SPECIAL REPORT
The Dorian in Alberta , Canada is part of Marriott International ’ s Autograph Collection and managed by Concord Hospitality . of real estate investment trusts or other ownership entities . And , in many cases , management companies will have equity in their properties .
One trend among larger portfolio owners , said Jabara , is for them to acquire a minority stake within the third-party management company . This allows for all the benefits of the management platform but also offers more control over how their portfolio is managed because they have a bigger seat at the table .
Resolute Road ’ s parent company , Braintree Group , will continue to buy hotels , said Kevin O ’ Neil , VP of business development at Resolute , but his hope is that the company will acquire sliver equity positions and focus more on third-party management . As a result of Resolute Road ’ s necessitating brand management . He said that developing hotels of this size often requires a significant equity contribution from the operator and brands are willing to commit greater investment for the right to put their name on those large assets .
There is an “ underserved need ” for a third-party manager to operate luxury hotels , said Contos , but they must first gain the confidence of brands that they have the ability to execute on the brand promise .
The level of competition in the local market can also influence the decision , said Nick Bilotta , senior vice president , strategic operations and customer development for GF Hotels & Resorts . In highly competitive markets , he said , brand affiliation might provide a competitive advantage by attracting guests familiar with and loyal to the brand , but a third-party management group with market presence can cross sell and fill hotels quickly with the aid of the other properties in their portfolio .
FEES & CONTRACTS : IT ’ S COMPLICATED Fees and contracts play a key role in choosing a brand or a TPMC to manage an asset . The fee issue is a complicated one : Though there has been a traditional argument that a brand is cheaper because there is a single fee , all observers agree it is more complex than that . “ There really is huge variation regarding fees ,” said Nick Kellock , COO for Concord Hospitality , which owns and manages hotels . “ It is hard to give a definitive answer ; generally , the overall cost of either option is not wildly different .”
There seems to be a clearer picture when it comes to the flexibility of contracts . The management contract terms of hotel brands tend to be longer term in nature ( 15-25 years ), said Vardharajan , while TPMCs are open to shorter term contracts of five to 15 years , which many investors prefer , since it allows them to sell their hotels unencumbered by the management contract , which could produce a higher sales price .
BLURRING BUSINESSES As both brands and TPMCs grow and consolidate , there is some blurring of their respective roles . Several management companies are owned by or are divisions
WE ARE NOT HERE TO COMPETE WITH THE BRAND ,” HE SAID . “ WE WANT TO BE SEEN BY BRANDS AS ONE OF THEIR BEST OPERATORS . IF WE HAVE A PROBLEM TO SOLVE , WE HAVE THAT RELATIONSHIP CAPITAL , SO THE OWNER GETS THE BEST OF BOTH WORLDS
– RICHARD JONES , COO , HVMG
12 hotelsmag . com September 2023