The management team or hotel operator is your primary long-term partner, and as such they must be closely aligned with your objectives, it is therefore vital that the understanding and relationship be mutually compatible. Selecting your approach to property management and the hotel management partner is the critical decision to be made after you have decided to proceed with hotel development, or indeed may cause you to reconsider the route or feasibility of the hotel development.
What Can a Hotel Operator Do For Me?
- Confirm Feasibility: In probability, the hotel operators active in your region have already reviewed and have a strategy for the national market and identified potential cities, destinations and districts within larger cities for possible development. In the light of their plan for the region for the micro-location, they require the limitations of your site and your proposed budget and concept assessment. Based on these factors the hotel operator should be able to give a quick initial indication as to the feasibility of the product within the portfolio of their brands and the structure of their potential relationship with you. If viability is unclear or marginal then the hotel operator may ask you to undertake further research, invite you to commission a hotel consultant or conduct additional research themselves.
- Confirm Concept & Configuration: The hotel operator brands usually have a defined configuration adapted to the market especially regarding the minimum number of rooms, room sizes and public facilities as well as the back of house areas required to support these services. Configuration variances may occur as a result of market opportunities, limitations of the site, competition and owner preferences forming the general concept of the property. The hotel operator may indicate more than one brand and concept appropriate for the development and should specify the pros and cons for each and may provide forecast financial projections. At this stage, it is practical for the hotel operator and your architects or a commissioned 3rdparty concept architect to draw up initial architectural concept sketches to ensure you and the operator align your ideas. Such process can help focus any differences in each other’s vision of the completed hotel, question the relevance of the brand to market, highlight limitations or inefficiencies of the building and illustrate opportunities to expand on facilities.
- Technical Consultancy: Do not underestimate the value to the completed property asset from the hotel operator’s technical experience; it is often the difference between an efficient and productive asset and a white elephant. There is sometimes a misconception that technical consultancy is simply about overlaying the hotel operator’s brand requirements on top of a generic architectural hotel structure but in the case of a competent hotel operator, nothing could be further from the truth. The technical input should be targeted foremost at creating the most efficient, market-aligned and profitable property within the market segment with long-term durability, flexibility and asset value. The management company have standards, features and designs, but these should only serve to enhance the asset directly or be practical adaptations for brand association. Technical support should be active before long-term contracts are in place and may to some degree be active before the initial commitment, but when not contracted it may only be limited depending on the immediate needs of the project and the hotel operator’s available resources at that time.
- Financial Support: Depending on the attractiveness of the property and agreement relationship the hotel operator may on rare occasions offer direct financial support in the form of equity, key money or loans or may give indirect financial support employing performance guarantees, or performance related fee waivers or deferrals. In any case, the proven track record and competence of an experienced hotel operator should provide some degree of comfort to financial institutions. While direct financial support or performance guarantees are not the norm in most markets the hotel operator should be able to provide you with estimates of financial performance (with disclaimers), support documentation and representation in front of potential finance partners.
- Procurement: Unlike other forms of CRE, the development of hotels requires the full fit-out and acquisition of all the fixture, furnishing, equipment and operating supplies of the property. Such procurement is a specific and detailed task requiring systematic knowledge of quality, quantity and benchmark cost. Hotel operators provide expert resources to support particular hotel procurement requirements and also utilize wholesale economies of scale and multi-unit discount agreements to reduce costs.
- Operational Team Recruitment: Hotels, particularly in upper scale sectors, are labour intensive, and structuring hotel management and functional team with cost-efficient and professional personnel is a skilled task. The bulk of preopening costs are absorbed in the recruitment, salaries and training. Therefore, timing is critical to ensure employees are engaged early enough to be familiarised and trained but not held longer than required creating a payroll without incomes. Poorly managed or mistimed preopening can cost several hundred thousand or more euros in additional capital costs or conversely can cause hotels to open with untrained employee causing permanent reputational issues. Typically, the process occurs six to twelve months ahead of the opening date and is a hierarchal pyramid of recruitment with the General Manager employed first. Hotel operators can shorten the lead time and speed up the process by providing cross-training at other properties or deploying tasks forces for short-term early coverage and support or late on the job training. There is often a misconception that international hotel operator’s overpay employees at the expense of owners, however since group properties offer employees career opportunities, quality training, higher security and the ability to enhance their resumes, such positive minded employees are generally ready to work for equal or lower salaries.
- Preopening & Commissioning: Typically, 6-12 months before the projected opening date the operator should provide a pre-opening budget to the owner detailing cost estimates for activities and expenses up until the opening of the property. The operator offers coordination and training of preopening personnel, sales and marketing of the property, contracting of clients, setting up and implementation of systems, the
organisation of services, execution of licenses and leases, commissioning and snagging of technical elements and timing of critical dates such as live reservations. Commissioning is usually staged initially with a soft opening and latterly with an official opening date. The official opening often accompanied with a ceremony provides a marketing opportunity, and the hotel operator can contribute corporate resources such as corporate chefs, high profile personnel and facilitate regional/global public relations and social media exposure.
- Management & Post Opening: In accordance with an annual budget and within limitations agreed with the owner the hotel operator’s primary responsibilities are to undertake the full day to day management of the property under the standards of the hotel operator and brand, maximisation of the enterprise value through sustainable business profitability and the maintenance and growth of the real estate asset value. Day to day management includes such aspects as ensuring fire life safety, organisation of personnel (such as recruitment, training, pay disbursement, relations and discipline), revenue management, managing outlets and other guest services (such as procurement of operating supplies, product quality, pricing and concession management), promotion of the business (such as advertising, marketing, reservations, sales and public relations), operational accounting and administration, cleaning and laundry, and handling property legal and security issues. Managing the asset value includes ensuring ongoing repairs, maintenance, and renovation, loss/damage prevention, the planning for replacement of furniture, fixtures and equipment, strategic planning and the identification of market opportunities/threats and CapEx needs.
See also:
When should I engage a hotel operator?