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Selecting a Management
Company

“From a general operational perspective, we empower property teams to do what’s best for each individual property,” Gavin Royster states in a recent Today’s Hotelier’s article.

 

A guide to investing in management companies by ZOHREEN ISMAIL

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“Finding a management company that is able to implement an integrated approach by analyzing sales, marketing, human resources, operations, food and beverage, quality control, and productivity is a key quality.”

THE HOSPITALITY INDUSTRY PLAYS a major role in growing our economy, partly because this is an industry that has been keeping up with the changing times. Hotel owners and operators are working every day, including weekends, and their best avenue of being successful and accomplishing tasks is investing in innovation and technology.

THE CHALLENGES

Many of our readers have quite literally grown up in the hotel industry and many others have started from scratch in building and creating a successful hotel business empire. Whether you own one property or multiple properties, one key feature that all hotel owners find important is finding creative ways to improve operational efficiencies that drive profits upward.

“From a general operational perspective, we empower property teams to do what’s best for each property and size. No two properties are the same. We take an innovative approach by having a structure to allow properties to innovate themselves.”

— GAVIN ROYSTER, CHARLESTOWNE HOTELS

“The biggest challenge hotel owners face is scarcity of resources,” says Gavin Royster, director of development at Charlestowne Hotels. “Whether you own one hotel or a few, it can be difficult to deliver, manage, and track financial performance without a sizable management platform.”

It sounds like an easy task: operate better, see better financial results. However, without a good infrastructure, there can be many challenges that arise. According to Royster, another major challenge hotel owners and operators face is filling their task force and building a trustworthy team.

“Today’s labor market and low unemployment rate make it difficult for owners and operators to build and keep strong property teams. The supply of hotels has outpaced the supply of labor. It’s an issue operators of all sizes are facing. However, the effects can be exacerbated with smaller-scale operators.

For example, one individual may own three to four hotel properties and run into problems if a key manager on the property leaves. Without the bench depth of a management company, filling that position effectively and expeditiously can be a challenge,” Royster explains.

A lot of smaller hotels don’t have the revenue to justify investing in a management company. By focusing on revenue management, smaller hotels can see a lot of improvement when revenue performance involves organizing the department at the corporate level.

“Often times, when a property has revenue management functions performed at the property level, there is greater susceptibility to deviating from defined revenue strategies and dropping rates too far or too soon if room nights don’t materialize quickly enough,” Royster says. “We have found that organizing revenue management at the corporate level allows for more objectivity and a greater adherence to defined revenue strategies, which in turn maximizes revenue for our properties.”

The challenge many face is having the resources to leverage their own expertise with the expertise of others and allowing that to optimize revenue. Boutique hotels face a challenge that usually the bigger brands do not.

WHAT TO LOOK FOR IN A MANAGEMENT COMPANY

“Boutique hotels are much harder to get right than traditional branded hotels,” Royster says. “In the independent world, you don’t have the reservation system, loyalty program, and name recognition that the big brands provide. It’s much more difficult to reach the guests you want and get them into your hotel at the price you want.

“We have developed robust internal revenue management and marketing teams to succeed in this area. For someone without that infrastructure, it can certainly be a challenge.”

WHAT DO MANAGEMENT COMPANIES OFFER?

The thought of investing in a management company has crossed the mind of almost every hotel owner at some point. If you want to find new ways of solving challenges and improving your business, the best way is by collaborating with others.

Innovation

Hotel owners who have grown up in the industry or started businesses from scratch have created and perfected operational strategies over the years. The innovation that management companies bring to these perfected strategies is what owners are seeking.

“From a general operational perspective, we empower property teams to do what’s best for each individual property,” Royster says. “We don’t have a strict playbook that instructs them on what to do in every minute aspect of the operation since each one of our properties is unique. This fosters innovation within our property team, which we can then, when appropriate, leverage across our broader organization.”

Technology

Another macro-level benefit management companies provide is data. “Leveraging as much data as possible to optimize all aspects of the operation is of paramount importance,” Royster says. “With over 40 hotels in our portfolio, we can analyze an extensive data set to see where an individual property’s performance may be improved.”

The future of economic success in the hotel business is collaborative. Analyzing efficiencies through data and technology, then taking steps to improve efficiencies and increase productivity, requires a collaborative effort.

EXPECT THE UNEXPECTED

There are many services and industry professionals at management companies who are able to handle and advise on topics that may not be front of mind for all hotel owners. Operational efficiency and generating revenue are usually No. 1 on an owner’s list. However, what many hotel owners don’t expect from management companies is assistance with other categories such as food and beverage, and human resources, which can also take up a lot of time and resources.

Hotel management companies understand the importance of achieving and recognizing all the moving parts of a hotel that generate income and play an important role in guest satisfaction. The more hotel owners learn about the capabilities of management companies, the more they realize the breadth of services that are offered. Finding a management company that is able to implement an integrated approach – by analyzing sales, marketing, human resources, operations, food and beverage, quality control, and productivity – is a key quality.

WHEN SELECTING A MANAGEMENT COMPANY

STEP ONE

So, what does one do first when looking to invest in a management company?

“Honestly, the first step is to think deeply what it means to have a third-party operator and if you’re truly comfortable giving up day-to-day operational control,” Royster says.

Owners who are self-operating are used to a hands-on approach, so there’s often a level of emotional attachment that can make trusting and collaborating with a third-party operator difficult.

Owners are encouraged to survey the market, just as they would do when purchasing a new hotel property. “Don’t go with a management company just because you have an existing relationship or because they came recommended by a friend in the industry,” Royster says. “There are myriad options out there. Figure out what your property and you as an owner need, and then look for a management company that is most aligned with and able to deliver upon those needs.”

MOVING FORWARD

By investing in a management company, hotel owners and operators are equipping themselves with the resources they need to move forward and keep up in the era of technology and innovation. Collaborative problem-solving is becoming increasingly popular across all industries. Whether you’re the owner and operator of multiple properties across the U.S. or own and operate one boutique hotel in a small town, investing in a management company could be the next step you need to grow your business and optimize profitability.