Value vs Volume

I have always believed in the organic growth of BON Hotels and have sworn in the past that I would rather go bust than take on a property to rack up the numbers in our portfolio, without being able to add value.

I find it quite alarming that one of the first questions I am asked at industry events is: “So, how many hotels have you got under management?” Is this how the industry measures success of a hotel management company? Surely it should be about how many properties we have added value and made a difference to? This for me (BON Hotels) is the most fundamental measure of success.

Our industry has been left with the tainted legacy of our predecessors, those who have fallen by the wayside, and for good reason, who have left the rest of us with a reputation to repair. It’s no surprise that so many hotel owners don’t want to go near a hotel management company when all they have experienced is an extravagant environment of high fees with little return. What we experienced in South Africa was unprincipled: many hotel management companies ran with excessive head office costs due to large salaries, too many staff and unmanaged expenses. These costs were never reigned in and when the time came for expenses to be covered, the response was to sign on another hotel, to get volume in fees, regardless of performing any due diligence or feasibility study on the property in order to establish if they could add value and profitability. This left many hotel owners in the lowly situation of being a small fish in a huge sea of properties.

Hotel management groups who are adding true value run on an entirely different approach. I recently had the pleasure of meeting the founder and owner of Austrotels, a European hotel management company with only six hotels under their belt. Mr Newmayer had a simple recipe: he promised to be available and accessible to his clients 24/7. His famous slogan upon signing an agreement with the owner was, “And now, Mr X, you can call me 24/7 for the rest of your life”. This highly successful management company is run by two people and has six prominent, decent-sized properties under management, as a result of which they add value, show a profit and have earned themselves an excellent reputation.

Although these now defunct SA hotel management companies have left their negative legacies behind, as long as we are adding significant value to our hotels, these perceptions will eventually shift.

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