Choosing a hotel and asset management company is no small task, as the impact of your decision can mean your hotel will either bustle with guests and high revenues or languish miserably with empty hallways and a pile of expenses.
We know what we all want from our hospitality assets – long-term competitive advantage, consistent market growth, higher-than-average revenue generation and sound cash flow. But how do you get there?
We sat down with Jamie Adams, Vice President at the Carlyle Group, a global alternative asset manager, who specializes in asset management and held previous stints at Marriott and Homestead Suites. He shared his insight on what hotel owners should look for when choosing a profitability partner to manage their hospitality assets. He also weighs in on the never-ending topic – go with a brand or fly independent?
Top Four Criteria Your Hotel and Asset Manager Should Meet
1. Experience in your geographic market
“Big benefits come from local knowledge,” Jamie said. Look for a management company that already has experience working in your locality. They’ll know the market, the destination’s strengths and weaknesses, your competitors, and ebb and flow of travel to the area, he explained. They can also better anticipate slow cycles and are better equipped to hire the right on-site team to maximize your profitability.
2. Staffing tendencies
“What are they doing at other properties? Are they staffing too heavy? Are they staffing too light?,” Jamie said. “Labor will be your biggest cost, so look out for management companies who tend to over-staff properties.” Look for a management property that hires just the right amount of people for the amount of guests the hotel attracts. Don’t sway too light, or that means your guest experience will suffer. Jamie explains that when he narrows down his own search for local hotel management companies, he checks their hiring habits based on their P&L’s. “Managers should be savvy enough that they can look at a property and already know how to run it,” he said.
3. Potential margins
“The most important factor to look for is the kind of margins they’re capable of running at their other properties,” said Jamie. Are they running efficiently? Do they have too many managers? You’ll be able to spot these immediately in P&L’s. Margins at 25 to 45 percent are optimal, Jamie said, but this can vary. Nonetheless, you should benchmark with other hotels.
4. Amount of hands-on attention from senior team
Look for the amount of support the regional and corporate team will invest in you. Oftentimes, the larger management companies will have so many properties, they won’t offer a lot of personalized attention. “The regional manager could have 11 hotels to oversee,” Jamie said. “So, they’re spread pretty thin.”
Go With a Brand or Go Boutique?
“In most major markets, signing on with a easily recognized brand can bring you the best chance of success,” Jamie said. You’ll have immediate access to reservations systems and loyalty programs. “I liken it to opening a spigot,” he said.
However, big brands mean bigger costs to pay, including reservation fees, royalty fees and a set of stringent rules to follow. Plus, the fees will promote the brand, not your individual property. So, you’ll have to invest even more in direct hotel internet marketing.
If you decide to go boutique or stay independent, you’ll have significantly lower costs and a lot more flexibility. However, you need to invest in smart hotel technology, plus marketing and branding strategies to command traveler recognition and drive reservations. Jamie adds that in some markets that people are traveling to anyway, such as South Beach or San Francisco, boutique hotels can fare off a lot more successfully than big brand properties.
“When deciding between going under a brand flag or independent, weigh the incremental cost versus the value a brand could add,” Jamie advises. “How many rooms is it going to generate? Is the ADR going to be higher versus a boutique hotel?”
Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com