•The long-term effects of real estate appreciation. Appreciation: The increase ,over time, in the value of an asset. •The profits that can be made from the hotel's monthly operation.
Privately Owned/Leased and Operated (cont.)•Investors are not typically active in the management of a hotel.•Sometimes a hotel investor who also manages (operates) the hotel.•Can be an individual and their family members or a large multi-national hotel company
Management Companies –Management Company:An organization that operates a hotel for a fee. –Sometimes referred to as a contract company.–Investors with only one hotel will often hire a single General Manager (GM).–General Manager: The traditional title of the individual at a hotel property who is responsible for final decision-making regarding property-specific operating policies and procedures. –Also a GM is the leader of the hotel’s management team
Management Companies (cont.) Responsibilities of Management Companies: –Secure and, if it has closed, reopen the hotel. –Implement sales and marketing plans to maximize the hotel’s short- and long-term profitability. –Generate reliable financial data about the hotel. –Establish suitable staffing to maximize guest and employee satisfaction. –Show the hotel to prospective buyers. –Report regularly to the owners about the hotel’s physical and financial condition. –Video link: Hotel Management Company. –
Management Companies (cont.) First Tier Management Company: Management companies that operate hotels for owners using the management company’s trade name as the hotel brand (Hyatt, Hilton)Second Tier Management Company: Managementcompanies that operate hotels for owners and do not use themanagement company name as part of the hotel name (American General Hospitality, Summit Hotel Management).
Management Companies (cont.) Level of Ownership •The management company is neither a partner in nor an ownerof the hotels it manages.•The management company is a partner, with others, in the ownership of the hotels it manages.•The management company only manages hotels it owns.•The management company owns some of the hotels it manages and none or only a part of othersit manages.
Management Companies (cont.) •Major elements of management agreements include:1. The length of the agreement2. Procedures for early termination by either party3. Procedures for extending the contract4. Contract terms in the event of the hotel’s sale5. Basic management fees to be charged6. Incentive fees earned or penalties assessed related to operating performance
Management Companies (cont.) 7. Management company investment required or ownership attained