Headlines come out hourly on the expansion of hotel brands and consolidation of hotel management companies. As these companies become larger, is this in the best interest of hotel owners? It depends.
While economies of scale can reduce expenses and build great loyalty platforms, the impact to a hotel’s performance ultimately depends on how much attention that investment will receive. Not all growing companies will keep their talent and support infrastructure growing at the same pace in which they add hotels. This can lead to gaps in support, and unless hotel owners are very involved, they may see a decline in performance and support in the process.
With all of this in mind, here are three tips for every hotel owner to consider before joining a larger company:
1. Qualify the type of support you will receive
When comparing companies, most are making similar claims to services performed so it is hard to differentiate. The “what” becomes less important than the “how” when comparing your options. Here are a few questions to ask:
- For the individuals that will be supporting my hotel, how many other properties or owners will they be supporting? Will this ratio always remain the same as your company grows?
- How do you make sure that my hotel is getting the fair share of attention to any needs that arise?
The answers to these questions will help you better understand the structure and the communication processes likely to occur. Be concerned if acceptable ratios aren’t locked in to sustain growth or there aren’t communication processes that automatically trigger a review with you based on the performance of your asset.
2. Add a layer of accountability
It is important to stay on top of the performance of the services that you are paying for. Service agreements are complicated legally binding documents, so be sure to establish some key metrics that allow you to self-audit on a regular basis. Never assume these services are being optimized as they should just because they are in a service agreement. Set a schedule to periodically review these services to ensure the fees you are being charged are justified. As the adage goes, “you must inspect what you expect.”
3. Hire an advocate that is aligned with your interests
Holding large companies accountable to services or results can be difficult as an owner. Revenue management, as an example, is a highly technical niche of the hospitality business. Fortunately, there are a handful of firms out there with a depth of experience that can work on your behalf to ensure you are getting the most out of their investment from a brand and management company. Best of all, some of these firms have contracts contingent on their results or return on investment. These outsourced firms usually have experience with many management companies and brands to provide a breadth of insight to make the most of your existing partnerships.
As an example, The Witness Group recently completed a transition from owner-operator to third party manager with their strategic alliance with Hotel Equities based out of Atlanta. "For us the consolidation was done in part to be able to focus our efforts on development and asset strategy," said Tommy Holmes, who leads asset management for The Witness Group. "It's important for anyone considering this to have a clear vision on what they're trying to accomplish, and also be able to mitigate any challenges on performance that a transition like this could have. Having a trusted partner with whom you have open and effective communication is vital in establishing long-term success."
While there can be benefits to the consolidations taking place, every owner needs to carefully weigh the pros and cons of doing so. There are many ways for a hotel owner to run a profitable business. They must continue to stay actively involved in the business, approaching each of their partners with a sense of curiosity and diligence. And with the right partner reporting directly to them, they can have at their disposal, leveraging the most of their asset in this industry.
Josh Ramsey is the co-founder and managing partner of Prosper Hotels.