I welcome your thoughts, concerns, open debates, or any ideas and actions you or someone you know is taking in response to these challenges. Please feel free to email me at adam@hospiamo.com
Introduction:
In the dynamic landscape of hotel management, the next 12 months represent a pivotal period of opportunity and challenge.
My aim is to share insights and strategies that can help hotel management companies, particularly those managing a modest portfolio of 8-30 hotels, to not only navigate these changes but to emerge stronger and more resilient.
Having had the privilege of working with both large-scale and boutique third-party hotel management companies in the US, I've seen firsthand the disparities in resources and operational bandwidth. This article is a call to action for those companies that might feel overwhelmed by the pace of change in our industry. It’s about fortifying our boats together—making them not just seaworthy but capable of navigating the future with confidence.
The Illusion of Operational Efficiencies & Pedigree:
For too long, the pitch of operational efficiencies, executive leadership pedigree, and operational excellence has been the siren song of hotel management companies. But here's the twist in our tale: that's exactly how to sink the ship.
The reality we must all face is that the luxury of time and the bounty of resources to focus on retention, training, and development have vanished into thin air.
Let's admit it, the traditional treasures are gone, and it's time to map a new course.
Building Back the GOP% will take Time, Resources and Focus.
The survivors of the next 12 months will be the ones who dedicate 80% of their time and resources to these six critical activities:
Non-Labor Expense Reductions: There’s at least 5% of total hotel revenue out there waiting to be (re)claimed. That's $10B worth of non-labor expense creep since 2010. That's over 80,000 high paying jobs just at hotels. Dive deep into renegotiating vendor contracts, consolidating vendors, and cutting away the excess that doesn't add value. Your crew on the ground and specialized consultants—general managers, accountants, revenue, sales, and marketing teams—hold the map to hidden treasure. Open up their time, and create processes to discover it, and it will be done.
Revolutionizing Hotel Management Agreements: Consider giving up the Incentive Management Fee (IMF) and adopting a risk/reward model that truly aligns with ownership interests. For example, self-penalties for failing to retain key personnel and guarantees that incentivize performance are the future.
Chasing Free Money: Scour the seas for credits, incentives, rebates, and any unrecovered revenue losses. There's gold in those hills, and it's time to mine it. No tools or time, hire someone.
Innovating Revenue Streams: Think outside the box of the traditional hotel space. Those 45 million square feet of mostly vacant hotel meeting space in limited and seelct service hotels? That's untapped potential waiting to be transformed into profitable ventures. Create something, a training, make your own hot sauce, brand it with your HMC logo, sell it online and give it away to your team members, learn how to do that and revenues and engagement levels will rise.
Diversification: In an industry as competitive as hotel management, differentiation is key to survival and growth. Rather than vying for supremacy in oversaturated markets, the goal should be to identify and exploit unique niches that align closely with your people and brand's strengths and values. This strategic diversification might involve expanding into new geographical territories, exploring untapped market segments, or developing innovative & digital products. The objective is clear: differentiate your brand to secure a competitive edge in a crowded marketplace.
Collaboration, Brand Identity, and Promotions: Stop battling in the same crowded waters and elevate your brand to compete just below the titans like Marriott and Hilton Brand Management. Thriving in today's hotel management sector requires more than just a strong brand identity; it necessitates a culture of humility and openness to external insights. The most successful companies embrace collaboration with outside advisors who offer candid, no-holds-barred feedback. The industry's scarcity of such advisors—stemming from a fear of backlash or being perceived as negative—highlights the need for a shift towards valuing and seeking out honest critique. By fostering partnerships rooted in transparency and leveraging external perspectives, companies can refine their brand identity, hone their promotional strategies, and navigate the market more adeptly.
Conclusion:
As we face an inevitable influx of hotel sales that all come "unencumbered with management" contracts, the time to act is now. These six critical tasks are not just about patching holes—they’re about reinforcing our structures for sustainable growth and success.
Together, we can build stronger, more resilient operations that are not only prepared for the challenges ahead but are poised to seize new opportunities. Let’s embark on this journey with optimism and a shared commitment to our industry’s future."
This approach aims to encourage a proactive stance, fostering a sense of community and collective resilience among hotel management companies of all sizes. It's about providing a lifeline, offering practical advice, and opening a dialogue to share solutions and success stories.
Here's my sincere advice: If you're out of bandwidth, out of budget, out of resources, stop thinking that way, it's stinkin' thinkin'. Get back to "whatever it takes" with the acceptance that it's a very different hotel management world, and you need help. Ask for it, nay...demand it.
If you're not prepared to adapt by investing significantly in the six key areas I've outlined — non-labor expense reductions, uncovering financial incentives, creating new revenue streams, diversifying your brand, and revolutionizing your management agreements—then it's essential to consider other options.
Merging, selling, or radically transforming your business model, such as moving towards an Employee-Owned Company (ESOP), might be necessary steps to ensure survival. The idea is not just to save your company but to position it for future success in an evolving landscape.
Adapt or face the likelihood of obsolescence. And if adaptation seems beyond your current capacity, seeking alternatives sooner rather than later could safeguard your future.
The hospitality industry will change dramatically; make sure your company is on the right side of this transformation.