Hotel operators and developers detailed some of the biggest challenges and highlights they face today at a recent Hunter Hotel Conference panel.
ATLANTA—While hotel management companies have more resources and tools to be efficient today, there are still some hurdles they have to jump over.
One of the biggest changes in third-party management that Ed Ansbro, managing director of Fairwood Capital, has seen over the last decade is companies have become more hands-on and responsive to owners and brands.
“We try not to get too far into the operations, get into their business, but we do challenge them,” he said on a panel titled, “Trends in hotel management” at the recent Hunter Hotel Conference. “What we’ve seen is really kind of the evolution of management companies that are a lot more owner-focused, more receptive … and sharing best practices from different management companies. It’s been a big improvement.”
Opportunities available today
Management companies are seeing a tremendous amount of new resources and tools as technology advances to help them be smarter decision-makers when it comes to managing rates and costs, said Mark Williams, CEO, Coakley Williams Hotel Management Company.
Beau Benton, president, LBA Hospitality, agreed not many other industries have the data and tools that hotel companies do to manage business on a daily basis.
With all of this advancement, it’s also key to be an early adopter of technology and not fall behind the opportunities, said Brad Rahinsky, president and CEO at Hotel Equities.
“Hopefully you’re taking advantage of that,” he said. “There’s really never been a more exciting dynamic time to be in our space. … Those who are first to the market, first thinkers, early deliverers, executioners will really win the day.”
Aside from technology, management companies are positive about the current economic stance. With gross domestic product expected to grow by about 2% to 3% this year along with money filtering back into the U.S. from the tax code modification, Rahinsky said, assets will start to see more revitalization and capitalization.
“That’s a good thing for all of us,” he said. “If we do that right, that will allow us to yield rate at the right times.”
Challenges, cutting costs
As the industry has heard time and time again from brand executives that hiring and retention is a pain point, management and development companies are pressured by it, too.
Benton said LBA Hospitality is spending a lot more time with recruitment at the corporate level to better staff its properties.
But wage increases are making that tough, panelists agreed, forcing them to look at what cost cuts can take place.
“If things are good right now and you have high expectations in terms of your margins and your flow through and that wage increase starts to take place and grab hold … where else can you cut (costs)?” Rahinsky asked.
The best case scenario is to grow staff internally and organically to better control the wage increase, he said. And when it comes down to it, owners and managers of hotels also need to think of themselves as a staffing company, he added.
“(Make) sure that the programs and platforms you’ve created internally create that organic opportunity … because it will always be the people, that’s the differentiator,” he said.
Williams of Coakley Williams Hotel Management Company cautioned against cutting too much on the personnel side to the point where property, guest and brand expectations are no longer being met.
In the immediate moment, there are smaller things like credit card commission savings that can be done to help save money, he said.
Benton said hoteliers also must prepare for an unknown event that sparks the next economic downturn.
“I think we, as a company, don’t have the fluff that we may have had in our hotels in 2008,” he said. “I don’t know that we have the ability to cut some of the areas that we did, because we haven’t added everything back.”
To stay on top of things and eliminate surprise costs, Ansbro said Fairwood Capital talks to its properties on a weekly basis to go through expenses and budgets.
Revenue management still key
Owners, brands and management companies still need to believe in revenue management, Williams said—on a weekly, daily and hourly basis.
Benton said LBA Hospitality still sees the opportunity for revenue management and requires its assets to use their revenue management services to cover margin pressures.
“Operations, revenue management and sales have to be aligned,” he said.
And when it comes to the annual budgeting process, contingency plans should be required, Ansbro said.
Rahinsky said Hotel Equities does that internally.
“The head in the sand approach is not effective,” he said. “If you don’t have contingencies for scenario A and B based off of what could potentially happen, then you’re fooling yourself and you should be prepared for that.”
Getting the most out of management companies
For brands and owners considering a partnership with management companies, Rahinsky said the company needs to define for the brand why and how they will be a revenue producer for an asset.
If the management company can’t, and it’s more of a cost than a value, it’s time to find a new group, he said.
“You want to make sure you’re getting the best value. That doesn’t always mean it’s going to be the lowest price. … So you need to make sure you’re 100% aligned with your management partner as owners,” he said.
One thing that’s hard to quantify, Williams said, is trust. Owners put a lot of trust in an operator running their asset, but he’s noticed sometimes he isn’t given that trust to do what he’s hired for, which is a pain point.
Rahinsky echoed that trust is the foundation of any company relationship, but it doesn’t happen overnight. He said at Hotel Equities, they won’t sign a partnership deal until both parties formally meet and understand each other’s culture and how that will drive value.