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Keys to profitability lie with the GM
February 25 2013

While asset management and profitability management are sexier career choices, sources said it’s important for hoteliers to promote the brightest property-level employees.

Highlights
  • For most people who enter the hospitality industry at the line-level, the path to the top is not often clear, sources said.
  • The hotel management tract is rather confined.
  • “If you’re working for Four Seasons, you’re not going back to Motel 6. And if you’re at Motel 6, I don’t think a full-service recruiter is really looking at you,” HVS Executive Search’s Kevin Kefgen said.
By Jason Q. Freed
Contributing Editor, Tech Impact Report

Editor’s note: This is the second in a two-part series exploring the evolution of the GM role within the hotel industry. For part one, see “Tenacity and personality drive the GM search.”

REPORT FROM THE U.S.—As the hotel industry becomes increasingly concerned with asset management and profitability, some hoteliers are worried the practice of hospitality—the art of understanding customer service and taking care of the guest—has gone by the wayside.

At hospitality schools such asCornell’s School of Hotel Administration sources said students are gravitating away from property-level management positions and more toward asset-management and revenue-management careers. The shift, sources said, is a result of a stigma attached to the hotel GM position—that hours are long, customer service is stressful, blame often falls on the GM’s shoulders and, most importantly, salaries don’t compensate for all those downfalls.

“The challenges of a GM position are that compensation is on the lower end of the scale, particularly when one looks at the nature of the job and number of hours committed to the job,” said Barbara Purvis, president and director of Essex Hotel Management, which has 10 hotels in its portfolio. “It’s 24/7, 365 and there’s never really a time to be away. Guest and employee issues can be brutal.”

In addition, for most who enter the hospitality industry at the line-level, more often than not the path to the top is not so clear. A front-desk clerk may be able to work his or her way into a select-service management role, but a C-level role with a brand or ownership company is no longer a reality. Today, those positions are filled with people with financial or branding backgrounds (see Marriott International’s Arne Sorenson and Starwood Hotels’ Frits van Paasschen), not those who have worked their way up through the line-level hospitality ranks.

Adam Zembruski, president of North Carolina-based management company Pharos Hospitality, said he sees this as a major problem for the industry moving forward. As important as the real estate side of the business is, Zembruski said it’s the people side of the business that really moves the needle from underperforming to profitable.

“In my opinion, hotels are not real estate,” Zembruski said. “They are an operating business, just the way a restaurant is. Profitability is not going to fluctuate on trends in the market like the housing market. If a hotel is not run properly, it’s not going to be a valuable asset.”

And, if Zembruski’s value of hotel management is true, the GM is the most critical person to determine a hotel’s long-term success.

“That’s where the disconnect is today,” he said. “A lot of the real estate folks don’t get it.”

Two sides of the coin
Not all hoteliers feel as strongly as Zembruski.

Keith Kefgen is a Cornell graduate who is now the CEO of HVS Executive Search, a division of HVS that provides human capital advisory services, including senior-level executive search, mid-management recruitment and compensation consulting.

Kefgen countered the notion that understanding real estate and understanding the needs of the guest are mutually exclusive. It’s incumbent on good business leaders to understand the investment and the operating sides of hospitality, he said.

“You can be an investment guy and still create interesting things that touch the guest,” he said. “Barry Sternlicht has proven that.”

(Strernicht held real estate positions at JMB Realty in Chicago and Starwood Capital Group while also leading Starwood Hotels & Resorts Worldwide for 10 years and helping create innovative guest-facing amenities such as the Heavenly Bed.)

Most times, though, Kefgen said young people pick their passion and embark on a career in one direction or the other. There are people who enjoy getting hands-on experience and getting close to the guest and there are people who are much more interested in enterprising value.

“You pick your poison—what you want to do with your life,” he said.

An industry divided
The real problem, according to sources, is the hotel management tract is rather confined. Most people who enter the industry tend to get pigeonholed within a segment.

