Horses for Courses

As much as people do business with like-minded people, businesses do business with like-minded businesses. There certainly needs to be some sort of a match.

Whether buying or building a hotel, the decision to involve a hotel management company is a big one. In fact, if the project is funded by a major financial institution, this requirement is obligatory. Albeit a requirement, this is where things can go wrong, as legacy relationships between financial institutions and the big management companies can get in the way of making the right choice. Hotel consultants can be biased to management companies who are rewarding them handsomely, and in doing this, don’t always act in the best interest of the business. The result? A mis-match between hotel and management company.

Big international players are suited to five-star city hotels; their strongest market is the international inbound travellers, so the match is substantiated. As for the rest of the hotel and resorts out there, I’ll be brazen here and say that regional players should be the choice.  

The cost of marrying your business with an international brand can be severe. Big hotel brands have less flexibility than regional players and their rules of engagement insist on international standards. Costs of adhering to these standards can be twice as high as their systems, operating procedures and brand requirements drive profit margins to the brink. Often these systems don’t complement the operational needs at all. Managers are left with systems that are not able to integrate or unsuited software that is onerous and comes at a not-so-small fee. Generic, prescribed menus are dictated, leaving owners hands tied as to supporting local. Wine lists for instance are decided at head office level, leaving an owner with no choice to ostracise his community. Clauses that bind owners on taking additional costs that may very well be a norm internationally, but are not a necessity by South African standards. We have recently seen a hotel owner forced into building an additional fire exit on his property because this was required by international fire and safety standards, yet it was not required by South African law. A huge, unnecessary cost.

Of course, the age old debate of Regional vs International management companies should come down to 1 calculation: who can put the bums in beds? To be successful at this, you need to know your market and more importantly you MUST be able to not only serve, but build relationships with the markets that are going to be servicing your hotel.

If you are dealing with a regional operator, you are dealing directly with the management team who has local experience. We are able to negotiate our contracts, make concessions and massage a deal until it works for both parties. I urge hotel owners to think carefully when making the choice for a local mid-market hotel; understand that there is such a thing as horses for courses.

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