The relationship between a hotel owner and its asset management company is like a marriage. As anyone who has made it past the first few anniversaries will attest, it’s only by working together that the relationship will succeed.
Now that the property management contract has been signed, the terms hammered out and the fees agreed to, where to go next? Once the ink is dry, ownership groups and management teams must partner together to achieve the desired results for an asset. This is essential in all elements of hotel management but is specifically important for a hotel’s financial success in three key areas: management of brand relationships, revenue management and e-commerce strategy.
Recently, a hotel was missing out on valuable revenue from international clients who were staying in the market, but not at this specific hotel. Together, the property management team and ownership team worked with the hotel brand to get the property listed on several international brand sites, improve website listings, translate the hotel’s website into several languages and attract new customers and revenue from several key feeder countries.
This never would have been possible without the united front presented by the management company and ownership group. While the management of brand relationships, revenue management and e-commerce and the strategies that surround them most assuredly will have varying degrees of success, one thing is clear: When approaching hotel management in a quickly-evolving world, the “us versus them” mentality of manager and ownership is a guarantee for failure. It is only the open, transparent partnership between the ownership and management team that will lead to long-term success and profitability for the hotel.
Brand relationships
A hotel divided cannot stand against brand demands. While the franchisor plays a key role in demand generation, establishing service levels and initiating customer communications, this does not mean it should be given carte blanche permission to make cash-infusion demands.
The relationship with any brand must be managed from both teams: the owners (as they work to evaluate the proper flag and negotiate capital requirements) and the management team (as they work to maintain brand standards, achieve required service levels and pass brand quality assurance evaluations). Clearly, these elements go hand-in-hand.
It is the hard work of the on-property team that provides management of service and cleanliness, and it is the owner and asset manager who understand the capital needs of the hotel, based on brand-dictated standards and scopes, as well as guest and operator feedback. Only the management company can tell the owner what the guests are truly saying, and only the owner can provide the capital to address those needs. A failed quality assurance audit can lead to unnecessary spending. A lack of spending can lead to poor service scores. Both teams need each other.
Revenue management
Before prices or strategies can be set, the first question of revenue management is: Who will handle this all-important task?
There are a variety of options, including a dedicated property resource, third-party revenue management firms and revenue management professionals at the corporate office of the management team. Regardless of who takes responsibility, revenue management requires a strategy around which all parties are aligned.
One of the key roles of asset management in this arena is to bring a broader perspective. It is easy for a hotel team to get tunnel vision, looking only at their competitive set, their inventory and their key accounts. However, taking a step back with the perspective of an owner, who may manage assets more broadly, can bring a new take on rate strategy and channel management. This collaborative approach can help both sides better see the forest for the trees.
As the industry looks to drive rates and achieve aggressive average-daily-rate goals, this might mean yielding out lower-rated business or driving retail rates—both risky moves that might not always prove to be successful. However, for a hotel to achieve an optimal revenue mix, these calculated risks must be taken. The team must have room to try, fail, correct path and try again. This requires the support of a sophisticated revenue management team and a willingness, on the part of the ownership group to see, at least in the short term, a bumpy ride on a STR report.
E-commerce strategy
Mobile and Web are the fastest-growing distribution channels, providing a huge source of revenue and roomnights to the hotel industry. And it’s not just coming from brand.com and the large, third-party booking engines. It’s coming from social media sites, deep-discount email offers such as Groupon or Living Social, mobile apps and, most recently, the biggest player of all, Google.
As such, property managers and asset managers need to ensure a strategy is in place to drive the desired business and to be selective about the less-profitable segments. All of the major brands are making great strides in developing and expanding their e-commerce initiatives, through pay-per-click, search engine optimization and vanity websites. But in many cases, this is almost too late, as several key third-party booking engines already dominate this space.
Wise management companies are rapidly expanding their teams to include specialists to manage social media, develop e-commerce promotions and foster relationships with the brand’s e-commerce teams. As these channels grow, asset managers and owners must partner together to ensure the brands are driven and focused in their e-commerce initiatives, the strategy in place is right for the hotel in question and the sales structures in place at the hotel reflects the needs of the property and its mix of business. This is an ever-changing landscape, and those properties with a comprehensive strategy, formulated by an asset and property manager, have a distinct, competitive advantage.
Sarah Ozanne works in Hotel Asset Management, overseeing the southeast region of two large hospitality portfolios for an investment bank. A graduate of Wake Forest University, Sarah worked as an analyst in hotel investment and asset management before moving into asset management. She resides in Dallas, Texas.
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