Anytime a hotel owner decides which management company they would like to select, they are considering a variety of factors. Today, we’re going to start with Geography.
Can they operate within that geography?
We’ve all put together a puzzle. Selecting a management company is similar, with a weighted scale toward the goals and objectives of the ownership group. Geography is one puzzle piece. We’ve seen hotel operators go into a new location and succeed, but we’ve seen many try and fail. When considering geography, it’s not just important to think about the region, but the overall dynamic factors of that specific market. You need to look for an operator whose geographic background provides a past predictor of success that you can parlay to future success.
An operator may be strong in the Midwest, but heavily in Chicago, and near suburbs like O’Hare, Naperville, or Schaumburg. However, if your asset is in Dayton, OH, that organization does not necessarily have the history to demonstrate operational expertise in Dayton. Dayton does not have the demand generators of Chicago or the overall business landscape. Your hotel will be drawing upon a completely different mix of business. Further, your hotel, being a “one-off” may not provide your operator with the same efficiencies as their centralized assets. As they promise performance, it may be difficult to deliver. However, if an operator has hotels in Fort Wayne, IN, suburbs of Louisville, KY, and Akron, OH, they may provide a better sample size to demonstrate that they understand your market and are willing to put in the sweat equity to maximize the value of your assets.
Here’s a quick hitlist to consider.
- If your hotel is in the Pacific Northwest, there are cultural and travel constraints that make it important to have an operator who has demonstrated expertise there and close enough geographically to have a 1.5 hour or less direct flight.
- If your hotel is in Manhattan, needless to say – it’s tough to give someone a shot at managing for the first time unless they’ve demonstrated to be homerun hitters in every other tier 1 union city with similar dynamics.
- If your hotel is in California, there’s more turbulence and complexities. A management company that has not developed the expertise to navigate those waters is a risk.
- Chicago, DC, Boston, Miami, Philadelphia and New Orleans are all unique culturally, have immense competition, have pipelines of rooms that keep flooding in, and have labor challenges. At a minimum, your operator will likely want to be versed in a few of those markets to enter the other.
- Airport markets, suburban markets and urban markets are all very different. Seek to explore operators who have portfolios that match your market dynamics.
- Know the top 25 MSA’s look for like groups. If it’s 10-25, find the groups that have demonstrated expertise there. Equally as important, groups that have the willingness to dedicate sweat, equity and excellence at the same level in the 24th top market as the 3rd top market.
Look in the management companies’ history, it tells the story of their portfolio and geographic expertise and this will help you assess if they are right for the geographic location to maximize the value of your asset.
If you’d ever like to chat, call me at 480-719-7215 or email joe.rice@jdisearch.com. Joseph David International’s Owner Advisory offers hotel owners with management recommendations and referral services at no cost. Companies are a collective of people. Nobody has deeper relationships, knowledge, and inside information in the hotel industry than we do. We’ve learned some tough lessons from the sideline for nearly the past 2 decades as we’ve watched ownership groups succeed and fail at bringing in the right operator.