The recently opened Residence Inn Eagle Boise in Idaho is managed by HVMG . |
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IF YOU ARE AN OWNER ENTICED BY [ KEY MONEY ], IT COULD [ BECOME ] A VERY TRICKY SITUATION
– MIKE “ WOODY ” WOODWARD ,
EVP & CHIEF GROWTH OFFICER ,
HVMG
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money . But even operators agree : Hotel owners getting attached to a management company just because of the provision of key money is not a winning strategy . If the operator is a dud , in the end , the upfront dollars are not worth it .
“ The operator is of unique importance ,” said Mike “ Woody ” Woodward , EVP and chief growth officer of Atlanta-area management company HVMG . “ The difference between good and bad operators can really impact a hotel .”
Brands play a major role in the success of a hotel — providing and driving largescale marketing , loyalty programs and distribution ; an individual hotel ’ s P & L is driven by its manager and the various day-to-day levers it pulls to
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not only generate revenue but contain expenses . And as Woodward put it , when it comes to key money , “ If you are an owner enticed by it and if you ’ re a first-time operator , it could be a very tricky situation that you may not understand until it ’ s too late .”
Brands may have more incentive to deploy key money since the terms they receive in exchange could turn out to be more lucrative , from the length of the deal to the percentage of royalty fees . Conversely , management contracts are typically constructed with shorter-length terms .
In some instances , Woodward warned , an owner should eschew key money out of unanticipated consequence . “ It may be there ’ s key money involved , but then the owner
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wants to sell the property and that money has not burned off over a certain period of time and now they have to repay it ,” he said . “ It ’ s educating those owners on what [ key money ] really entails .”
Of the 10 or so deals HVMG did in 2024 , only one involved key money and the decision was made because the hotel was going through a major renovation and it helped finish out the capital stack . “ It was the right thing to do and ensured we were both married to the project ,” Woodward said . Rob Smith , CEO and president of Denver-based management company Stonebridge Companies , has a somewhat cynical view of key money . In his estimation , key money can create an unnecessary tension within the
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Mar / Apr 2025 hotelsmag . com 11 |