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LAS VEGAS – What works best in a chain of franchisees? A strong top-down approach for a unified standard, where a few franchisees simply advise a franchisor? Or a bottom-up approach of licensees who decide the brand’s own collective fate?
There are a lot of extraordinary things happening at Vantage Hospitality, holding company of Americas Best Value Inn and Lexington Franchising Inc. For one, Vantage is a hotel company directed by the chain’s individual hotel owner-operators. At times it resembles a republic and at other times it looks more like direct democracy plucked right from ancient Athens.
Unlike most hotel owner-operators, Vantage licensees do not just advise the brand, they command the brand. For example, Lexington franchisees and Americas Best Value Inn members decide brand standards, required amenities, smoking policies, green initiatives and even fee increases. America's Best Value Inn's general board and advertising council are each comprised of delegates and a preferred vendor representative, who are elected by its general body of members. Advertising committee delegates serve three-year terms, while franchisee representatives of the general board serve two-year terms. Any proposed initiative must be approved by a minimum 66.66 percent of Vantage’s hotel owner-operator members.
“People are amazed when I tell them that it is our members who decide how much they want to pay for membership fees and marketing services – not my partners or me,” says Bloss. “Most people would expect unanimous defeat at best and a rebellion at the worst – but that doesn’t happen.” In the podcast below, chief operating officer Moyle agrees. He tells a story about owner-operators who actually voted for a fee increase.
Wouldn’t democracy introduce division and partisan politics into a system of independent hotel entrepreneurs, while a traditional chain management structure would provide the certainty and unity of a traditional company-owned, top-down command structure? Not here. No matter how much I prodded hotel owner-operators in quiet solitary spots at their annual conference in Las Vegas, assuring them that their anonymity would be preserved, not a single franchisee had a bad word to say about their brand or its leadership. That’s a stunning experience for me. In public meetings, the brand leaders seemed to come most alive when an operation issue or problem was asked. It was a visual sign that input and involvement from members was not only encouraged in Vantage, it was expected.
What are the results of its citizens taking charge of the international brand? These hotel licensees receive more bang for their royalty buck. According to HVS global hospitality services 2013 analysis, America’s Best Value Inn’s actual 5.8 percent fees of total rooms revenue are the lowest of any major economy hotel chain. (Day’s Inn is the most expensive at 13.41 percent.) And what are owners receiving for their low royalty payments? America’s Best Value Inn is perceived by consumers as best in budget hotels, according to a 2013 Harris Poll EquiTrend Equity Score.
When it comes to franchisees, the brand is innovative too. In 2008 ABVI instituted the “100 Percent ROI Promise,” which promises to deliver more revenue than an owner pays in franchise fees. If hotel owner-operators aren’t satisfied, Vantage will waive its license fees. Action plans will be implemented until acceptable delivery of business is realized. In an industry that wants to lock franchisees in with 20-year contracts, Vantage offers short-term one-year contracts to hotel owners. And if that weren't enough, hotel owners are allowed to exit the chain without penalties if the brand is not working for them.
Vantage hotel owners vote and decide on who will be the preferred vendors. Vantage says that it does not profit from its vendors. Any and all savings are passed along to the members. If the chain’s hotel licensees can find products with the same specifications, they are welcome to use those vendors.
As one can imagine, the company has faced few lawsuits from its franchisees.
During Vantage Hospitality Group’s annual conference a year ago, I spoke with CEO Roger Bloss and COO Bernard Moyle. Vantage is the holding company for economy hotel chain Americas Best Value Inn and the mid- to upper-scale Lexington line, founded in 2007. With over 1,100 hotels, Vantage is now the world’s eighth largest hotel company in property count.
With that as preface, here is a short podcast of Blue MauMau's conversation with CEO Roger Bloss, followed by COO Bernard Moyle.
This is part three, the last in our interview series with Vantage Hospitality Group's corporate leadership.