With so many companies involved in even one property, it’s important to make sure everyone works for a common goal and considers themselves part of a team.
PHOENIX—Each of the players involved in running a property has a specific role with certain goals and responsibilities, and sometimes those come into conflict. Everyone—brand, owner, operator, asset manager—wants the hotel to succeed, but they might each have a different approach to making that happen.
Panelists at The Lodging Conference spoke about ways to maintain, repair and, when necessary, end the partnerships formed when running a hotel. The session was titled “Managing the relationship between asset manager, management company, flag and owner.”
Role of an asset manager
Generally speaking, the asset manager acts as the liaison between the owner of the property and the operator, said Robert Hayward, SVP at CHMWarnick, and the specific duties and approach of the asset manager can fluctuate depending on how sophisticated the owner is.
In recent years, Hayward said, his company is finding more and more owners who have inherited a property.
“They have no idea how hotels need to be run,” he said.
The property itself can make a difference as well, said David Marvin, founder and president of Legacy Ventures. The value and complexity of the assignment can justify a different layer of asset management, he said.
“A full-service hotel naturally might give rise to that need,” he said.
An asset manager can also act as an expert representative of the owner when dealing with brand-managed hotels, Marvin said.
“The brands wake up every day and, understandably, their thoughts are about the brand,” he said. “They might be inclined to replace the carpet a little sooner than it needs to be replaced.”
As a management company, Crestline Hotels & Resorts sees no difference between communicating with an owner and an asset manager, President and CEO James Carroll said. Sometimes the management company is sophisticated enough and has the capability to assess capital needs, work with the brands and take on higher levels of work beyond the day-to-day operations, he said, and some owners can deal with such a management company.
Aiming for collaboration
The asset manager needs to be in sync with the property owner, Marvin said, but the best-case scenario is a collaborative effort where the management company is on that team as well.
Operators used to look at an asset manager as someone who will hit them over the head and nickel and dime them for every expense, Hayward said.
“I hope they’re looking at them more today as this collaborative approach where we’re all a team, we all have the best interest of the owner and asset in mind,” he said. “It’s about sharing ideas and working toward a common goal. Obviously that won’t always happen, but clearly the best method is collaboration.”
Working together and coming to an understanding can head off or work through problems. Kirby Payne, president of HVS Hotel Management and HVS Asset Management, said when it comes time to do the annual budgets, some management companies prefer not to provide executable spreadsheets and give PDF printouts instead. That doesn’t work, he said, because his company wants to find the bad formulas that can explain any budgeting problems.
Taking that to another level, he said, some management companies wouldn’t share anything generated internally, which is a record belonging to the owner according to the management agreement.
“Some management companies take a while to understand,” he said. “Though collaboration, I think we have always gotten there.”
When to cut ties
The biggest conflict Carroll recalled was between an unsophisticated owner and an asset manager who was looking for trouble.
“That’s how they seemed to curry favor with the owner,” he said. “The more the asset manager found wrong, the better the asset manager is doing their job. I would argue the flipside. … As an owner, the less you hear about conflict means things are probably doing their job as well.”
The situation became increasingly hostile, he said, until the company decided to go directly to the owner—a move Carroll called “somewhat sensitive.” The asset manager is the owner’s representative, he said, and this move meant going around the system.
“We were able to convince the owner (that) the asset manager was hindering performance at the hotel, not helping it,” he said. “We linked performance of the hotel to the removal of the asset manager. That got the asset manager out.”
Property-level leadership is another major source of conflict, said Randy Hassen, president of McKibbon Hospitality.* If the asset manager believes the general manager or the director of sales isn’t fully engaged or right for the role, there might be the expectation of quick termination. But that doesn’t happen. From a human resources standpoint, the parties might review their contracts to see what options are available.
“If it gets to the point where you’re looking at the contract for what you can and can’t do and you’re getting legal involved, your relationship is going south,” Hassen said.
The single best provision in any contract is easy termination, Marvin said. When performance and expectations diverge and appropriate action isn’t taken, he said, this route might be the answer if hundreds of pages of legalese can’t provide a solution without a huge cost.
*Correction, 17 October 2016: An earlier version of this story referred to McKibbon Hospitality by its previous name before its recent rebranding.