This is a tough subject to broach; control can give anyone a subconscious and addictive rush. After all, who actually wants to give up control? Certainly not many hotel general managers or any senior executive for that matter.
As an owner, though, it can be especially beneficial to give up control of your hotel and retain a third-party management company to help manage your hotel. True, this may come off as a bit self-serving since my firm, Newport Hospitality Group (NHG), specializes in managing flagged and independent hotel properties.
However, there is a reason these entities exist; they add real value! Here are three key examples how they help owners and why owners should consider them.
You will make more money
Hiring an experienced third-party management company will most likely result in more money to your bottom line. This hearkens back to the basic economic principle of specialization of labor.
If you self-manage your hotel, you probably do not have the level of resources, experience or ‘bench strength’ at your disposal as a third-party manager. These additional resources have a direct correlation to your hotel’s operations. Oftentimes, we are able to pay for ourselves and increase the bottom line at the same time by growing top line revenues through a more detailed and disciplined approach to revenue management as well as by deploying our seasoned sales teams into each market.
Being in business for over 30 years means that we are able to uncover new business, no matter how small, or make changes to the ways the hotel is being priced. I have personally walked into hotels and unearthed major pieces of potential business within a couple hours simply by asking the right questions or by drumming up groups via revisiting local companies who have been ignored.
A good management company will leverage its size and resources to find better pricing for you on the same supply chains and through the same vendors that you currently use. NHG works closely with not only GMs, but also department heads, training each on how to effectively manage all operational expenses from payroll to toothpaste.
You will sleep better
Giving up control can often take a psychological toll. In the case of running your own hotel, you take on many additional layers of liability and undue stress. Once you hire someone else to run the business, this newfound layer of insulation can be discomforting, marked by a stark feeling of helplessness. Don’t panic! If you’ve hired the right team, you will be able to sleep soundly knowing that someone else will get the phone call in the middle of the night when there’s a problem.
It’s standard practice for a management company to become the employer and therefore assume all of the associated employee law liabilities. You will have multiple points of contact who will step in and handle any potential problems, ranging from natural disasters all the way down to an employee calling in sick. As NHG is primarily based along the East Coast, we have had hurricanes hit hotels, and we actively engage with the teams prior to the storm to ensure they have the right plan in place. We also deploy members of our team to head to these hotels before, during and after said events to ensure the asset and the teams are protected. Further, it’s typical for a management company to handle all of the insurance details, which provides yet another form of stress relief for an owner.
You will have more time
It’s often said that time is the new luxury. You can always make more money, but the clock claims us all. Morbid, yes, but true.
Part of the value associated with hiring a third-party management company is that they will spend the countless hours dedicated to successfully running the daily minutia of your hotel. A proper management company has a specific resource to handle every function ranging from assisting with renovations to ensuring the property has the right rates available online.
Not having to focus on the execution of details and team accountability will free up time in your schedule allowing you to grow your portfolio or simply enjoy life a little more. Many owner-operators visit their hotels on a weekly or daily basis, but when they engage with a management company, they are able to see the forest and not just the trees.
It isn’t uncommon for a prospective client to have reservations about using a management company either because they have had a bad experience in the past or simply because they are finding it difficult to give up control of their multimillion-dollar asset.
After almost 30 years of third-party hotel management, we have countless stories of winning over these same concerned clients. They have been free to focus on building their portfolios and expanding the business base, providing much greater returns. Ultimately, there are many highly qualified management companies and each one is capable of delivering better results than what a single owner is able to produce individually.