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Fred Schwartz Talks about AAHOA’s Future
ATLANTA —Fred Schwartz, president of the Asian American Hotel Owners Association, discusses what's coming up for the association and in franchising. He speaks about ranking franchisors by fair franchising practices, the future of franchising legislation and what's in store for AAHOA.
Under his leadership, AAHOA has nearly quadrupled the group's paid membership from 3,000 in 1996 to 11,000 in 2012. Its growing membership currently own 43 percent of the nation's hotels.
Fred Schwartz Talks about AAHOA’s Future
The group is well-known in the hospitality sector for its focus on curbing franchising abuses. Its 12 points of fair franchising frowns on franchisors setting up a hotel next door to their own franchises, instantly terminating a franchise at will without bothering to ask for a cure period, or having franchise salespeople say one thing in order to make the sale but then legally disqualifying the franchisee from calling them to task on sVuch false claims. It's a tough world with lots of tricks in franchising and AAHOA knows it.
Before joining AAHOA, Schwartz managed the hotel program for the 1996 Olympic Games in Atlanta. He has held senior management positions with Hyatt Hotels, Warwick International and Crowne Plaza.
Blue MauMau sat down with Mr. Schwartz at the expansive Georgia Worldwide Congre
ss Center on May 4. It was the second day of this year's Asian American Hotel Owners Association annual conference.
BMM – How is AAHOA's conference this year?
Schwartz: Excellent. We have probably one of the strongest agendas to date, with the debate between Michael Steele and Howard Dean, former heads of the Republican National Committee and the Democratic National Committee. Today we had President George W. Bush answer our questions. We had a hotel industry issues panel, moderated by attorney Robert Zarco and six top franchisor executives. We had a trade show, with almost 400 vendors. We had Bollywood bands entertain us last night.
At AAHOA's conventions, it is non-stop networking, non-stop food, non-stop entertainment. As we sit here in this interview, right now there are four concurrent education seminars, along with the trade show (of exhibiting vendors). One thing we pride ourselves on is a very strong, interactive AAHOA convention.
BMM: How many were in attendance?
Schwartz: There are still walk-ins happening but right now there are probably about 3,500 attendees. I don't have the latest numbers from the registration desk today, day two of the convention.
BMM: What's on the agenda for AAHOA?
Schwartz: We are ratcheting up our advocacy efforts. One of the competitive edges of AAHOA is the unifying characteristics of our members.
Access to capital is important because our members want to build. Our entrepreneurs are the ones who will put America back to work, sort of speak, because they want to build and employ people. In so doing, they help our industry and the economy.
The lending environment for hotel owners is stagnant, although lending for consumers is starting to increase. It's probably easier to get a credit card now than before. It's easier to get a car loan than it was before. But it's still tough for small businesses.
BMM: The Department of Justice (DOJ) recently declared that all hotel owners by the middle of March have a fixed lift in every pool to lower and raise handicapped swimmers. The DOJ then extended their deadline, thanks partly to AAHOA lobbying them. What's happening with the mandatory pool lift regulation?
Schwartz: We are still fighting. Our outgoing chairman Hemant Patel testified before the House Judiciary Committee. He pushed not only for a portable pool lift but also for extending the deadline for another year. Also, the bill from House Representative Mick Mulvaney (R-SC) is out, recommending a portable lift and a year to transition to get the pool lifts.
As an industry, it is very important that we provide accessibility to our guests. Since 1991, we've taken that seriously. You see that from our implementation of handicapped parking spaces to hotel rooms that are accessible, to roll in showers to front desks that have accessible areas for wheel chairs, to TDDs for the hearing impaired. Obviously, it is an important market to target but also it is the right thing to do. That is first and foremost. We are in the hospitality industry so we need to make our hotels accessible.
Many of our members have hotels with swimming pools. We want that to be accessible to handicapped guests. All we are saying is to make the requirement for portable lifts (rather than a fixed lift on every pool) so that we can move the portable lift into the appropriate pool when it is needed. This will prevent people from playing on the lift and getting hurt. Everyone wins if it can be a portable lift.
BMM: It sounds like AAHOA is going to need a new law enacted to successfully overturn the Department of Justice's mandate if portable lifts in pools are to be used. How likely is it to have a new bill successfully enacted?
Schwartz: It's tough. We have to keep pushing for it. We have excellent people who have testified and will continue.
In the meantime, I believe we have to be compliant of the new pool lift requirements in June. There are tax incentives for pool lifts that are in place. For accessibility changes, a hotel can deduct 50 percent of the cost paid for a pull lift, up to $10,000. That makes it up to $5,000 tax deduction if you have a hotel that has 30 employees or less or a million dollars in revenue or less.
BMM: There's been no discussion in this conference about Choice Hotel being let back into AAHOA with good standing. What can you tell me about where the situation stands?
