If you are a hotel owner looking for a hotel management company, the amount of potential hotel management companies you could choose from are enormous, ranging from big international brands to one-man-shows. If you work for a hotel management company, you will probably want to know what else is available in the market, so that you know how you can get an edge when it comes to grabbing the attention of investors, developers, and the market in general. Given this, what's the future of hotel management companies?
Joining our conversation are:
- Alexander Wallace, CEO of Pragma Hospitality ;
- Olivier Berrivin, Managing Director, International Operations Asia of Best Western International;
As a Hotel Management Company, What Gaps Does your Company Fill in the Industry?
Alexander Wallace: Pragma Hospitality is what we call a 'white-label' management company; a Hotel Management company without any particular brand of its own, nor any brand affiliation. We fill the gap between owner managed and brand managed hotels. Pragma offers professional tools for hotel owners who might have less hotel experience, so that despite this lack of experience, they can still manage their properties to international standards, and get access to distribution and business strategies that are the product of many years of experience having run successful hotels.
Olivier Berrivin: Best Western Hotels (BWH) Hotel Group was built on a franchise model, so we're not a pure management company per se. In the USA, all our properties are franchised. In Asia, because of the specific needs of different markets and the fact that we had to provide similar services as our international competitors, we decided to offer management services on the top of our franchise agreements and this has been very well received by our new partners and has allowed us to become highly competitive in the region.
What Sets Your Company Apart From Other hotel Management Companies?
AW: We do not require our owners to follow those particular building, interior and operational standards that nearly all the other hotel management companies demand. We have flexibility towards the owners expectations and adjust hotel properties to match both owners' and guests' needs. This is done by implementing systems just the same as you'd find in any internationally branded hotel company, only under the name of the owners choosing.
OB: We focus on what we do best: the economy and midscale segments.
BWH Hotel Group has a long and solid reputation of proposing attractive agreements that benefit all parties, including a reasonable fee structure that focuses on the bottom line and clear results, rather than imposing some heavy top line fees that don't always reflect the operator's performance (such as the contribution of OTAs).
Our current managed portfolio totals fewer than 40 hotels and this gives us the ability to invest time in the hotels' day-to-day operations, through our GMs and operating teams, to make sure that the correct commercial and financial decisions are made in a timely manner to achieve budgets. The upside of this approach is that a happy owner will recommend us to other potential partners, which makes our job much easier when it comes to brand development.
Our priority is to increase our regional footprint through our core brands (Best Western, Best Western Plus, Best Western Premier), while also establishing all our new brands (including Vīb, GLo, SureStay, BW Premier Collection, Sadie, Aiden) in the right markets and locations. Last but not least, the acquisition of WorldHotels in early 2019 finally gave us the opportunity to expand and compete in the upper-upscale and luxury segments.
A lot of individual owners these days want to create their own brands because they believe that they are offering something 'unique'. What do you think of this approach? How do you make a stand alone property profitable?
AW: A lot of new owners are very creative nowadays when it comes to developing their hotels. They are influenced by their own travels - what they personally have seen and experienced. They have also decided to get into the business based on their understanding of what the supply is of that type of property in the market / country that they're opening up in.
OB: This is true, but you can count on the fingers of one hand the number of truly successful standalone, unbranded properties. Every owner wants to create that 'unique' flavor for his or her property, but to succeed takes a very delicate blend of ingredients, including the right location and market mix, the right leadership, a clear vision and concept, the right hardware, and most importantly, a great team that understands and can implement the concept.
When travelling for personal reasons, I always try to book an unbranded property based on the recommendations of colleagues and friends. I've stayed in properties where the new technologies were quite limited, but where the human communication was excellent and created a pleasant experience. Like in all ventures, many try but only a few succeed!
As mentioned earlier, owners need the perfect combination of ingredients. Surround yourself with the right people who share the same passion to create something different, and don't compromise on service quality and originality. Try to keep your finger on the pulse and anticipate your clients' needs. Innovate while remaining true to the original core concept that made your property successful.
There are a Lot of Hotel Management Companies and Hotel Consultancy Firms Entering Into the Market in Coming Years -In your Opinion, What's the Future of Hotel Management Companies?
AW: Hotel consultancies typically come before the hotel management companies and are usually the first contact for hotel developers and owners. This was not always the case - it has only recently started to trend like this over the past few years. Developers and owners realize the importance of consultancy companies' advice regarding their plans to develop their properties, or raise the performance of their existing hotels.
Advisory companies are more and more in demand and are mainly focused on Management Company research and selection for the owners and developers. The sheer amount of brands in the hotel world is confusing for owners, and the complicated management agreements that these brands offer scares most new developers. That means that the expertise of the consultants who advise on how and which brand to choose, and guide them through the management agreements is a must.
Owners are also increasingly looking for consultants to stay on board once a management agreement is signed and assist in overseeing the development or the actual operation of the hotel.
This is what we call Hotel Asset Management, and it assures the owners that a professional is standing between the multinational brands and the owner to assure that communication between parties is flowing, that the Management contracts are fulfilled from both parties and that the performance of the hotels is optimized.
Companies like JLL, HVS and the rising star, Nova Asset Management have long histories of experience in their teams and should be a must for all owners.
As for Hotel Management companies, the super mergers of large international brands makes it more complicated for owners to choose the right brand. The close proximity between each of the different brands of the same management companies, scares owners and developers. The sheer size of these companies, makes the owners feel that there is no executive communication possible. The larger brands have their agendas to grow bigger and add more brands so they can scale up to to counter the OTA's in the distribution systems and develop their own powerful systems.
More and more owners realize that a brand is not always necessary to fill a hotel and run it professionally. Due to more and more online tools, owners learn fast and don't see the need to bind themselves for lengthy management agreements from which they can virtually not get out.
Owners are more and more looking for smaller management companies, so they can keep their own identity in the hotel, have shorter agreements and simpler terminations so once the Hotel is performing to its maximum they have an option to step out and continue the management themselves. The lesser hassle during development or handover to 'white-label' companies is very welcome by the owners. They don't have to fulfill hundred of pages of brand-standards - which is a huge plus.
The future will see more and more individual management companies. The role of a management company will shift from operations to distribution and yield management.
OB: Major international brands will always retain the largest shares of the market, simply because of their existing footprint, brand awareness, global network, sales & marketing platforms and other services. Yes, the market is full of small so-called 'management-companies' with self-appointed CEOs, but they don't last as they don't have the infrastructure or the teams to succeed. Signing an agreement is difficult and some are even so desperate for deals that they provide their services virtually for free. In doing so, they create a bad image of what hotel management services should be, and ultimately owners return to the professional companies.
Still, this is not true of all small hotel management companies. We do work with some well-established ones which have a proven track record and strong local market knowledge, giving them real credibility. As I mentioned above, many will try but only a small number will succeed.