Centralized Services | Practical Law

Centralized Services | Practical Law

Centralized Services

Centralized Services

Practical Law Glossary Item w-000-1787 (Approx. 3 pages)

Glossary

Centralized Services

Certain reservation, marketing, purchasing, and other services, programs, and benefits a branded hotel manager or franchisor may provide to a hotel owner. The type and costs of these services can be negotiated, depending on whether the parties are entering into a management agreement or franchise agreement. The level of centralized services offered by a brand is often one factor hotel owners consider in deciding whether to select a particular brand.
Some services may be optional while others are mandatory. Owners want to negotiate for the optimum number of services based on the particular hotel's market. From a cost perspective, owners want to ensure that they are:
  • Not paying more for services based on what other comparable brands offer.
  • Not paying more for services based on what other comparable hotels pay for similar services.
  • Not paying a mark-up or profit margin based on the brand's out-of-pocket costs.
  • Receiving volume discounts and rebates earned by the brand based on all managed or franchised hotels.
Well-known or established brands are generally less likely to negotiate the terms and costs of their centralized services. Conversely, boutique brands may be more willing to negotiate the terms and costs of their centralized services.