Franchising model for expansion of the international travel business


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The hotel sector of the travel industry is the leader according to the indicator of economic growth, which is observed in both developed and developing countries. Even under the economic instability and global natural disasters, the industry has seen growth in recent years. The franchising model for expanding activities is central to all successful hotel chains.
The article deals with the franchising model for the travel business expansion and the economic performance of hotel chains such as Marriott International, Wyndham Hotels, and Hilton. They hold a prominent place in the global hotel business, have a steady tendency to expand their business, hold high positions in the ranking of the best franchises in the world and have been recognized by experts.
The main risks for the franchisor and franchisee are determined when making a decision on the expansion of the international travel business, which must be taken into account when developing new markets for hotel chains. The main advantages of the franchising model of expansion, which promote understanding between the parties of the franchise agreement, dynamicize hotel chains expansion and allow for reducing their expenses and increasing incomes.
It was found that the growth of net profit and total income in the indicated hotel chains was due to the increase in the number of rooms in franchising and the positive dynamics of franchise income. A more dynamic pace occurred after the crisis growth in revenues from the franchisee compared with the managerial model. A closer relationship between revenues and key financial indicators has been proved when using a franchising model.

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    • Figure 1. Dynamics of hotel chains’ total income, USD mln
    • Figure 2. Dynamics of net income of hotel chains, USD mln
    • Figure 3. Changes in main hotel KPI’s at Marriott International Inc. in 2008–2016, %
    • Figure 4. Dynamics of income from franchise payment in hotel chains in 2008–2016
    • Figure 5. Dynamic of the number of rooms in a hotel chain Marriott, 2008–2016
    • Figure 6. Franchising model for deciding about the international travel business expansion
    • Table 1. Comparison of the main competitors according to the key indicators, 2016
    • Table 2. Volume of revenue from different sources, 2008–2016, USD mln
    • Table 3. The regression analysis results for Marriott