hotel chains in 2008–2016
- Figure 5. Dynamic of the number of rooms in a hotel chain Marriott, 2008–2016
- Figure 6. Franchising model for deciding about the international travel business expansion
-
- Table 1. Comparison of the main competitors according to the key indicators, 2016
- Table 2. Volume of revenue from different sources, 2008–2016, USD mln
- Table 3. The regression analysis results for Marriott
-
- Alon, I., Ni, L., & Wang, Y. (2012). Examining the determinants of hotel chain expansion through international franchising. International Journal of Hospitality Management, 31(2), 379- 386.
- Altinay, L. (2007). The internationalization of hospitality firms: factors influencing a franchise decision-making process. Journal of Services Marketing, 21(6), 398-409.
- Ben Aissa, S., & Goaied, M. (2016). Determinants of tourism hotel market efficiency. International Journal of Culture, Tourism and Hospitality Research, 10(2), 173- 190.
- Brookes, M., & Roper, A. (2010). The impact of entry modes on the organizational design of international hotel chains. The Service Industries Journal, 30(9), 1499-1512.
- Chen, J. J., & Dimou, I. (2005). Expansion strategy of international hotel firms. Journal of Business Research, 58(12), 1730- 1740.
- Connell, J. (1997). International hotel franchise relationships – UK franchisee perspectives. International Journal of Contemporary Hospitality Management, 9(5/6), 215-220
- Connell, J. (1999). Diversity in large firm international franchise strategy. Journal of Consumer Marketing, 16(1), 86-95.
- Dev, C. S., Erramilli, M. K., & Agarwal, S. (2002). Brands Across Borders: Determining Factors in Choosing Franchising or Management Contracts for Entering International Markets. The Cornell Hotel and Restaurant Administration Quarterly, 43(6), 91-104.
- Dirnou, I. (2004). Expansion Strategies of International Hotel Firms: A Transaction Cost Economics and Agency Theory (285 p.). School of Management Studies, University of Surrey.
- Falko, Y. A. (2015). Sientific-theoretical principles of global informatization in tourism business. The Bulletin of the Dnipropetrovsk University. Series: Management of Innovations, 23(4), 92-100.
- Franchise Direct (2017). Methodology for the Top 100 Global Franchises Ranking.
- Ghorbal-Blal, I. (2008). An Exploration of the Role of the Construct of Control in Expansion Strategy of Hotel Chains: A Multiple-Case Study (341 p.). Virginia Polytechnic Institute and State University.
- Grynko, T. V., & Krupskyi, O. P. (2015). Franchising as a tool for organizational culture formation in tourism. Actual Problems in Economics, 1(163), 145-154 [in Ukrainian].
- Grynko, T. V., & Krupskyi, O. P. (2015). Unit culture role in operate developing of tourism and hotel business. In K. S. Shaposhnikova et al. (Ed.), Corporate management: processes, strategies, technologies (pp. 142- 167). Kherson: Helvetica [In Ukrainian].
- Hachemi Aliouche, E., Kaen, F., & Schlentrich, U. (2012). The market performance of franchise stock portfolios. International Journal of Contemporary Hospitality Management, 24(5), 791-809.
- Hilton (2016). We Are Hilton. We Are Hospitality. 2016 ANNUAL REPORT.
- Hyun-Soo Woo (2016). Intra-Firm and Inter-Firm Agglomeration: The Location Decisions of Multi-Unit Firms (125 p.). Arizona State University.
- International Franchise Association (2016). Franchise Business Economic Outlook for 2016 (27 р.). International Franchise Association Educational Foundation. IHS Economics, January 2016.
- Ivanova, M., & Ivanov, S. (2014). Hotel Chains’ Entry Mode in Bulgaria. Anatolia, 25(1), 131-135.
- Johnson, C., & Vanetti, M. (2005). Locational strategies of international hotel chains. Annals of Tourism Research, 32(4), 1077- 1099.
- Krasnikova, N. (2013) Current trends of Development in international tourism. Herald of the Dnepropetrovsk National University Series ‘Economics’, 7(3), 257-262 [in Ukrainian].
- Marriott International (2017). About the Marriott Fact Book.
- Marriott International Awards and Recognition (2017).
- Marriott International Franchise Cost & Fees (2017).
- Marriott International, Inc. (2010). Transition Report 2010 (123p.). United States Securities and Exchange Commission. Washington, D.C..
- Marriott International, Inc. (2013). Transition Report 2013 (122 р.). United States Securities and Exchange Commission. Washington, D.C..
- Marriott International, Inc. (2016). Transition Report 2016 (139 р.). United States Securities and Exchange Commission. Washington, D.C..
- Martorell Cunill, O., Mulet Forteza, C., & Gil-Lafuente, A. M. (2013). Choice of entry mode into a foreign market. Kybernetes, 42(5), 800-814.
- Matthews, S. (2016a). Introducing Marriott International: Your Key Company Overview.
- Matthews, S. (2016b). What You May Not Know – But Should – about Marriott International. Part 8 of 15. Jan 14, 2016.
- McGuffie, J. (1996). Franchsing hotels in Europe. Travel and Tourism Analyst, 1, 36-52.
- Michael, S. C. (2000). The effect of organizational form on quality: the case of franchising. Journal of Economic Behavior & Organization, 43(3), 295-318.
- Moon, J., & Sharma, A. (2014). Franchising Effects on the Lodging Industry: Optimal Franchising Proportion in Terms of Profitability and Intangible Value. Tourism Economics, 20(5), 1027-1045.
- NASDAQ. (2017). MAR Company Financials.
- Pine, R., Qiu Zhang, H., & Qi, P. (2000). The challenges and opportunities of franchising in China’s hotel industry. International Journal of Contemporary Hospitality Management, 12(5), 300-307.
- Piot-Lepetit, I., Perrigot, R., & Cliquet, G. (2014). Organizational form and efficiency of franchise chains. International Journal of Retail & Distribution Management, 42(7), 671-684.
- Skripak, S. J., Parsons, R., Cortes, A., & Walz, A. (2016). In Fundamentals of Business. Hospitality and Tourism (рр. 329-362). Pamplin College of Business and Virginia Tech Libraries.
- Stanković, M. (2017). International Franchising in the Hotel Industry. Facta Universitatis, Series: Economics and Organization, 415-426.
- Statista Official Site (2017). Number of Marriott International Hotel Rooms Worldwide from 2009 to 2016.
- Wong, T., & Wickham, W. (2015). An examination of Marriott’s entry into the Chinese hospitality industry: a Brand Equity perspective. Tourism Management, 48, 439-454.
- Wyndham Worldwide Corporation (2016). Annual Report 2016.