A Hotel Management deal is like a marriage. The first stage of choosing a partner often involves the emotions, and inexperience can only increase their potency. It takes time to learn who, and how, to trust – and in this regard the same is true for hotel owners. It’s easy to be seduced by a slick management proposal, but in the end the arrangement has to make business sense.
Next comes a word of caution: hotel management agreements are not all about fees. Of course, fees are important, but when they’re lower than you expect – or sometimes when they’re higher than you expect – there’s usually a reason and it rarely works out in your favor. When the numbers seem slightly off, that can be a warning to proceed with caution – so make sure you take advice from industry professionals who have your best interests at heart.
Given the potential for things to go wrong, how should hotel owners go about things the right way? Here are six key ideas from industry experts, Nova Asset Management.
First of all, any management agreement has two sides, and must be fair to both parties. That means realistic expectations from the owner, while the operator or brand must be able to back up their promises with sufficient evidence that they can meet their targets.
Secondly, the owner has the upper hand when choosing an operator – in fact, the operators should be lining up hoping to run your hotel. If they aren’t, a specialist second opinion can help you understand why.
Third, time is money – yet owners all too often believe they can find a new operator and re-brand their hotel within a matter of weeks. In reality, the process of choosing a new operator runs into several months.
Fourth, you can’t just pick your favorite brand and skip the selection process altogether. If you do, the brand will simply pressure you to sign their own standard contract. Remember you are always free to challenge their proposal or re-negotiate everything step by step – ideally with the eyes of NOVA Asset Management in your corner.
Fifth, never forget that when you sign with an operator, you’re primarily signing up with a distribution network. Many owners are under the impression they’re buying into operational standards, but the reality is that the actual running of the hotel will depend on the GM of the operator’s choosing, and how they interpret the role.
Finally, you may think it’s easy to get in touch with potential operators yourself. The reason you shouldn’t is that selection involves more than mere introductions. At NOVA, our goal is to look after owners and ensure progress is made within a reasonable time frame. We help owners to show off their asset in the best possible light, so operators can instantly see the value in agreeing to a management deal. We look at the entire deal from the perspective of the owner, but with the added benefit of long experience and an in-depth understanding of the significance of each and every clause.
Remember when we compared management agreements to marriage and romance? Happily ever after might be the dream, but preparation, due diligence, and adherence to sound advice are the best way to live that dream.