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Making the Case for Third-Party Management

Touting Third-party Management

Three Reasons Owners Should Give Up Control Of Their Hotels

Thursday, February 28, 2019
Tommy Beyer

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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 employ a third-party management company to help you. Here are three key reasons why that’s the case and why owners should consider them.

You Will Make More Money
Hiring a veteran third-party management company will most likely result in more money to your bottom line. This harks back to the basic economic principle of specialization of labor.

If you are self-managing your hotel, it is likely that you do not have the same amount of resources, experience or ‘bench strength’ at your disposal to help you effectively manage your asset. Oftentimes, when talking to a prospective client, we explain that we will be 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 possibly the biggest piece 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. 

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 new-found layer of insulation can be discombobulating, 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 liabilities. You will have many points of contact who are there to 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 nowadays 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 multi-million-dollar asset. 

After spending some time running their hotels for them, however, we have many stories of winning over these same concerned clients and leaving them telling us that they should have hired us years ago! Ultimately, there are many high qualified management companies out there and each one is capable of delivering better results than what a single owner is able to produce individually. 

Perspectives

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