Marrying owner and operator

Viability director and managing partner Guy Wilkinson urges early caution when establishing a relationship with your owner; decisions taken at the outset can have repercussions later on

When a hotel owner is seeking an operator to manage his/her property, it’s a bit like a courtship. I know this is a cliché, but nevertheless the comparison can reveal a lot about some of the pitfalls inherent in the process.

Let’s just get the predictable analogies out of the way. It begins with a ‘beauty parade’, in which the operators each strut their stuff and show off their assets to win the owner’s favour. It proceeds to a ‘pre-nuptial agreement’ with a single party, before a full marriage contract is signed.

As in modern society, the alliance may only last say, 10 to 15 years, before a divorce becomes inevitable — and sometimes earlier, due to ‘irreconcilable differences’. In other cases, of course, marriage is like going bald — there’s no parting…which would all mean, by inference, that the humble hospitality consultant often plays the successive roles of chaperone, minister and marriage guidance counsellor!

The first tip I would offer those about to embark on such a relationship is to remember that both before and after all the features and benefits, terms and conditions have been discussed and negotiated, what ultimately matters is that the two parties actually like each other.

In many ways, the union of two large organisations like an owning company and a management company would seem very different to a marriage. In reality, however, the best corporate alliances may well be based on just such a relationship.

The final decision regarding which operator gets appointed often depends on the rapport established between the owner or their representative, and one single individual from the management company, be it a development director or someone more senior.

Thus the role of all staff of a hotel chain is sensitive, from the junior support staff to the senior decision maker, as is the ability of a chain to offer personnel continuity, ideally over many years.

Meeting expectations
At the end of the day, the owner rightly views him/herself as the one who is making the lion’s share of the investment in a hotel, and taking way more risk than the operator.
He/she rightly expects to be treated with the utmost respect, and to deal with mature, experienced hotel people who can share — or at least relate to — the outlook of a very rich and successful business person. Of course, the ability to find other common ground — in terms of language, culture, interests, even politics and religion — is also important.

Too many times have I seen my hotel-owner clients’ expressions on being sent a junior representative to ‘sell’ them the virtues of a giant global chain. The PowerPoint comes out, the slick brochures are distributed, but the eye contact is never established and the operator is unceremoniously removed from the short list.

Equally, it can be very unfortunate if key members of the contract negotiation team are absent from subsequent dealings with the owner. The pre-opening period can be a crucial testing ground for the owner-operator relationship, when a lot of money has to be spent without seeing any immediate return, and a lot of major decisions made in quick succession.

I have seen too many examples of ‘disconnect’, when the owner has to deal with myriad new team members from the operator’s side — be they technical services staff, pre-opening specialists or incoming GMs — while those friendly faces from the development department or regional director’s office are unavailable for comment.

Of course, the same problem can also affect the operator, if for example, outside advisors involved with the contract negotiations are not retained as owner’s representatives.

I realise I have something of an axe to grind here, but the reality is that a management contract provides a framework for all subsequent interactions between owner and operator, and its first and arguably fiercest testing ground is the potential mine field of design, construction and pre-opening.

Why not keep on hand the very people who dotted the i’s and crossed the t’s at the contract stage, to keep tabs on the practical actions resulting from those long-considered decisions?

Not only that, but surely it is important to recognise the value of retaining those loudest well-wishers at the wedding, those who always remember to send anniversary flowers? At the end of the day, it all boils down to relationships.