The lean economic circumstances of the past few years have helped accentuate the importance of skilled third-party hotel management, providing increased scrutiny of both performance successes and failures.
One critical element consistent in every hotel management success story is the importance of accountability. And in no segment of the industry is management accountability more important than when taking over management responsibilities for struggling hotel assets. In those situations, where every dollar counts and execution is critical, communication and the ability to deliver results on mutually agreed upon guidelines and deadlines, is essential.
The unfortunate truth is the experience and proficiency of the best third-party management specialists often is required because of lack of direction and focus at the property level. For example, the prior management team is not delivering, and the situation has stagnated or deteriorated, placing ownership in a position of damage control. Besides the obvious negative financial implications of a mismanaged operation, ownership may also have to deal with onerous franchise and lender default issues as a result of poor operations, disastrous consequences for a property that is already limping along.
Hotel owners, investors and asset managers need to consistently be asking themselves if their hotel management company is being held sufficiently accountable. While the best hotel management professionals provide the kind of critically important on-the-ground expertise, close coordination, collaboration and oversight that are essential ingredients for management success, owners need to demand accountability to ensure they are leveraging that expertise in the most efficient and effective way possible. Regardless of the economic situation, your hotel management company needs to be answerable for results in order to maximize the return on your investment.
Our experience, and the collective experience of other top hotel management firms, has reinforced our conviction that owners should focus on the following key areas to ensure they are demanding the highest standards of accountability from their management team:
Owners and operators should ensure their management company is proactive in establishing (and using) clear and consistent lines of communication. If owners have to repeatedly request updates or information, something is wrong. Communication should be timely, honest and open, with regular reports and financial results presented in a way that gives a clear picture of the evolving financial and operational profile. A big part of productive communication is making sure ownership goals and objectives are clearly defined beforehand. The interests of ownership and management should be aligned, with a clear understanding on how success will be defined and measured.
Property-level leadership, especially the hotel’s GM, remains one of the key elements of effective hotel management. The GM is the individual with the most significant influence on operational details, day-to-day performance and results. And because the GM occupies an important “pivot point” between ownership and hotel staff, he or she must be able to communicate ownership’s vision of success and have their team focused and accountable to produce results.
Consequently, one of the most important questions any owner/operator can ask themselves is: Does my management company have the right person to lead my hotel? At a time when the industry is rebounding and revenue per available room is coming back, we found when we have taken over properties that were treading water or losing ground the lack of active and inspired leadership was a common contributing factor.
3. Property metrics
Property and performance metrics are a vital factor in the accountability equation. The key here is to determine how to measure what matters. With information and reporting overload always a concern, hotel management professionals need to be focused on what matters most. Make it a priority to concentrate on accurate forecasting of revenues, proactive management of payroll and expenses to achieve financial results, active management of quality service scores/customer satisfaction, and aggressive sales and revenue-management strategies. Accountability in those four metrics will provide a detailed and accurate portrait of ongoing hotel management success.
4. Brand relationship
Every successful hotel manager should have a good working relationship with the brand management team. Ownership should ensure the professional engagement between hotel management and brand management is positive, productive and collaborative, with managers understanding they have both the ability and the responsibility to clearly communicate to ownership any red flag issues regarding quality inspection scores or customer service scores.
This is particularly critical in places where a breach of brand standards could negatively impact the franchise agreement. The ability of hotel managers to work closely with brand management is especially important in instances when brand standards require capital expenditures. All such expenditures need to be carefully managed and thoughtfully implemented, prioritized based on a balance of customer impact, brand requirements and return on investment. The delicacy of the decision-making process makes it all the more important hotel management communicate clearly with ownership, presenting each brand-related expenditure as a detailed economics-driven business case for ownership review.
5. Sales and revenue management
A keen and pervasive focus on revenue management serves as the economic foundation of every successful hotel management turnaround. While every hotel is different, and experienced third-party management professionals will adapt their plan to meet the needs of the property and the market place, a well-defined and measurable strategy is critical. What is the same, in every case, is a disciplined approach is required—doing the basics well every day. The lack of that discipline is one of the most common problems we encounter when taking over a struggling property, and one of the first characteristics of the professional culture we address.
Ultimately, our experience on the ground has demonstrated over and over again that hotel management accountability is about producing results. Results for guests, in the form of impeccably clean and well maintained accommodations and a memorable guest experience, and results for owners and investors in the form of exceptional financial results. Ownership can go a long way toward achieving those results by demanding solutions—not excuses—and ensuring accountability is a priority, jointly promoting honest and direct feedback from their management company.
Joseph Smith is executive VP with Chesapeake Hospitality, which is headquartered in Greenbelt, Maryland, just outside of Washington, D.C. Chesapeake Hospitality is a mid-sized, third-party hotel management company with a proven track record in both full- and select-service hotels. Ranked in the top 50 largest independent operators, the company manages properties under the Hilton, Starwood and InterContinental Hotel Group brand families. For additional information, visit the company’s website.
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