A Critical Analysis of Hotel-Impact Issues

Abstract

The growth needs of hotel chains sometimes collide with their franchisees' needs for territorial protection, particularly with the maturation of most hotel markets. The term "incremental impact" is used to describe the possible loss of business experienced by an existing lodging property when a new hotel or motel with the same or a related brand opens nearby. An impact study can help estimate the likelihood and extent of incremental impact from a new property. Most experienced impact analysts can develop a reliable qualitative determination of impact, but quantitative estimates are subject to many vagaries. If chains offer clear impact policies, franchisees will at least know where they stand when the franchisor proposes to open a new property nearby. Alternatively, territorial-protection clauses may protect franchisees and clarify the franchise relationship.