When selecting an operator, the following factors should be considered: The operator’s reputation in the marketplace Their relative experience in the region Their brand marketing strategy Their operational/business model
Hotel owners must also decide whether to take a direct management approach or adopt an existing franchise business model. The latter means the hotel is managed by the owner or a third-party asset management company, and the operator provides only its logo, promotion channels, etc. for a fee.
Achieving the Perfect Fit
TFG Asset Management will identify, source and secure the best operator for your property. To date, we have arranged upward of 30 hotel management contracts (HMCs) with some of the world’s leading hotel operators.
TFG Asset Management will ensure: • Only the best qualified and most suitable operators are selected and pre-qualified for consideration; • The operator’s brand strengths, portfolio, management style, reservation systems and fee structure are evaluated to the finest detail.
TFG Asset Management will also manage the process of: • Handling all commercial terms and conditions for the Memorandum of Understanding; • Negotiating and securing HMCs or franchise agreements..
Providing an optimal balance
Under the Hotel Management Contract, disagreements between the operator and the owner fall into three main groups:
- Level of control and influence. It is the perennial subject of argument to what degree a hotel owner should take control before and after opening. In Dubai the owner usually has a higher degree of influence in the course of pre-opening and opening stages. Yet this role shifts after the hotel opens. The operator is an expert in hotel management, hence now hotel operations are under its total control. But crucial decisions and strategies must have the proprietor’s approval. The examples are entering into any food service operation agreement or a commercial activity on the hotel premises.
- Brand standards. All stakeholders strive to ensure the hotel is profitable and generates high Return On Investment. Still strategies to achieve these mutual targets will vary. An owner’s view targets property level. The operator appreciates brand reputation in general, thereby adopting corporate-level strategies. The challenge is to balance the operator’s need to achieve uniformity and the owner’s desire to meet the needs of the local hospitality market.
- Budgeting process. It is the owner’s obligation to finance the hotel operation and to provide the necessary working capital. The owner seeks to reduce its financial requirements and to enhance the property’s appeal compared to its closest competitors, which will generate higher guest spend. The hotel asset manager balances the interests of the proprietor and the operator. The Asset Management team will recommend a sensible, well-grounded budget based on the hotel operator’s initial proposal.
The appointed Asset Management team resolves conflicts between the hotel owner and operator. This will strengthen the understanding of mutual operational obligations and constraints. A strong partnership will diminish the risk of any issues delaying the hotel\\\'s opening.