A more positive relationship between a franchisee and the hotel parent company can lead to better occupancy rates and happier customers -- not to mention increased profits. That's according to a new study by Cornell's School of Hotel Administration.

"If a franchiser wants to improve the performance of its hotels, it should treat them more like partners rather than as 'necessary evils' to be tolerated or, worse, adversaries to exploit," said Chekitan Dev, associate professor of strategic marketing at the School of Hotel Administration.

The benefits of a strong marketing partnership between franchiser and franchisee, according to the study, are higher:

• hotel occupancy rates, compared with direct competition;
• average room rates, compared with direct competition;
• gross operating profits, compared with direct competition;
• quality assurance ratings, compared with other hotels in the chain;
• guest satisfaction ratings, compared with other hotels in the chain.

Dev and study co-author James Brown, associate professor of marketing at Pamplin College of Business at the Virginia Polytechnic Institute and State University, polled 331 North American general managers from two major hotel franchisers on their business relationships with franchise headquarters. They asked them to rate their hotel's association with the franchise headquarters and to rate the franchise headquarter's performance during the past year, among other issues.

Researchers also investigated hotel sales volume and profitability in terms of both gross and net operating profits and evaluated the hotels competitive performance against its direct competitors as well as examined the hotel's financial performance, such as average room rates, gross operating profits, sales volume and guest satisfaction and quality-assurance ratings.

Franchisees who scored highest in the poll -- indicating they had an "excellent relationship" with their franchise headquarters -- had an average gross operating profit per-available room (GOPAR) of $12,400. Those franchisees who scored lowest in the poll -- indicating they had an "arm's length relationship" with their franchise headquarters -- recorded an average GOPAR of $7,400.

Examining financial data on per-available-room bases allows one to compare both large and small properties fairly; in addition, the researchers said, assessing financial performance per-available room indicates how effectively the hotel uses its resources.

Franchisees who scored highest in the poll also recorded greater income than those who rated their relationships with franchise headquarters as "arm's length" or "average." The income before fixed charges per-available room (IBFCPAR) was $9,600 for those with "excellent relationships," compared with $6,900 for those with average relationships and $5,800 for those with "arm's length" relationships.

"An effective relationship between both parties benefits both parties," Dev said. "The more income a hotel property generates, the more cash it returns to the franchiser."

Often, however, the relationship between franchisee and franchiser can be a cantankerous one, Dev said. "A franchiser creates the national image of a hotel chain through its advertising and thus creates an expectation in customers of what their visit to one of these properties will be like," he said. "If the visit doesn't meet the customer's expectations, the customer isn't pleased with the hotel chain, which can sour the relationship between franchisee and franchiser."

Franchising accounts for more than 65 percent of the existing U.S. hotel-room supply, with franchisers taking from 5 to 10 percent of the franchisee's revenues.

The study was published in the December 1997 issue of the Cornell Hotel and Restaurant Administration Quarterly.