In hotel development, hotel operators play a central role in shaping both the property’s concept and long-term performance. Beyond daily operations, operators influence project feasibility, brand positioning, design standards and operational strategy. Understanding what a hotel operator can contribute during the development process helps developers select the right operating partner and structure an effective long-term relationship.
The management team or hotel operator is your primary long-term partner and, as such, 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 your hotel management partner is a critical decision after you decide to proceed with hotel development; otherwise, it may prompt you to reconsider the 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 the national market, developed a strategy, and identified potential cities, destinations, and districts within larger cities for possible development. In light of their plan for the region and the micro-location, they will require an understanding of your site’s limitations, your proposed budget, and a concept assessment.
Based on these factors, the hotel operator should be able to provide a quick initial indication of the product’s feasibility within their brand portfolio 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
Hotel operator brands usually have a defined configuration tailored 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 result from market opportunities, site limitations, competition, and owner preferences that shape the property’s overall concept.
The hotel operator may indicate more than one brand and concept appropriate for the development, specify the pros and cons of each, and provide financial projections. At this stage, it is practical for the hotel operator and your architects, or a commissioned 3rd-party concept architect, to prepare initial architectural concept sketches to ensure you and the operator align on your ideas. Such a process can help focus on differences in each other’s vision for the completed hotel, question the brand’s relevance to the market, highlight limitations or inefficiencies in the building, and illustrate opportunities to expand the facilities.
Technical Consultancy
Do not underestimate the value of the hotel operator’s technical assessment; it is often the difference between an efficient, 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 has standards, features, and designs, but these should only serve to enhance the asset directly or to 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. However, when not contracted, it may be limited, depending on the project’s immediate needs and the hotel operator’s available resources at that time.
Financial Support
Procurement
Unlike other forms of CRE, the development of hotels requires the full fit-out and acquisition of all fixtures, furnishings, equipment, and operating supplies for 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 utilise wholesale economies of scale and multi-unit discount agreements to reduce costs.
Operational Team Recruitment
Hotels, particularly in upper-scale segments, are labour-intensive, and structuring hotel management and functional teams with cost-efficient, professional personnel is a skilled task. The bulk of pre-opening costs is absorbed by 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, thereby avoiding a payroll without income.
Poorly managed or mistimed pre-opening can cost several hundred thousand or more in additional capital, or, conversely, can cause hotels to open with untrained employees, leading to permanent reputational issues. Typically, the process occurs six to twelve months before the opening date and follows a hierarchical 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, deploying task forces for short-term early coverage and support, or providing late on-the-job training.
There is often a misconception that international hotel operators overpay employees at the expense of owners; however, because group properties offer employees career opportunities, quality training, greater security, and the ability to enhance their resumes, such positive-minded employees are generally willing to work for equal or lower salaries.
Preopening & Commissioning
Typically, 6-12 months before the projected opening date, the operator should provide the owner with a pre-opening budget detailing cost estimates for activities and expenses through the property’s opening. The operator offers coordination and training of pre-opening personnel; sales and marketing of the property; contracting with clients; setting up and implementing 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 by a ceremony, provides a marketing opportunity, and the hotel operator can contribute corporate resources, such as corporate chefs and 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 renovations; loss/damage prevention; planning for the replacement of furniture, fixtures, and equipment; strategic planning; and identifying market opportunities/threats and CapEx needs.
Operational Strategy & Revenue Optimisation
Once the hotel is operational, the hotel operator assumes responsibility for the day-to-day management of the property. This includes staffing, marketing, distribution management, revenue management and operational performance monitoring.
Operators typically implement global reservation systems, loyalty programmes and brand marketing platforms that enable the hotel to tap into international demand. At the same time, they manage pricing strategies, sales channels and operational procedures designed to optimise occupancy, average daily rate and profitability.
For many owners, the operator’s operational expertise and distribution network represent the primary reason for selecting a branded operator rather than running the property independently.
What a Hotel Operator Will Not Do
Although hotel operators play an important role in shaping and managing a hotel, several responsibilities typically remain with the owner or developer. Understanding these boundaries helps avoid unrealistic expectations when negotiating with operators or structuring management agreements.
Operators Do Not Invest Capital in the Project
Most hotel operators do not invest their own capital into a development. Their role is to manage the hotel on behalf of the owner rather than to finance the project. While some operators may occasionally participate through strategic investments or joint ventures, this is relatively uncommon and usually limited to specific strategic projects. In most cases, the developer or investor remains fully responsible for funding the land acquisition, construction and project development costs.
Operators Do Not Guarantee Financial Performance
Hotel operators typically manage the hotel under a management or franchise agreement, in which they are compensated through management fees tied to revenue or profitability. Because of this structure, operators rarely guarantee financial performance or investment returns. While they may provide operating projections during the development stage, these forecasts are not guarantees of future performance. Hotel management agreements may include performance tests, but these are usually limited mechanisms that allow owners to terminate the agreement if performance consistently falls below agreed benchmarks.
Operators Do Not Control Development Budgets
During the development phase, operators often provide input on design standards, room layouts, back-of-house requirements and operational functionality. However, they do not typically control the project budget. Decisions regarding construction costs, procurement strategies and contractor selection remain the responsibility of the developer or project management team.
Operators Do Not Replace the Owner’s Asset Management Role
A hotel operator manages the property’s daily operations, but they do not represent the owner’s investment interests. For this reason, many hotel owners appoint asset managers or maintain internal asset management teams to oversee the operator. Asset managers monitor financial performance, review budgets, approve strategic decisions, and ensure that the operator’s actions align with the owner’s investment objectives.
Why This Matters
Recognising the limits of the operator’s role helps developers structure more effective project teams. Successful hotel developments typically involve collaboration between multiple specialised participants, including developers, consultants, project managers, operators and asset managers. Each participant contributes different expertise, and understanding these boundaries helps ensure that key responsibilities are clearly allocated throughout the development and operational lifecycle.
Further Resources:
HDG – Do I Need a Hotel Operator?
HDG – When Should I Engage a Hotel Operator?
HDG – How to Choose a Hotel Operator?
HDG – The Hotel Operator Proposal
HDG – Hotel Management Structures
Hospitality Net (December 2020) – “What is a Hotel Operator?“