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How Much Does It Cost to Open Holiday Inn Express Franchise?

Do you want to open a hotel business by buying Holiday Inn Express franchise? If YES, here is how much it cost to open Holiday Inn Express franchise successfully. If you are looking towards opening a Holiday Inn Express Franchise, it will be nice for you to have a preview of what the company represents before going ahead to enquire about the total cost of opening the franchise in your location.

Holiday Inn Express was founded in 1952 and they began franchising in 1954, about 66 years ago. The current CEO is Elie Maalouf and they have their corporate head office at Three Ravinia Dr., #100 Atlanta, GA 30346, USA. As of 2018, the company owns and operates 215 franchises (5,895 across all InterContinental Hotels Group brands).

The franchisor is Holiday Hospitality Franchising, LLC (HHFL). HHFL’s ultimate corporate parent is InterContinental Hotels Group PLC. The franchisor offers and grants franchises under the terms of a License Agreement.

The license provides for the establishment and operation of an InterContinental Hotel or an InterContinental Resort. InterContinental Hotels are typically located in major markets, important secondary cities and resort destinations. InterContinental Hotels and InterContinental Resorts are full service facilities targeted to discriminating business, conference and leisure travelers.

Other brands under the InterContinental umbrella include: Atwell Suites, Avid Hotels, Candlewood Suites, Crowne Plaza Hotels and Resorts, Even Hotels, Holiday Inn Hotels and Resorts, Holiday Inn Express, Holiday Inn Club Vacations, Hotel Indigo, HuaLuxe Hotels and Resorts, Klimpton Hotels, Regent Hotels & Resorts, Staybridge Suites, and Voco Hotels. Here are areas where you are expected to spend money and the cost associated with it;

Financial Investment Required to Open a Holiday Inn Express Franchise

1. Initial Investment Range: $7,544,298 to $24,836,120

2. Franchise Fee: $50,000

3. Royalty Fee: 5% of gross rooms revenue

And the Due Date for this fee is Paid by electronic funds transfer every Friday for the preceding Reporting Period. The amount of the Royalty Fee for any renewal term will be that provided in the Franchise Agreement executed for such renewal term.

Please note that “Gross Revenues” include all revenues generated from the provision of any and all services and/or the sale of any and all products and, whether by the franchisee or a third-party provider, that relate to or arise from the Franchised Business. It does not include taxes collected from customers.

  1. Royalty In Case of Casualty: 2% of GRR based on average GRR for preceding 12 months.
  2. Standard Fee for Room Additions: $500 for each new approved guest room or suite.
  3. Public Offering or Private Placement Processing Fee: $25,000 plus additional costs incurred by HHFL.
  4. Audit and Interest: Amount of discrepancy, interest and $3,000 (audit fee may be increased on system-wide basis).
  5. Re-licensing Fee: $500 per guest room but not less than $75,000.
  6. Change of Ownership Fee: $500 per guest room but not less than $75,000.
  7. Realignment and Name Change; Brand Conversion Processing Fee: $5,000 for franchisee name change, ownership realignment or brand conversion.
  8. Indemnification: All expenses, including attorneys’ fees and court costs, incurred by HHFL, its parents, subsidiaries, affiliates, and their successors and assigns to remedy any defaults of, or enforce any rights under the license; to effect termination of the license; or collect any amounts due under the license.
  9. PIP Inspection and Preparation Fee: $8,500 for a PIP (and $5,000 for a re-inspection).
  10. Promotions; Required and Optional Advertising Materials: Expenses incurred.
  11. Services Contribution: 3% of GRR in aggregate.
  12. Initial Marketing Contribution for the Frequency Program: $10.00 per approved guest room.
  13. Special Marketing Contribution for Frequency Program: $4.75 per enrolling stay with a flat 1000 points issued. 4.75% of qualifying full folio revenue from frequency program members. 1.425% of qualifying room and meeting revenue from frequency program members.
  14. IHG Commission Services (ICS) (Travel Agent Commissions): 10% (minimum) commission on total room rate.
  15. Third Party Distribution Connection Fees: Varies.
  16. IHG Ignite Digital Marketing Fees: 2.75% commission on all consumed direct digital revenue booked.
  17. TMC Revenue Program: 2.25% override fee (in addition to standard travel agency commission) on non-negotiated corporate contracted rates for consumed room nights, to a maximum of $20,000 per year or $25,000 per year for participating Luxury & Lifestyle program hotels.
  18. IHG Business Edge Program Booking Fees: 4% of consumed transient revenue booked through the IHG Business Edge Program.
  19. Groups & Meetings Fee: 3.5% of consumed or presumed/agreed room revenue sent to hotels via IHG MeetingBroker (This fee will increase to 4.0% in 2023.)

Please note that after year one, there will be a $25,000 cap on the year-over-year increase in fees and a $30,000 fee limit per booking. New hotels will have the fee cap applied after their first year as an IHG hotel.

