tension between the brand and its initial developers and in order to avoid development delays as these conflicts are ironed out , it is important that the brand and the developer agree upfront on what is meant by the brand ’ s brand standards ; such as , whether there are comparable existing hotels the parties can look to in the future that set the quality level of the brand ’ s standards , the projected competitive set of hotels to the new hotel , and the projected costs of implementing the standards , from a hard and soft goods perspective and from an operational and staffing perspective .
BRAND RESOURCES – Unless the brand is being launched by an established US brand or an established international brand , there may or may not be a larger platform supporting brand services for the initial hotels opening under the new brand , such as technical services , reservations , and purchasing . So the developer may be agreeing to brand services that may be developed in the future , may never be
developed or may never grow beyond a small platform or a limited number of properties . For the developer , it is important to ensure that the cost of any centralized services are fairly allocated to the property ( i . e ., the first hotel should not bear the burden of the entire centralized services or marketing costs for an international brand and the marketing fee should be fairly allocated between US and international marketing efforts ). The brand should be sensitive to these concerns and have a strategy for the timing of development of brand resources in the future to present to any potential developers .
BRAND LONGEVITY – One of the biggest considerations for the brand and the developer is what happens if the brand does not grow or somehow misses the mark . If the hotel is not successful , then both parties may want to either end the relationship or reposition the property . It is important for the parties to discuss the parameters for any exit ahead of time as the brand ’ s and the developer ’ s interest may not be aligned once the hotel fails to hit projections .
Above all , both the brand and the developer need to keep in mind that working with a new brand is different than working with an established brand and , to ensure that the project and the brand are a success , both sides need to be flexible in addressing the inevitable challenges of launching a new brand .
About the author Gosia Kosturek focuses her practice on hospitality law and general corporate law . She assists clients in numerous types of corporate transactions , including acquisitions , mergers , and financings , primarily in the hospitality industry . Kosturek is also a member of the firm ’ s Data Security & Privacy Practice Group . Contact her at gkosturek @ eckertseamans . com
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