When Does a Hotel Operator Actually Add Value?
There are plenty of industries that appear to be slowing down in the world today. Hospitality is not one of them. According to last year's global travel report by the research firm Deloitte, global bookings surpassed AUD $2.1 trillion in 2017, with continued growth projected through 2018 and beyond. Influential factors include greater competition amongst airline companies, a renewed focus on face-to-face business meetings, and a growing preference for experiences over things.
More bookings though lead to more competition. Whilst this is great for the Trivagos of this world, it is a double-edged sword for travelers because too many options can be frustrating. A 2015 report from Kayak claimed that one in four Australians spend as much time researching and booking holidays as we do on the holidays themselves. Observations like this have led to a lively discussion on the merits of limiting consumer choice.
Well, travelers aren't the only ones with difficult choices to make. As new hotels are designed and built throughout Australia and the world, their ownership groups must face the critical task of choosing a hotel operator. There are many operators to choose from, especially in bigger markets - and the choice you make will have far-reaching effects. After all that planning, who will shoulder the responsibility of delivering a quality guest experience? How can we be sure that the chosen operator will add maximum value in today's marketplace? And do we even need one? Here are a few things that merit closer scrutiny.
Can the operator fend off competitors?
An operator won't add maximum value for the owner unless it skillfully navigates the competitive landscape. This implies industry-leading marketing, an ongoing awareness of what your direct competitors are doing, and an uncompromising commitment to the best possible guest experience. Competing in the market today demands nothing less.
Are they skilled at negotiating rates with OTAs and suppliers?
The big hotel chains are moving to reclaim the booking process, but OTAs still own a massive percentage. Our process for choosing an operator should include careful scrutiny around that operator's ability to negotiate the best rates from OTAs, as well as from brick-and-mortar travel agencies and other hospitality suppliers. How does the operator approach this area of the business, and what is their track record with other hotels under their management? A strategy for increasing direct bookings over time is also vital. It is unlikely that many operators will be able to exceed the numbers coming via OTAs but a good operator stays on top of market trends and actively seeks maximum leverage in the booking process.
Do they provide robust structure, systems and procedures?
This blog often reiterates the centrality of the guest experience; but how are exceptional guest experiences made? We need a healthy and vibrant work culture, which leads to happier employees and better interactions with guests. We also need efficiency and orderliness, from the big picture right down to the smallest details of daily operations. An operator that truly adds value will have robust structures, systems and procedures that define back-of-house operations and allow the hotel to thrive as a cohesive whole. And most importantly, they will promote a culture of service that permeates throughout the whole organization.
Can they demonstrate stable financials?
Unless this is the first hotel this operator will ever manage (in which case, proceed with extreme caution!), financial performance should be easy to scope out. A strong operator uses the hotels already in their portfolio to demonstrate healthy operational margins. The 'how' and 'why' of these margins is equally important. A good operator demonstrates solid financials not only through operational efficiency and accounting, but through the work culture and guest experience they generate.
Holistic symmetry between owners and operators
For owners of new or renovated hotels, putting a property in the hands of an operator can be as daunting as it is necessary. An organised and informed decision - one that gives credence to the areas discussed here - will go a long way toward finding an operator that adds value.
There are other factors in play, and not all of them are quite so tangible. There is even the question of whether or not we even need an operator but that is worthy of another article altogether. Assuming that you don't want to operate yourself, the challenge lies in finding an operator that ticks the right logistical and financial boxes, while also understanding and embodying your vision. This kind of holistic symmetry between owners and operators is not a luxury in the 21st century travel market - it's an absolute necessity.
Dean Minett
Director - Minett Consulting
Minett Consulting
