Schwartz adopts US management model for his hotels

Richlister Jerry Schwartz has adopted the American white-label franchise model for his city and country hotels, saying it's cheaper.

Mercure in Canberra.

Richlister Jerry Schwartz has adopted the American white-label franchise style of management with four of his city and country hotels, saying it is cheaper, and he won’t be compelled to promote hotelier Accor under the new agreement.

Dr Schwartz, worth $596m, in the forthcoming The List, has decided to tip 1000 rooms across four hotels in NSW and the ACT including the Mercure Sydney, Ibis Sydney World Square, Mercure Canberra and the Fairmont Resort Blue Mountains into the new franchise agreement under a company headed by Scott Boyes, chief executive of the newly formed Trilogy Hotels.

Dr Schwartz said he had known Mr Boyes, who previously worked with Accor for 29 years where he was charged with looking after 85 hotels.

“Now he is looking after (my) four hotels. I am getting wonderful exclusive treatment from him at the moment,” Dr Schwartz told The Australian on Tuesday, adding that The Schwartz Family Company is Australia’s largest privately owned hotel company with 4000 rooms across 14 hotels.

Dr Schwartz said he could not divulge whether he would tip the rest of his hotel portfolio into the Trilogy franchise model because they were still under old school management agreements which would not expire for a few years.

Mercure in Canberra.

Dr Schwartz said around 70 per cent of American hotels are under so called white-label franchise agreements because they are cheaper for hotel owners.

“This way we pay distribution and marketing fees, they are slightly cheaper than the other ways, such as leases or management style agreements, where we pay a flat fee and an incentive fee,” Dr Schwartz said.

The four hotels will still retain their Accor branding.

Trilogy Hotels is the brainchild of Mr Boyes, hotel veteran and lawyer Tony Ryan and Grant Alchin, who is known for his ability to transform underperforming hotels into profitable operations for both Accor and IHG.

In a statement, Trilogy Hotels said their model was relatively unfamiliar in Australia and New Zealand but was well established in the US where it was started by Aimbridge Hospitality in 2003 with eight hotels and has since grown to 1500 properties across 23 countries.