How to decide the Management Model of a new Hotel
Photo Credits: Unsplash, Avel Chucklanov
One of the main focus points during the Hotel Concept Making process is the analysis of the owners’- investors’ profile, but also of how they will be involved in the daily operation of the new Hotel. This is indeed a pivotal question, as it is important to ensure the property’s smooth operation after its launching.
This article will focus on answering the crucial question of how to manage a hotel, in an effort to help potential investors in the Hotel Sector, as well as entrepreneurs who already operate a property but are unable to decide the most appropriate management model for their business.
The alternatives of Hotel:
By the phrase "hotel’s management model", we mean the business model which we will apply in order to assure a smooth and profitable operation of the business. We begin with the least engaging options and continue with those that require our full commitment:
By the phrase "hotel management model", we mean the business model that should be applied, in order to assure a smooth and profitable operation of the business. We will begin with the options that require the least involvement of the hotelier, and continue with those that require full commitment:
Hotel leasing to a third party: This is the option with the owner’s least personal involvement, according to which the investor builds the hotel and then rents it to a third party manager, who has full responsibility for both of its administration and its expense management. The only obligation of the tenant to the investor is the payment of the agreed rent, and, in this case, the investor has no word neither on the operation nor on the decisions concerning the property. Simply put, investors cannot assume that they are performing the profession of a hotelier, but that of a real estate rentier.
Cooperation with a Hotel Management company: In this case, investors should choose an experienced Hotel Management company, which will be responsible for the full operation of the property, from operation to sales and also budgeting. However, the full coverage of the funding and of any expenses that occur remains in the hands of the investors, who approve the budget and, of course, receive the company's profits. Hotel Management companies are usually paid a percentage of the profit or of the turnover, while some hybrid models that combine fixed payments plus performance rates are also rather common. In this model, we can say that investors are active in the hotel market.
Autonomous Administration: In this last scenario, which is quite common, the investor, who performs 100% the profession of a ‘Hotelier’, is in charge of the hotel’s overall management, as well as the budgeting and expenses coverage. Clearly, this is a difficult model, as it requires in-depth hotel knowledge at all levels (Operation, Marketing, Sales, F&B, etc.), significant experience, but also full dedication, possibly with the support of a small management team - always depending on each property’s size and specific needs. Over the years, and with the constantly increasing hotel requirements, new types of companies have been developed, such as Reservation Management Companies, which offer high-quality services in parts that require even higher specialization, ensuring the success of the hotel.
How can you choose the right model adequate to your needs:
The decision comes as a result of the combination of experience and knowledge, but mainly of the time that you intend to spend in this profession. Beginning from the most demanding model, this of the autonomous hotel management, if you do not have experience in the field, a good option would be to hire a management company for the first years of operation, so that you can be trained on the job. It is, of course, important to inform the third-party company about your intentions, so that it can configure the services accordingly and agree on your role within the hotel’s workforce (we suggest circular work in all departments). Alternatively, if you are confident about the administrative part, we recommend lightening your responsibilities during the first years by hiring an Online Sales and Reservation Management company, which will secure your company's income and allow you to focus on the main experiences that you want to offer.
If you are approaching the hotel market as an investor and you also have a relevant vision for the industry, the Hotel Management model is ideal, as it retains your involvement with the hotel, and gives you a final word regarding the property's important decisions. At the same time, this method discharges you from the heavy operation process of a hotel business. However, the choice of the hotel management company should be very strict, in order to ensure your constant control and monitoring over the various tasks.
Some key points when choosing a management company should be:
What is the communication model and decision-making process, and to what extent does the third-party company match your company's culture?
How many and which hotels does it already manage? Does it have experience in your hotel's destination? And what is its size?
How does it manage sales, and are both online and offline channels included?
Finally, in case you are interested in just leasing the property, it is important to try to understand the tenant's management intentions, as, depending on their ability to answer your questions, might determine the tenant's credibility.
Last thing to remember:
The way we specify a Hotel Concept determines how flexible we can be in several management models. Therefore, it is a good idea to do the necessary research at the first stage of the specification process, in order that the final decision is taken into account in the directions that will be given to the design teams. This can give the property all the necessary features that are important for its management and also contribute decisively to the overall success of the investment.
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Nikos S. Morantis
Founder & Strategy Specialist
Working closely with Hoteliers from all over the world, examining their needs, but also constantly studying the latest digital marketing techniques applied in the global travel market, Nikos has the pleasure to develop some of the most promising tourism projects, always having open horizons in new challenges.