The hotel business is characterized by a unique segregation of duties and multiple stakeholders.
While in some cases one person does it all, hotels could have a lender, an owner, an asset manager, a management company and a franchisor. All interact in a complex ecosystem, working together to improve performance.
Though every interaction is relevant, there is no partnership more important than that of the general manager and the owner. Owners ensure the business has the funds and the infrastructure to operate. The general manager, directed by the management company, orchestrates the day-to-day work needed to generate profit. The quality of their relationship can make or break a hotel.
This partnership is not always easy to manage for a couple of reasons. First, few general managers are trained to work with owners. Hotel schools or colleges seldom teach owner interaction the way they cover interaction with other stakeholders such as guests, employees and suppliers. Additionally, owner contact starts happening late in a hotelier's career — usually when they become a general manager, by which time they are fully responsible for the business.
Second, while the owner and management company are aligned behind maximizing return, in some cases the parties may disagree. This puts the general manager in the difficult position of mediating between the management company — usually their boss — and the hotel owner, who they work for. In addition to profitability, general managers are charged with guest satisfaction, protecting the brand, having a good work environment, reducing risk and keeping the hotel in shape. Owners could question those priorities when they require additional investment.
To that end, I recommend the following ideas for general managers to navigate this complex relationship.
Find Your Owner's Purpose in Hospitality
While most owners are investors seeking return, you must dig deeper.
Some are passionate about the industry or are continuing a family tradition. Others like the prestige associated with hotel ownership. A few are real estate developers who expect the hotel to improve the neighborhood and drive office/retail rents up.
Understand their purpose and help them achieve it.
Seek Long-Term Profit
A hotel is an expensive building intended to produce return for decades. Decisions should always favor the long-term return, not short-term profit.
If requesting capital for a project, try building a solid business case. When proposing a guest or employee initiative, link satisfaction to future revenue. If an owner wants to postpone a renovation, remind them of the long-term consequences if your market share drops due to poor quality and bad reviews.
Align Your Market Vision
Hoteliers must often make long-term decisions depending on how the business will evolve.
Exogenous factors could alter future profit significantly. A new local attraction might increase demand, oversupply could threaten rates, or a new legislation may raise labor costs.
Managers and owners should align their vision to be more efficient at strategizing. A pessimistic owner might hesitate to do an expensive renovation, whereas an optimist could overinvest and expect impossible returns. Owners and managers should carefully plan for what they both think the next business cycle will look like.
Use Data
Most companies have a standardized owner’s package, which every general manager can build upon in their presentation. Non-hotelier owners may need help understanding data and interpreting results to make decisions.
If an owner will be required to fund a cash shortfall, start socializing this in advance by sharing the cash-flow forecast. When discussing renovations, share guest satisfaction surveys and market share reports, emphasizing the role of capital expenditures in maximizing your market share and revenue.
Be a Brave Mediator
Management companies and franchisors may propose an investment or purchase that could be unnecessary or untimely for some hotels. This is particularly challenging with branded management companies, which tend to favor brand equity over hotel performance.
A general manager should be able to explain to a hotel owner the importance of doing its fair share to keep the brand powerful. At the same time, general managers should defend their owner and question the applicability of brand standard/requirement when appropriate.
While hotels are a real estate asset, performance hinges on people working together. Owners and managers must seek long-term profit in an aligned market vision, use data and balance brand and hotel equity.
Hugo Desenzani is chief executive officer of Intursa (Libertador Hotels, Inversiones La Rioja).
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community.Please feel free to contact an editor with any questions or concern.