Digital media’s impact on franchises

Steve Ballmer, CEO of Microsoft noted at the recently held meeting of world leaders in advertising in Cannes, France, that traditional media will not bounce back. The UK's Guardian newspaper carries a report where Ballmer says that the "global advertising economy has been permanently reset at a lower level meaning that there is no recovery to pre-recession levels".  At the same event an FT report has Google's Eric Shmidt noting what is glaringly obvious to most that they have not "needed to advertise" as they "pretty much operate from an end-user referral basis." 

Many hotel companies have already made the shift to both digital media while moving to leverage user generated conent like tripadvisor.com, which can lead to end-user referral. The former is evidenced by the rapid decline in ads in mainstream newspapers from hotels, major and minor. TV advertising, traditionally a big part of the advertising and marketing budget of the majors is being steadily replaced by online where absolute costs could be as little as 10% of that for TV ads.

While no numbers are available in the public domain, TV spending continues to be a significant part of hospitality majors. For franchisees who, in some instances, contribute as much as 35% of their franchise fees for marketing fees to cover the cost of brandwide advertising and marketing, to a franchisor, it could have a meaningful outcome were the savings passed through. Greater franchisee input on media outlays, should at a minimum, be at the forefront of franchisee concerns.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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