It is no secret, and currently happening in the whole Hospitality world, management take overs. As more properties getting into financial problems to create a return, they are focusing on the help of the bigger brand to help them out.
In the past 4 months, Phuket has seen changes in management in many sectors. As there is a current oversupply in the property sector, owners are sometimes desperate on the look out for the right firm, or in some occasions, just any firm. As these hotel management firm rely on growth to cover their costs, deals are being closed in a very quick pace.
Most recently La Tour company took over another property, that of Grove Gardens, which has increased the total presence in Phuket with 3 properties. Selecting the firm is a delegate job. Most owners might choose based on popularity or brand awareness in the industry. Often forgotten is the success rate of these management firms in the Revpar contribution. Comparing your future management partners by Revpar succession rate, is an easy differntiator of success.
Second choice the owner have to make is the cost of this transition. It’s is by far more expensive then hiring the right management team. You will buy into a brand, which is the far most highest fee you will have to pay (a cut on your profit). To line up your property with this Branded firm, requires additional funding to set all your FF&E to its standards. Adding all these cost up together you might have to ask your self if a management firm is THE SOLUTION.
But as an owner you never ever have to forget that these firms have to take care more then one property. In some of these cases these are properties owned by private equity firms or investors, which are driven on result. We see the trend happening in the world of the OTA’s, the more commission you pay, the more interesting you will become to them. But how much they are really care about your investment and your profit? The incentive structure should be clearly examined as you as an owner have not created a charity fund.
The success factor is the profitability of the branded management firm, which can be checked based on Revpar. Revenue management is the very basic you have to ask yourself in such a choice, “what is my future management partner doing in the field of Revenue management?”.