  1. Revenue Management for Hire Program: $2,699 – $3,350 per month depending on total hotel room count and annual occupancy. (These fees apply until December 31, 2022, after which they may change.) Plus, out of pocket travel expenses for SCH personnel. (These fees are modifiable with 90 days written notice.)
  2. IHG Rewards Club Measured Standards: $1,000 per standard failed commencing with the second failed quarter. Fee escalates each consecutive quarter hotel in “Failure” status and is capped at $5,000 per measured standard per quarter.
  3. PMS Software Maintenance: Maintenance and/or hosting fees may be increased up to 5% per year. Costs will vary according to the franchisee’s technology needs.
  4. Property Management Fees: Opera – Premise Based Varies.
  5. FastConnect Plus And Access Control Manager: $167.32
  6. Secure Payment Solution Maintenance Support: $156.25
  7. Guest Internet Access – Bandwidth Service Subscription (IHG Connect): $1,000 to $2,800. Pricing is estimated and varies based on regional service providers.
  8. Guest Internet Access – Hardware Maintenance & Guest Support (IHG Connect): $1.50 per guest room; $25.00 per meeting/conference room, plus $20.00 per 2000 sq. ft. of total meeting space, maximum of $500.00 (meeting room support fees only apply if total meeting space exceeds 2000 sq. ft.)
  9. Guest In-Room Entertainment – Hardware, Maintenance, Guest Support, & Content (IHG Studio): $5.50 per room, per month for software, maintenance, and guest support. $7.20 per room, per month for content. $1.25 per room, per month for HBO (where required).
  10. Employee Safety Devices: Initial fee of $125-$150 per room in the first year of installation plus $20.00 to $25.00 per room, per year for software and maintenance support
  11. Security Software for Public Access Computers (Business Centers): $495.00 to $525.00 per workstation, per year for software, maintenance, and guest support $315.00 to $399.00 per printer, per year for the optional mobile printing feature.
  12. Gift Card Equipment: Estimated terminal cost of $295 – $400 (one time charge) if a terminal is required.
  13. Technology Services Fee: $16.08 per room, per month.
  14. Tax on Sales/Gross Receipts: HHFL’s actual cost.
  15. Ongoing Management Training Fees: Pricing for workshops range from $375 – $5,000 per workshop per participant depending on length, subject, content and delivery.
  16. Employee Engagement Survey: $7 to $12 per employee each year.
  17. Owner or GM Conference – Lifestyle Brands: Up to $2,500 per attendee, not inclusive of travel.
  18. Guest Relations Fees: Quality and Service contacts from hotels will be handled by Guest Relations in the ‘One Contact Resolution’ process. Hotels will be charged a case management fee of $150 per incident, plus the compensation amount of no greater than one night room and tax.

Please note that Non Service and Quality cases (such as billing or reservations issues) that are not resolved within 48 hours by the hotel will be handled by Guest Relations with a case management fee of $150.

  1. Local Advertising Spend, Local Marketing Fund, or Cooperative Advertising Contribution: At least 1 percent per calendar year and the Due Date: for this is Monthly.

Please note that each local advertising Cooperative may elect to increase the monthly contribution if approved by a two-thirds majority of the members, and the minimum contribution is subject to adjustment by an amount not to exceed the increase in the CPI.

Centers owned by Holiday Inn Express  and its affiliates are also members of their respective local Cooperative and each company-owned Center has the same voting rights as the franchised locations within the Cooperative.

If the company-owned Centers comprise the majority of a given Cooperative, the maximum and minimum fees for that Cooperative will be consistent with the range stated in this Item 6.

  1. Building Construction (including engineering and architectural plans): $62,530,660 to $84,600,230
  2. Primary Identification Sign (including installation, freight, foundation and wiring): $210,000 to $420,000
  3. PMS Equipment; Software; Installation & Training; IHG Concerto™ Equipment & Training; SPS Equipment; Software; Installation & Training: $124,000 to $187,000
  4. Guest Internet Access – Hardware (IHG Connect): $22,500 to $49,000
  5. Liquidated Damages Under Area Development Agreement: This fee varies but the Due Date is Payable within 30 days of the termination of the Development Agreement.
  6. Audit Costs: All costs and expenses associated with the audit, reasonable accounting and legal costs.
  7. Attorneys’ Fees and Costs: Will vary under circumstances. (Due Date:  As incurred.)

Payable to Holiday Inn Express  if it is forced to retain independent counsel and seek damages or injunctive relief to enforce the Franchise Agreement (whether or not suit is filed) or if Holiday Inn Express  is required to defend your unsuccessful claim against it.

  1. Term of Agreement and Renewal: The length of the initial franchise term is 20 years from the date the hotel opens in the system for a new development; 10 years from the date the hotel opens in the system for a conversion; and 10 years from the term commencement date for a change of ownership or re-licensing. The License does not provide for renewal or term extensions. If the franchisor agrees to re-license, franchisees may be asked to sign a contract with materially different terms and conditions than the original contract.
  2. Financial Assistance: The franchisor does not offer any formal program for direct or indirect financing. HHFL, SCH or its affiliate, General Innkeeping Acceptance Corporation (GIAC), may furnish loans or guaranties. HHFL, SCH and GIAC consider making loans or guaranties under terms and conditions that would be negotiated on a case by case basis with the prospective franchisee and any decision to make a loan or provide a guaranty would be made in the judgment of HHFL, SCH or GIAC alone, and conditioned upon approval of the Executive Committee and Board of Directors. It is the franchisee’s responsibility alone to obtain adequate financing for all expenses related to the development, opening and operation of the hotel.

In Summary,

  • Initial investments: $7,544,298 – $24,836,120
  • Ongoing Initial Franchise Fee: $50,000
  • Ongoing Royalty Fee: 5% – 6%