Senin, 02 Maret 2015

System for Selecting Management Company

Entrusting your hotel to a management company requires very thorough due diligence during the selection process. Picking the right operator could mean the difference between owning a financially successful lodging facility or one that could take you into bankruptcy. To put this decision into perspective, I have reviewed the operations of more than 8,000 hotels during the past 30 years and found fewer than 2,000 that were run with a high level of competency. Most hotel management companies lack the ability to maximize long-term revenues and minimize long-term expenses.

I find most hotel owners will select a management company based almost entirely on a recognizable brand name. While a strong brand is important, there are many other issues that need to be considered during the selection process.

Over the years, I have developed a numeric rating system to evaluate the strengths and weaknesses of hotel management companies so owners can compare the attributes of several operators. Each question has a rating ranging from -4 to +10. Simply total up the numeric ratings for each the management companies you are considering and the result will provide a better idea of which one to select.

1. Comparing the size of the hotels managed by the operator to your property, most are:
- Larger                                   -1
- The Same size                       0
- Smaller                                  -1

2. Comparing the chain affiliations of the hotels managed by the operator, most are:
- Same affiliations                    +1
- Similar affiliations                    0
- Dissimilar or no affiliation       -1

3. If the operator manages other hotels in the same market area, are these considered to be:
- Directly competitive                 -4
- Somewhat competitive             -2
- Non-competitive                      +1

4. Experience of the management company:
- New company, limited experience      -1
- Moderate experience                         0
- Established-extensive experience        +2

5. Management company's financial resources(ability and willingness to invest funds in the property):
- Limited-no investment potential            -1
- Moderate-token investment                  0
- Strong-meaningful investment               +2

6. Operator shows willingness to invest funds in the property as a loan(double amounts if funds are contributedas equity)
- Initial Inventories                                          +1
- Working capital                                            +1
- Pre-opening expenses                                  +2
- FF&E                                                         +3
 - Debt service, other financial guarantees       +3 to +5

7. Management company has extensive experience in one of the following specialized areas that would directly benefit the operation of the hotel:
- Destination Resort operation                    +2
- Major convention operation                     +3
- Unique market                                        +1
- Major food and/or beverage operation    +2
- Development assistance                          +2
- Opening new hotel                                 +2
- Distressed property(turnaround)            +3
- Bankruptcy                                           +2
- Unions                                                  +3
- Operating in secondary cities                 +1
- Property ownership                               +2

8. Management company appears to be flexible in accommodating the following needs of the owner:
- Short-term contract                       +4
- Termination buy-out provition        +4

9. Management company's ability to generate profits(based on actual verified financial performance):
- Normal-competent management                   0
- Better than average                                     +5
- Exceptional operating ability(profits)            +10

10.Management company offers ability to obtain:
- Specialized identification                           +2
- Financing                                                 +4
- Feeder city representation                        +2
- Track record of success                           +2

11.Management company has exceptional expertise or offers specialized services in the following areas:
- Central reservation system                                +2
- Centralized sales and marketing                        +1
- Regional sales offices                                       +1
- Convention and group sales                             +1
- Frequent traveler program                              +2
- National advertising program                           +1
- Top-level personnel                                         +2
- Financial systems and controls                         +1
- Other specialized services                               +1
- Group purchasing                                           +2
- Interior design                                                +1
- Personnel recruiting(Web based)                    +2
- Development capability                                  +1

12.If management company is a first tier operator, does:
- Name have wide-spread identity                  +2
- Identity have positive value                          +1

13.Management company has the following deficiencies:
- Poor references                                                    -4
- Loss contracts(deduct for each loss)                     -1
- Limited home office structure                                -1
- High management turnover                                   -2
- No growth plans                                                  -1
- Excessive growth plans                                        -1
- Will not subordinate incentive fee                         -3
- Unwilling to provide restrictive covenant              -4
- Fee based entirely on % of total revenue             -3
- Can you get along with this company:                  -3 to +3

I wonder how many hotel owners can even answer all these questions about their management company? If you can, you have probably selected the right one.

By : Stephen Rushmore, MAI, CHA, CRE, president and founder of HVS International, a global hotel consulting firm with offices in New York, Miami, Denver, San Francisco, Vancouver, Mexico City, London, New Delhi, Singapore, Sao Paolo and Toronto.

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