As a hotel owner/investor with perhaps one or two hotel assets, you have invested your hard-earned capital and risked tapping into your loans in pursuit of a profitable lodging operation. Also, given your limited exposure to the hospitality industry, you may have selected a professional management company to operate your hotel. Perhaps a “top tier” management company, a company that not only franchises hotels but also provides management services. Alternatively, he may have selected a “second tier” company. That is, a hotel owner/franchisee with dozens, maybe even hundreds of hotels managing their own assets and those of others. Or perhaps he has chosen a smaller boutique firm with possibly one or two hotels of its own looking to add to its management portfolio. No matter who you have selected, you expect them to have your best interests in mind with every decision they make. Well, that may not be exactly the case.

The goals of lodging owners and investors are rarely completely aligned philosophically or financially with the goals of their designated management or sometimes even their brand. Operators and brands often have conflicting goals, which are in direct conflict with maximizing profitability for owners. For example, brands have an interest in maintaining brand standards and creating “brand equity”, which may not always be in the best economic interests of an individual accommodation asset. Sure brands will argue that what’s good for the brand will have a trickle down effect on you, but changing your new wallpaper behind the front desk from a shade of beige to a shade the brand wants to install in all its hotels (which I that a major brand has asked them to do, which will remain anonymous) is actually a misuse of capital that will never affect revenue or guest satisfaction.

Management companies, on the other hand, have an interest in growing their portfolios and their income (usually a percentage of your own), but may not be motivated to help your hosting operation achieve its maximum financial return. short individual or, even worse, long. finished. They may also lack the experience or incentive to control costs, seek the best market position for an individual property, maximize a hotel’s market penetration, or possess the knowledge to find their way through the myriad of distribution channels. old and new.

Given that average management fees, currently hovering around 2.5% of a hotel’s total gross receipts (including incentive fees), are significantly below rates of yesteryear, it’s no wonder. In recent years, in an attempt to increase revenue, management companies focus on generating incremental revenue by adding properties to their list at lower rates. Many of these companies maintain the same number of staff and resources by spreading them over more assets.

Take the following example. At the current rate rate, an additional $25,000 in hotel revenue represents about $500 in fees. Let’s face it, $500 is not a significant enough return on the additional efforts, staff time, and resource allocations it would take for the management firm to generate that additional $25,000. However, as a homeowner, it can make the difference between paying your mortgage with cash flow or out of pocket.

The economic facts just don’t add up. Consider a typical select-service hotel with 100 rooms, an average daily rate of $70, and 70% annual occupancy. Average rates for this hotel would be around $35,000. With management company revenues per hotel at such a low level, what can an owner really expect from them? While your hotel may benefit from any spending power, it will also absorb travel-related expenses related to management companies, accounting services, co-op marketing, etc. This is often an area where some less scrupulous management companies recoup some of the revenue lost in recent years.

When the fees are at this low level, the game becomes volume. It is not my intention to criticize any management company. I was COO of three small to medium sized companies operating national brand and independent luxury hotels and currently represent many hotel owners through our consulting practice. I see both sides of the problem. But… there are few volume-focused companies in any industry you can think of that are known for their outstanding levels of service to their customers.

So what’s an owner to do? Become an informed owner who monitors your hotel’s performance (or hires someone to do it for you). Please note that for $35,000 a year in fees, your services may be restricted to the limited supervision of a property manager; let’s hope it’s good. If you’re hiring a management company now or are in the stages of interviewing one, ask yourself a few questions about their relationship and how they will report back to you on how successful your hotel is. You may not need all of the information suggested below, but you certainly do need some. ask yourself…

Get a report from a company representative who is on site for a day or two each month detailing their findings of the physical plant, operations, and sales efforts by the staff they supervise? Does his finding match yours?

Obtain timely monthly operating statements that compare results against budget and last year?

Receive monthly reports on the performance of the hotel measured by third-party companies, such as
1) Smith Travel Research’s STAR report to review its REVPAR performance against a precise competitive set and market tranche;
2) TravelClick’s Hotelligence Reports to measure your GDS penetration;
3) Distribution channel contribution reports to review your brand, internet, wholesaler, GDS and other contributions to your revenue?

Receive monthly booking pace reports to review your revenue position compared to the same period last year along with an action plan for improvement?

receive monthly sales reports such as; Top Customers report showing the productivity of the hotel’s top 20 customers and the changes in their productivity year over year; reports on the returns generated by advertising expenditures in pay-per-click, GDS, print and other advertising media; and salesperson productivity reports to determine who sells and produces at your hotel?

Obtain reports on the effectiveness of your reservations department (such as conversion and coverage reports) and the quality of a guest’s stay through secret shopper calls or visits?

o Receive monthly reports on how satisfied your guests and staff are compared to your brand or similar hotels?

Receive reports on the industry performance in the areas of profitability, expenses, labor costs, REVPAR generation and market penetration of your hotel at least once a year to compare the performance of your management company?

o Receive annual reports on changes in the market, such as more or fewer competitors, new or closed businesses or industries in the area?

Or receive an annual marketing plan with monthly or quarterly updates on progress?

receive assistance in the planning and implementation of capital projects?

Receive an annual report on asset condition and franchise compliance?

As an owner, the ball is in your court and many times you hire a management company because you are too busy to get involved in the details necessary to ensure that the return on your hotel investment is maximized. Maybe it’s time you took some time to investigate if this is happening?