No Vacancy Expo 2021 is back and better than ever!
Hotel business is different. It’s real estate but it’s not like regular real estate where a commercial building or retail or residential where decisions are made on a periodic basis about leasing and renovations.
In a hotel, decisions have to be made daily. Sometimes hourly.
Sometimes because the weather changed. Those decisions are made by a manager, a general manager, who’s been hired by a management company. Now, that management company manages several hotels, dozens hotels, maybe hundreds of hotels. They could be your competitor across the street or a competitor in a different market or a different brand.
Now, don’t get me wrong. Management companies are important. They add a lot of value. But they have conflicts. And those conflicts fall down, in particular, to the general manager. The general manager of the hotel is hired by the management company and he is the key person on the ground, making those day-to-day decisions for that owner, that entrepreneur.
But who are his loyalties to? And what’s his perspective and his vision. He doesn’t really work for the owner. Of course, he wants to do best by the owner both as a fiduciary, as a professional. He’ll look good if he makes the owner a lot of money.
But when the rubber hits the road and he has to make a hard decision, consciously or unconsciously, is he making that decision for that owner or is he making that decision because his bosses at the management company see things, perhaps, from a different perspective?
Second most important person at a hotel is the sales person. He or she has the same conflicts with the management company. She’s an employee of the management company. But if it’s a flagged hotel, a Hilton, a Marriot, a Starwood property, she’s also working very closely with that flagged franchisor, who are putting limits called “brand standards” on the property. What you can market, what you can renovate, what your rates are sometimes. You can’t live without them.
They are providing your reservation system; they’re providing their whole infrastructure, as well as brand recognition. If you’re a cookie cutter hotel, right in the middle of their franchise, it works. But if you have a funky location, maybe some meeting space that’s more significant than the typical franchise, well, you’ve got to do some things quite a bit differently.
So, all of that leads to what’s that owner/entrepreneur or that guy that vision with the vision to do? Unless you’ve got deep pockets to start your own management company or your own brand, you want to be very aggressive in how you manage them. Don’t turn over control to them. Don’t release the total control to them.
Make sure you’ve got some sort of accumulation of either internal staff with experience in the hotel business to ride herd on these people. Perhaps hiring what we call an asset manager, as opposed to the property manager, to ride herd on the property manager and the franchisee.
The answer is be smart. Be very aggressive. Go to the meetings yourself as an owner/entrepreneur. Have your key people go there. Make sure your team is there and give them authority to question the management company, to question the franchisor.
The motto is “Believe in your management company, work with them, take that franchise if it is appropriate for your hotel, but be very aggressive in how you manage them.” As one of our former presidents once said, “Trust but verify.”