Being a Holiday Inn is No Holiday, at Least for 300 Owners Right Now

It looks so easy to own a franchise -- someone else comes up with the winning formula. To succeed, you simply have to connect the dots and do what the manual tells you.

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It looks so easy to own a franchise -- someone else comes up with the winning formula. To succeed, you simply have to connect the dots and do what the manual tells you. Of course, as anyone who owns a franchise will tell you, there's a little more to it than that, and sometimes following the formula isn't so easy. Case in point -- right now, 300 Holiday Inns are in danger of losing their franchise license.

This was made clear at a recent InterContinental Hotels Group convention when Holiday Inn brand chief Kevin Kowalski told the audience of approximately 2,000 hotel franchises that most of the 3,300 Holiday Inn hotels around the world have completed upgrades or committed to making mandated changes by or before the deadline of February 1, 2010. However, 12 percent of the Holiday Inn hotels -- about 300 -- haven't. And those who don't will lose their franchise license, no exceptions. According to USA Today, Kowalski told the assembly before him: "If you're in the minority 12 percent that haven't committed yet, step up and do it. If you have a quality problem, fix it. We're not changing timing." He added, "On the compliance date, February 1, those hotels will get a failure letter and so will their banks."
Why haven't 300 upgraded? Money, obviously. To continue operating as a Holiday Inn, the franchise owners have to buy new bedding, pillows and towels and renovate their lobby. They also have to pipe in hip, modern music from an approved playlist, put in green uplighting on the exterior and making a smattering of other improvements. The Wall Street Journal reports that the cost of revamping each hotel -- which the franchise owner has to pay for, and not IHG -- will be between $150,000 and $250,000.

It's brutal, but I think anyone can see the logic here. If you want your brand to be synonymous with modernity and quality, you have to demand certain things from your franchise owners, and having worked at a hotel during my college years, I picked up a whiff of what can happen when you let your brand go downhill. I worked at a Days Inn. It was a nice enough hotel, and the people I worked with were good and hardworking, but there was a dingy quality to the place; I couldn't imagine wanting to be a guest at this particular Days Inn. There was always a sense that the hotel had seen better days, and sure enough, a couple years after I left, I drove by, and it was no longer a Days Inn. In the subsequent 17 years that have followed, I believe the hotel has changed names two or three times.

Not that I'm unsympathetic to the plights of these individual hotel owners who are at risk of losing their Holiday Inn license. From what the WSJ reports, some of them are reluctant to pile on more debt to their business, and others haven't yet been able to come up with the financing. Lending is tight right now, and a few mortgage bankers haven't received Holiday Inn's memo. Unfortunately that's the way it goes in the hotel franchise industry -- sometimes, just like a wayward traveler, you're left out in the cold, locked out, and looking for a new place to stay.

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