Syndication and franchising in a new age

14 Mar 2024
Words Grantlee Kieza Resort News

Syndication and franchising in a new age

One of the big changes in the Management and Letting Rights (MLR) industry in recent years has been the number of syndicates and corporate entities buying into it.

Twenty years ago the industry was almost exclusively ‘mum and dad’ operators, and while figures produced by property economist Josh Mangleson, from ResortBrokers, suggest families still run 80 percent of MLR businesses, the numbers are definitely changing.

In recent years large corporate entities, such as Accor, with their Mantra band, and Minor Hotels with their Oaks brand, along with companies such as Quest and Mosaic have been the ones with the money to buy large net profit schemes.

Accor is the world’s largest hotelier but they also have the world’s largest holding in management rights buildings and while those buildings are mostly in Queensland, where the MLR industry flourishes, they also have buildings in Sydney and Melbourne.

There are also small and medium-sized groups in the MLR space such as ULTIQA Hotels & Resorts, Dreamtime Resorts, StayCo, and CLLIX Apartments and Hotels, which are also making their significant presence felt.

CLLIX Apartments and Hotels oversees 18 properties and 800 apartments; 12 of the properties are in Queensland – Brisbane, the Gold Coast, and Sunshine Coast – five are in Melbourne, and one is in Adelaide.

StayCo operates resort and holiday properties on the Gold Coast and Noosa and is one of the largest operators in the Broadbeach and Surfers Paradise markets.

There are also more and more sophisticated investors with skin in the game forming syndicates to use the economies of scale when buying management rights schemes, sometimes with hundreds of lots. These syndicates bring together investors and operators and help managers get a leg-up when they otherwise wouldn’t have the capacity to borrow the necessary funds.

Another business model that is starting to make real inroads into MLR is franchising.

Craig Hooley, the Chief Operating Officer, Minor Hotels, says his company has four properties with franchise agreements already signed, three with the Oaks Hotels, Resorts & Suites brand and one under the Avani Hotels & Resorts banner.

The company is negotiating franchising deals on 30 more serviced apartment properties under the Oaks banner.

“We unveiled our first franchised hotel in January last year – Oaks Toowoomba Hotel,” he said.

“We took the position to franchise because of an inherent demand for the support that a franchise framework can provide.

“What we found, particularly in regional locations in Australia, is that the properties are generally smaller businesses, with managers who are not experienced operators and in need of support.

“By joining an established growing global company, operators can access benefits including extensive distribution networks, an international loyalty program of 20 million members, an experienced central reservations centre and corporate account programs.

“Our experienced team also provides phone support to operators seeking consultation, at any time.”

Mr Hooley said the Oaks franchise model supported smaller operations.

“Because the management rights business is becoming more competitive, operators must have better systems and brand awareness,” he said.

“It requires a significant investment of time and money to build those things, but through franchising, operators can take advantage of our established brand and distribution system, as well as access training in the standards of customer service required to be competitive.”

Mr Hooley said the Oaks franchising model also provided relief managers which were often sorely needed at family-run businesses where the operators were often crying out for a break.

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