Schwartz: There have been notices sent out to our members about the firm's reinstatement. We've had fruitful dialog with its CEO Steve Joyce and his leadership team. Choice has made some changes that we appreciate. One significant change they made was the good standing provision — where beforehand if your hotel lost good standing you forfeited the ability to protest a new hotel going up in your territory. If your hotel was underperforming in market share at 80 percent of market penetration, before AAHOA got involved in negotiating with Choice, you could have lost your good standing. We thought that putting another hotel in would just exacerbate the situation performing at 80 percent when you should perform at 100 percent. That's now changed for the better.
BMM: What's your take on the future of fair franchising?
Schwartz: It's important for franchisees to — as Hemant Patel would say — take a seat at the table rather than be on the menu. That means that not only AAHOA needs to have a seat at the table but also franchisees, within their respective franchise advisory councils. Franchisees sign contracts, fifty to sixty pages in some cases. That's what governs the relationship. But having signed a contract still doesn't prevent franchisee members from making sure their input is heard to make sure that fairness prevails when franchisors are looking at changing things. Franchisors need to recognize that they cannot be successful unless their franchisees are successful.
BMM: How do you push fair franchising with hotel franchisors if their leadership could care less?
Schwartz: I think it starts with education and data to show that franchisors should take a look at these issues. We need to meet. AAHOA is one of the largest buying groups of hoteliers in the country. We are important to the success of their companies and they are important to the success of our hotels. That in itself is some common ground on why we should be able to have a discussion where the desired result should be one that has shared interest for both of us. Our interests should be their interests. They certainly want unit growth and unit growth is important for brand exposure. But when does unit growth cross the line into encroachment?
We look at how issues affect our members. When we make some inroads in franchising, it not only helps our hotel members but it also helps the franchise-owning community at large. It's important to inject into the discussion how a situation is viewed externally. There may be a situation in which a franchisor wants to do something that is so opposed to best practices in franchising, not just AAHOA's point of view, it's important to bring that external perspective in. That external perspective can help resonate more. And that is again why I highlight education. Because based on industry standards, it is not just AAHOA's perspective but industry standards that is out of joint.
BMM: Has the time come when AAHOA annually ranks individual hotel brands on their franchise agreements and fair practices, according to the standards set up by AAHOA's 12 points of fair franchising? As a purely hypothetical example, from a scale of zero to ten, Best Western in 2012 might get a strong overall score of eight and Choice Hotels a less than stellar three in its abstaining from abusive legal traps in its franchise contracts and its carrying out of fair practices. How about giving AAHOA's fair franchising standards some teeth?
Schwartz: We could. We've had some discussion on it. I think it is important that we are vigilant on what's going on with the franchising companies and sit with them on initials that affect franchising, whether its territorial protection, or protection from instant termination. Our goal is to have fair franchising that helps everyone.
BMM: What's your take on the defeat of the attempt to curb franchising abuse with California's assembly bill 2305?
Schwartz: We went in there knowing that we were going to face a really tough, uphill battle. We knew that most of the assembly members were going to vote against it. We worked hard in visiting the assembly members, sharing with them why this bill was important. It truly helped make for a balanced agreement and for some protection for franchisees. We only lost [the passing of a second assembly committee] by one vote. I think that speaks highly of the franchisee community and their support of the bill. It speaks highly of AAHOA members, who came out in strength, probably a hundred plus members.
When you share with assembly members why franchisees are in attendance, they get it. We weren't in Sacramento to undermine brand standards. But if we put our life savings into a hotel — although we understand there will be natural competition with others — why should there be competition from our own brand that harms us? So AB 2305 said that you just can't put a brand next to another brand. Or if there is termination of a franchise, and we understand that terminations may happen, then at least give the franchisee a cure period. Give us 60 days. If the parking lot needs paving, don't say you are now terminated; rather say get this parking lot fixed in 60 days or else you will be terminated.
These are not areas that are going to negatively impact franchisors. If anything, I think such a law would increase franchising. The franchisor could impart that to the franchisee community. California's assembly members understood that. For some reason, some members didn't want to vote for that level playing field. We raised the awareness very clearly in Sacramento on how risky franchising can be without having balance.
I think franchisors recognize how galvanized the franchise community can be and are hopeful that through their recognition that some of the provisions in the California bill should be provisions in their agreement. Abusive franchisors may now breath an immediate sigh of relief that the bill went away, I don't think it will be a long-term sigh of relief.
BMM: You are saying that the problem hasn't gone away. The pain and angst of the franchisee community is still there.
Schwartz: Right. But it is not just angst. There continues to be a desire to protect our life savings.
There are other state lawmakers and other members that are looking at pushing a fair franchising bill in their states. This isn't something that is going away.
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