Deadly sins of operators, asset managers
 
Deadly sins of operators, asset managers
06 DECEMBER 2016 8:27 AM

Many of the problems between GMs and asset managers stem from the deadly sins of arrogance and complacency.

This is the fourth article in a six-part series on hotel asset management.

With apologies to Ponticus, Cassian and Aquinas for trivializing the original seven deadly sins, this metaphorical list was created as a guidepost on what not to do if you are a management company or a GM interacting with an asset manager—or vice versa—and want to have a productive relationship that will optimize the success of your hotel.

These lists are not comprised of hypotheticals; I have seen these sins committed many times—far more frequently than one might expect.

Management company’s deadly sins (through the eyes of an asset manager):

  • Arrogance—thinking (and acting like) you “own the truth” or your way is the best way (meaning, the “only way”)
  • Hiding the ball—not disclosing bad news or important facts on a timely basis
  • Not owning failure—or learning from it
  • Complacency—failure to grow, improve and/or adapt to changing circumstances
  • Patronization—nodding to criticism and then returning to failed prior behavior
  • Viewing your asset manager as an enemy instead of an ally
  • Placing less than an “A-team” at a property (or playing the shell game—moving sub-par managers from property to property until you find an owner/asset manager who will accept sub-optimal performers)
  • Not holding regional and/or property level personnel accountable for results
  • Favoring safe, but sub-optimal, status quo over thoughtful experimentation
  • Budgeting—or judging results—based on a comparison to prior years (Who says prior performance is the appropriate benchmark for success?)
  • Relying on the management contract as an arbiter of disputes or shield against rational challenges
  • Excessive focus on what’s in the brand’s best interest rather than what’s in the owner’s best interest (for example, focusing on RevPAR versus net RevPAR or revenue growth versus profit growth)
  • Transferring high-performing personnel to another hotel when it is purely/solely in the management company’s interest
  • Withholding information requested by the asset manager because it is not required to be provided in the management contract (for example, sales productivity by individual)
  • Proffering “softball” budgets to minimize the chance of not achieving them
  • Not focusing attention on each managed asset (often the result of growth beyond the capacity to support)
  • (Branded operators) forcing compliance with inapplicable brand standards that are not core to the brand or valued by guests

GM’s deadly sins (through the eyes of an asset manager):

  • Failing to take measured risks and/or experiment (e.g., not pushing ADR; not minimizing high-cost channels)
  • Not inviting the asset manager into the executive committee selection process
  • Thinking like a hotelier instead of a business person
  • Not being on top of your market or your operation (not knowing the numbers, for example)
  • Failure to lead and inspire your team to get optimum performance (individually and collectively)
  • Failing to plan and think strategically
  • Positioning the hotel based on ego versus rational economics (It’s nice to be number 1 on TripAdvisor—or have that fourth star on a lobby plaque—but are those accolades warranted based on achievable pricing and optimal profitability?)
  • Not exposing your executive committee to the asset manager or stifling their participation in meetings with the asset manager
  • Failing to anticipate changes and avoid surprises (positive or negative)

Asset manager’s deadly sins (through the eyes of a management company or general manager):

  • Indiscriminately dismissing brand standards as irrelevant or damaging to an owner’s interest (A brand that fails to deliver a common customer experience or meet a common customer expectation is not really a brand.)
  • Using information provided by management as a weapon instead of a tool
  • Playing “Gotcha”—grandstanding in front of an owner and/or blindsiding the management company/GM in a meeting with the owner, their peers, the executive committee or others
  • Going around the GM to give directives to property management or staff
  • Not sharing best practices to support the performance of the hotel team
  • Not understanding the reasons/benefits/costs of differing operating modalities between different types of hotels (for example, luxury vs. four-star; resort vs. urban hotel; traditional hotel vs. lifestyle hotel)
  • Advocating positions that are unrealistic or unachievable
  • Failing to properly articulate owner’s goals and views to the management company and local management team
  • Exercising authority over evidence, analytics and rationality
  • Offsetting insecurity (a lack of knowledge/experience) with officious brute force
  • Failing to convince the operator that it is safe to make a mistake committed in good faith
  • Forgetting that the role of an asset manager is not to “manage” a hotel, but instead to make sure that the manager does
  • Assuming the operator is not interested in doing what’s in the owner’s best interest (They are innocent until proven guilty.)
  • Not protecting the operator from the whims and actions of an unknowledgeable and/or irrational owner
  • Not being able—or willing—to put oneself in the hotel manager’s shoes
  • Trying to force-feed change instead of getting management to embrace and adopt it (We are not making foie gras.)

Dante’s Purgatory may not await those who commit these sins, but guilty parties will surely be limiting the success of their hotel—and their own success in the bargain.

Richard Warnick is Managing Director and Co-Chairman of CHMWarnick (“CHMW”), the leading provider of hotel asset management and owner advisory services. The company asset manages over 60 hotels comprising approximately 25,000 rooms valued at roughly $15 billion. CHMW’s owner advisory services cover virtually every aspect of the hospitality industry, and all phases of a hotel’s lifecycle, including ground up development and repositioning. The company is currently providing development advisory services for client hotel and resort projects valued at over $3 billion. CHMW has offices in Boston, Phoenix, New York, Los Angeles, San Francisco, Fort Lauderdale, Minneapolis, and Honolulu. For more information, contact 978.522.7000, visit CHMW’s website at http://chmwarnick.com/or follow us on LinkedIn www.linkedin.com/company/CHMWarnick or on Twitter @CHMWarnick.

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