Mr. Donaldson

Executive Leadership

Successfully Outsourcing Hotel Operations While Maintaining Control of Your Property

By Edward Donaldson, VP Marketing, Small Luxury Hotels of the World

Within the Small Luxury Hotels of the World brand, many hotels have been owned and operated by the same families for many years. Some of our European members have had family ownership through generations. Today, however, owner/operators find themselves in a very different environment to that which existed even just 15 years ago. The hotel business is demanding of an individual owner's time and resources. Historically, one owner/operator is so intimately involved with his hotel that he sees no reason to record any details on the business. An owner/operator would then pass on this proprietary knowledge to his children and they in turn would manage the business pre-armed and educated in the dynamics of the hotel.

Today traditional owner/operators are finding that their children do no want to spend long hours toiling in a hotel and prefer to pursue other professions, such as law, banking or medicine. Consequently, the owners of small luxury hotels are finding it increasingly difficult to plan their retirement. They cannot pass the hotel on to their children because they are not interested and finding buyers is increasingly difficult. Additionally, many independent owners wish to retire from the business but not divest themselves of the asset. Indeed buyers today are extremely sophisticated and informed and demand of vendors a high degree of statistical information on the historic performance of the hotel, and not just audited accounts.

The dilemma therefore is if you are intending to retire from a life managing hotels, how do you plan for it? How can an individual owner prepare all the statistics that will facilitate a sale? How can a hotel be marketed to potential buyers? What if the owner does want to sell at all, but his children do not want to manage? How can an owner retain possession and not have to run the business or rely on another individual to manage the operation on his behalf?

One solution would be for owners to engage the services of a specialist management company who can make available to a hotel the full range of skills to ensure financial success. Generally speaking most individual managers are expert in one field of the hotel business including the three key fields of service, marketing and accounting/finance.

As the independent owners seek alternate solutions, management companies are fulfilling the needs of these owners. One such firm, Luxury Hotel Partners Limited, a niche European hotel operator specializing in the small independently owned luxury hotel sector, manages the properties on the owners behalf allowing them to retain the property as an asset, free themselves of the daily operational burdens and insure the future value of the property.

Knowing that in most cases the owners look at their properties as they would their own children, management companies like Luxury Hotel Partners often remain very inclusive by providing the owners of the hotels a high degree of control over their asset through a regular reporting program. Such management firms must fully appreciate that for a successful owner/operator to relinquish the day-to-day operation of his hotel is a difficult decision. It is key for the ownership and management to work together to ensure a not only a seamless transition, but also secure the overall success and profitability of the hotel continuing the legacy that has been established.

Many management companies that specialize in the small, luxury boutique sector will most often look for support to market these independent hotels to consumers. Luxury Hotel Partners and other management companies will turn to the established consumer brands, such as Small Luxury Hotels of the World or similar marketing groups. Thus owners are assured that the quality of their hotel is maintained to the highest level and owners can be proud of their continuing ownership in a luxury hotel.

In addition to managing a property to relieve an owner of the day to day burden, management companies can also provide the solution for those owners in other areas such as the planning the sale, maximizing the property value and ensuring the future existence of the business of the hotel should that be the goal of the owner. Aside from the preparation for sale, management companies will use their extensive networks of contacts to search out buyers for the hotels as well.

Fee structures for management companies can be flexible. Luxury Hotel Partners' fees are adapted to the needs of the owner and are always based on performance. For example, in the case of preparing a hotel for sale, Luxury Hotel Partners could be remunerated by being paid a percentage of the sale price or take a partial stake in ownership if operating the hotel. Working on a commission structure permits the owners to succeed in their goals with out utilizing valuable capital.

As the boutique luxury hotel industry continues to grow and flourish globally, these niche oriented management firms will experience an increase in demand as more and more independent hotel owners seek the ability to outsource needs.

Ed started his career with Servico, Inc as Director of Sales for several franchised Hilton properties. After a move to New York he became Director of Sales for The Royalton. Ed also served in regional positions with Pegasus Solutions. He has headed up the sales efforts for Summit Hotels, Sterling Hotels, Golden Tulip Worldwide and Rosewood Hotels. Ed has served as Regional Director, UK for TravelCLICK and VP of Sales for hubX, recently purchased by Pegasus. Ed currently is VP, Marketing, The Americas for Small Luxury Hotels of the World. Mr. Donaldson can be contacted at 212-953-2064 or ed.donaldson@slh.com Extended Bio...

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