MANAGING A HOTEL MANAGEMENT COMPANY

HOW MUCH SUPERVISION IS TOO MUCH AND HOW MUCH IS TOO LITTLE? 

Back in the day........Management Companies were untouchable. Their word reigned and their strategy went unquestioned. Owners could ask questions once per year at Budget time. That was then and this is now!

The emergence of remote hotel ownership over the last twenty years has seen ownership morph from the hands of knowledgable hotel owners to large financial institutions, governments, insurance companies and pension funds. All, or most of them are experts in hotels, because they stay in them all the time!!

The move also by the large operators and chains out of real-estate to a function of brand management, as opposed to hotel ownership and management, has been complex but absolute. Today, with the exception of a few, hotel groups are no longer hotel owners. Their interest is in earning fees and expanding their spread through multiple brands and, if necessary next to the one they just opened. The risk has been outsourced and the owner is now on his own.

Enter the Asset Manager...........to manage the Hotel Manager. Yes, it adds an extra layer but it places the interests of the owner front and centre into the hands of an 'expert'; a referee, a linesman, a coach, an auditor, a banker, an engineer and a project manager. This Asset Manager represents the owner and speaks the same language as the hotelier, understands the lingo, the excuses and the red flags. He comprehends double-speak, revpars & charge-backs, he is weary of capital repairs, FF&E replacement charges and split purchase orders.

Managing the Hotel Management Company is more than administering the Management Contract or vetting the GM's bar bill.........which was considerable in my time!! It is a delicate balance between giving them the rope to manage what is written in their contract and communicating the fact that you know what is going on without interfering.

Some asset managers are control freaks and their style can neutralise management. A good Management Company in this industry needs to be creative, innovative and agile. Tried and true strategies from the past no longer hold water. New methods must be employed. Department heads are the greatest source for innovative ideas and there are a precious few opportunities to reject all their ideas. Some must be allowed through and failures should not result in 'death'. Bottom up ideas are the most successful because they are implemented by the creator.

Heavy, hands-on asset managers must not stifle this side of the business.

Perhaps the greatest skills that can be proffered by an Asset Manager are those that relate to the bricks and mortar of the business. The building, the equipment, the FF&E, the infrastructure and the capital projects. These require skills that are not natural within management companies or the hotel itself.

Clever analysis of the spending will pay huge dividends for the owner (and the operator) as the business is strategically maintained, improved and focused on improving the bottom line. Here are our Top Ten areas for Asset Managers to focus

• Planning projects
• Code compliance
• Capital Planning
• Preventive maintenance reviews
• Building & Equipment reviews & life expectancy
• Renovation planning & execution
• Foodservice productivity planning
• FF&E Procurement
• F&LS equipment reviews
• Project management 

In the hotel industry as a general rule, owners invest for the financial return garnered from the operating profit plus the appreciated value on the sale of the hotel when sold. Reinvesting funds in the upkeep ensures that the value increases and the profits grow exponentially. Carefully planned capital programs, pro-active preventive maintenance systems, intelligent replacement of FF&E and daily excitement from the employees makes for a winning combination.

'Milking a Cash-Cow' is the expression we use in the hotels where high volumes leads owners to believe that there is no need for reinvestment in the product, no expectation that business will fade or good employees will move elsewhere. 

In the past, Asset Managers tended to come from the financial services industry. In the future, it is our belief that the future Asset Managers will be drawn from the large, multi-disciplined engineering companies, those whose specialties lie in building sciences, project management, mechanical, electrical, heating, ventilation and air conditioning trades, sustainable design and alternative energy, foodservice design, fire & life safety systems, air quality, water and waste management and equipment life expectancy.

Add to that the need to periodically review the performance of the brand and the management company from a strategic perspective.

Let's face it. Thirty year management contracts were at one time a natural. Today however they do not mesh with an owners' objective of a 7-10 year exit strategy.

Times are a'changing and the way managers are managed must too!! General Managers are hired to represent the owner by the operator and are provided with two hats. How and when to change hats is an acquired art.

As a long time manager of managers, I enjoy observing how adeptly they change their hats as they manouevre their way around representing the owner on the one hand and the operator on another. In the meantime, refereeing this change of garb is almost an artform.