For a brand to have meaning in any useful sense there must be a collection of clear and concise standards which ensure that each user of the brand has the responsibility to deliver a consistent and uniform guest experience.
The great hotel operating companies of the world whether they are international or entirely local, or whether they have one brand or a suite of brands, fundamentally depend on their owners and franchisees to adhere to brand standards. Typically the brand standards are most comprehensively codified with respect to five (5) star brands as these generally are the most treasured gems in the operator’s stable of brands.
For both managed and franchised hotels, operators take various approaches to brand standard compliance. Some operators mandate brand standard audits and if not complied with on one or more occasions then adverse consequences may be imposed upon the recalcitrant owner with the ultimate sanction being termination of the management or franchise arrangement, removal of the brand and the potential of a claim for significant damages against the owner for breach of contract.
For hotels under management agreements, compliance with brand standards at all times is achieved through the daily management leadership of the general manager and other senior personnel appointed to the hotel by the operator. In practice, however, operators adopt a common sense approach to compliance particularly with respect to matters such as upgrade requirements pertaining to technology in advance of the expiration of the life cycle / tax written down value of existing technology in the hotel.
To take but one example in the technology landscape, mandated requirements to comply with state of the art plasma screen / LCD television receivers are tempered by a recognition that this should only be insisted upon when the life cycle / tax depreciation expiry date of existing television receivers is reached.
Brand standards are the essence of the symbiotic relationship between all owners and franchisees who are authorised to use the brand and the operating company who is the brand owner. Each owner/franchisee looks to the operating company to mandate brand standard compliance across the chain of hotels using the same brand and to take decisive action with respect to instances of non-compliance. The operating company relies on each owner/franchisee to comply with its contractual obligations to comply with brand standards and spend the necessary funds to ensure that this takes place.
About the author
Graeme Dickson is a partner in the Structured Real Estate group in Sydney at Baker & McKenzie and is global coordinator of the Firm’s leading Hotels, Resorts & Tourism Practice Group. He is recommended by Best Lawyers, Chambers Asia Pacific and Doyle’s Guide for his work advising on hotels and tourism law.
Graeme acts primarily for clients in the hotels, resorts, tourism and wider property industries. He has worked extensively on structured purchases and sales of hotel and resort properties, and on managed investment fundraisings which include all forms of public trusts, timeshare schemes, tax driven investment schemes and other similar investments. He has advised on hotel and resort management contracts — including non-disturbance agreements between owners, operators and lenders — and integrated resort developments in Australia, New Zealand, Fiji, Tahiti, Maldives, the Caribbean, Singapore, the United States, People’s Republic of China (including Hong Kong), Japan, Vietnam, Malaysia, India, Thailand, Cambodia, Indonesia, Korea, the Philippines and Eastern Europe.