Scottish hotel management company RBH Hospitality Management is taking its first steps internationally.
RBH has 44 hotels in its portfolio — including properties affiliated with Hilton, IHG Hotels & Resorts, Marriott International and Accor — all located in the United Kingdom, and has offices in Glasgow and London. But recently it has signed a strategic alliance with Melbourne, Australia-based hotel management company Gatehouse Hospitality that will leverage the skill sets of both sides to propel growth in both markets.
David Hart, CEO at RBH, said it has been a long-term plan for the management company to expand overseas, but what was critical in making the jump was finding the best route and partner.
“We’re clearly a third-party operator. We do not own or lease, so it, so the exercise was in finding markets where third-party management can thrive and where there is some scale," Hart said. “We do want to get into [mainland] Europe, which remains big on leases and has numerous different legal systems and cultures, but that is a big jump. We could see scale immediately with a Gatehouse."
In terms of third-party management opportunities, Australia is very similar to how the U.K. was about 15 or 20 years ago, he said.
“[In Australia], there is opportunity to shift to third-party management, and investors see the benefits. We have contacts there, and at the back end of last year we realize the alignment with Gatehouse. Franchising is a relatively new concept in Australia,” he said.
Hart said RBH has more experience in third-party management and forward-thinking expertise, while Gatehouse has wider consultancy, asset-management and financing experience.
“We want to be proactive in finding and putting deals together. There is significant, potential investment from Asian investors into both the U.K. and Australia, and this alliance is also an excellent way of tapping into this,” he said.
Hart said there are no limits as far as how many hotels the alliance will cooperate on.
“The agreement is an initial step, and there is not a high overhead. It is about making those connections with investors and putting ourselves to a better degree on the map,” he said.
RBH also has been busy in the U.K. moving further into the luxury segment, which it did not start out in. The company recently added the Westin London City and The Gantry London, Curio Collection by Hilton.
“We have also wanted to move more in luxury. We have been fantastic in midscale, but there were no real options for third-party management at the luxury end. You have to show them you can do it,” he said, adding the two hotels both opened in November.
RBH signed another agreement for a management contract in the luxury segment in July, but full details have not been revealed.
“These openings will gain us traction, but in many cases in upper luxury, brands are not always convinced by third-party management, even if investors wanted to,” Hart said. “You need to take the arguments to the very top. These hotels do have the cost-base capacity and can receive huge benefits in terms of scale, expertise and alignment. The change will absolutely happen. Five to 10 years ago, some could not be franchised, but now they can."
Cost Crises
One of the arguments for adopting third-party management in the hotel industry is management companies' ability to control costs in alignment with owners’ interests. Hart said that the current inflationary pressures are straining owners' expenses.
One example is the agency housekeeping model most hotels operate.
“That’s starting to become messy, as these companies are having staffing problems themselves, and it is getting expensive. We want to bring it in-house and make it part of our teams,” he said.
RBH also has management interests in food and beverage.
“At our Indigo Cardiff, there is a Marco Pierre restaurant, and we effectively run it," Hart said. "We look at such things carefully when there is procurement involved. When your costs have only gone up by eight percent, you tell yourself, well done! We changed our supplier of scrambled eggs, and we saved £80,000 ($96,275) over all our hotels."
Hart said a source of pride at RBH is that the company provides what he called a "complete solution."
“We do not outsource anything. Our capital projects team in in-house. We have chartered surveyors, and people see benefits of that. That is not talked about loudly enough, and we’re now able to put out our team almost as a stand-alone project,” he said.
Hart added RBH is realizing this in its first external project, a serviced-apartment property next door to a hotel it already manages.
During the early months of the pandemic, RBH avoided closing any of its hotel rooms, he said.
“We feel our locations are a little better than average, so our recovery was ahead of the market, our [revenue generating index] performance now ahead of pre-COVID-19 numbers," he said. “Our portfolio is in a good place. Of course, there are some issues, and we have managed to get valuable pieces of business, even when what was available was restricted."
RBH has just signed an additional three hotels with an owner who owns 300 properties around Europe, with details to be announced soon. Other new projects include a Courtyard by Marriott in Sheffield to open in early 2023 and an AC by Marriott also to open in 2023.
In total, there are seven hotels in its pipeline, and the alliance with Gatehouse is sure to add more to the mix.