A 'manchise' agreement could be the next development in the Middle East hospitality industry. A 'manchise' agreement could be the next development in the Middle East hospitality industry.

Experts have revealed that a 'manchise' agreement could be the next development in the Middle East hospitality industry.

Speaking after the Arabian Hotel Investment Conference (AHIC) advisory panel, Abdellah Essonni, chief hospitality officer of Maad International Co, commented that the company he works for believes in brands rather than creating its own, and added that the trend is now to 'manchise', which involves signing a management agreement for a couple of years and then switching to a franchise model.

Abu Dhabi National Hotels (ADNH) CEO Khalid Anib said: "Manchises have been introduced in other parts of the world and it’s becoming popular in this region. You would essentially have the option to execute the right to convert a management agreement into a franchise agreement."

However, Essonni added that this trend has taken a while to enter the region. He explained: "There’s been a reluctance from brands to do that in this part of the world because they believe that it would take time for the owners’ structures to develop that operational expertise, but that’s changing as we go along. We see more and more of that, and that’s a good sign. Owners are becoming more sophisticated when it comes to hotel operations."

Anib added that the main reason owners picked a franchise model was not the fee structure; rather it's the daily operational expenses management. He said: "We just want to be in control of the daily operational measures and related expenses. Look at P/L statement for franchise and managed hotels, there’s a big difference in the ratio. It’s more efficient in the franchise hotel."

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