If a hotelier enters the industry by way of the full-service segment, it might be 20 years before he or she works their way into a GM role at a noteworthy property. If the person enters in the select-service segment, he or she can become a GM within as little as two years, but the chances of jumping into the full-service segment are low.

“If you’re working for Four Seasons, you’re not going back to Motel 6. And if you’re at Motel 6, I don’t think a full-service recruiter is really looking at you,” Kefgen said. “I don’t think people jump between segments as much as you might think.”

Zembruski agreed, saying once a person obtains a GM role at a full-service hotel, they don’t tend to leave that segment—which limits the opportunity for others.

“There’s not a lot of opportunity for really passionate, smart, intelligent GMs in the select-service industry to move up into that role. It’s like moving into the (National Football League),” he said. “They have this stigma of being a select-service hotel GM and in the interview process they’re almost not even looked at.”

Salaries between the two segments are night and day as well, said Kefgen, who leads a practice at HVS that collects and studies hotel salary data. He said GM compensation is highly related to three things—the segment, the size of the hotel and the geographic location.

“As you move up segments, compensation increases. Running a Four Seasons hotel versus a Motel 6—while I respect both brands—the complexities are different,” he said. “Also, as the hotel gets larger, there is a tendency for compensation to go up.”

Solutions?
Is there a way to patch the disconnect between investment and operations, and therefore make the GM role a more attractive position? The answer, sources agreed, lies in a movement to provide hotel employees with the appropriate amount of training.

“Those select-service managers are really hungry for education and training,” Zembruski said. “They want to learn the asset-management role. They want to look at (the business) from a value perspective.”

However, Zembruski said the opposite trend is not occurring; asset managers and investment managers are not trying to learn how to operate hotels.

“Therefore, you end up with people who don’t know any way to operate a hotel better so they just cut payroll,” he said.

While full-service brands typically have a solid training program in place, employees in the select-service segment are left to learn on the job, sources said.

“It’s still an academy type of education in this business,” Kefgen agreed. “Once people become GMs, are they getting ongoing training? Are they going back to school? Very rarely. I’m sure there are individual companies, but in the industry as a whole, it’s pretty weak.”

“They’re getting intense training without even having a program in place,” Zembruski added. “Select-service hotels have to do more with less and it’s a double-edged sword because (employees) get the experience, but they put in a lot of hours with not a lot of promise.”

Essex Hotel’s Purvis said the nature of the GM position isn’t going to change.

“Part of it is identifying those people who enjoy the position and developing them,” she said. “Those who are opting into management, those are people for whom being behind a computer would never fulfill them.”

Zembruski also said the industry would benefit by extinguishing the stigma that all GM roles are dreadful.

“You’re not working 15 hours every single day. Sure, if a pipe bursts on Wednesday night at 10 p.m., you’re going to get a phone call and you need to go in,” he said. “But once you’ve put in your time and been trained you can start to get engaged in the community, spend more time at the corporate office, get brand training and learn asset management.

“It’s just not going to happen at Day 1.”

COMMENTS   Show All
A GM's perspective
2/26/2013 10:59:00 AM
I agree with the title of this article! Also, great diversity of contributors, from all sides. To even boil it down further, the GM role is about adding value....Period. I like to think I add value to the lives of our guests and employees. I add value to the community and am motivated every day to add to what the hotel is worth. But it is a double-edged sword. Better performance = More profits = better valuation = potential sale = me out of a job (most likely). Hotel GMs should somehow be incentified (financially) by a sale, rather than fearful. And that is THE fear among us GMs.
K.V.Simon
2/26/2013 12:43:00 AM
The two part series on GM's role was very instructive. We should not attempt to separate that which is already united. GM's role as a business manager and operations manager is inseparably interwoven and the education,training and development of talent to fit the GM's role must take into account this unchanging truth. The challenging role calls for a convergence of skill sets and competencies with a multidisciplinary approach.
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