Boutique Hotel Strategic Management

You just bought or built your hotel, the first question you need to ask yourself is what you want to do with it.

There are several management options to operate a hotel, and the choice of management style typically depends on the owner's goals and preferences. Here are a few common options:

1. Owner-Managed: The owner of the hotel manages the day-to-day operations themselves.
2. Independent Management: A professional management company is hired to operate the hotel independently.
3. Franchise Management: The hotel is operated under a franchise agreement with a larger hotel brand or chain.
4. Leasehold Management: The hotel owner leases the property to a third-party operator who runs the hotel.
5. Asset Management: A third-party management company is hired to oversee the operations of the hotel on behalf of the owner.
6. Management Contract: The hotel owner enters into a contract with a management company to operate the hotel on their behalf.

Here are some pros and cons to help you decide.

1. Owner-Managed:

    Pros: The owner has complete control over the operations of the hotel. There are no management fees to pay. The owner has a personal investment in the success of the hotel. Cons: The owner is responsible for all aspects of running the hotel, which can be time-consuming and stressful. The owner may lack the expertise needed to effectively manage the hotel. There is a risk of personal financial loss if the hotel does not perform well. 

   Independent Management:

    Pros: Professional management companies have expertise and experience in operating hotels, which can lead to improved performance. The hotel owner does not have to be involved in the day-to-day operations of the hotel. Independent management can help with marketing and branding efforts. Cons: Management fees can be high. The hotel owner may have limited control over the operations of the hotel. The management company may not have the same level of investment in the success of the hotel as the owner. 

   Franchise Management:

    Pros: The hotel can benefit from the reputation and marketing efforts of a well-known brand. The franchise company may provide support and training to hotel staff. The franchise company may have access to resources and technology that can improve hotel operations. Cons: Franchise fees can be high. The hotel owner may have limited control over the operations of the hotel. The hotel may be required to adhere to strict brand standards, which can limit creativity and flexibility. 

   Leasehold Management:

    Pros: The hotel owner can generate income from leasing the property. The hotel owner does not have to be involved in the day-to-day operations of the hotel. The leasehold operator may have expertise in operating hotels. Cons: The hotel owner may have limited control over the operations of the hotel. There is a risk that the leasehold operator may not operate the hotel to the owner's standards. The hotel owner may not be able to benefit from improvements made to the property by the leasehold operator. 

   Asset Management:

    Pros: Asset management companies can provide expertise in hotel operations and financial management. The hotel owner does not have to be involved in the day-to-day operations of the hotel. Asset management can help maximize the value of the hotel as an investment. Cons: Management fees can be high. The hotel owner may have limited control over the operations of the hotel. The asset management company may prioritize financial performance over other aspects of the hotel's operations. 

   Management Contract:

   Pros: The hotel owner can benefit from the expertise and resources of a professional management company. The hotel owner has some control over the operations of the hotel through the contract. The management company has a vested interest in the success of the hotel. Cons: Management fees can be high. The hotel owner may have limited control over the operations of the hotel. The management company may have a pre-existing way of doing things that may not align with the owner's vision for the hotel.

The cost of each hotel management option can vary greatly depending on factors such as the size and location of the property, the level of service and amenities provided, and the terms negotiated with the management company. However, here is a general market estimate of the costs associated with each option:

1. Self-management: This option typically involves the lowest upfront costs, as the owner is responsible for all aspects of the operation. However, the owner will need to invest in staffing, training, marketing, and technology to ensure a successful operation. The ongoing costs of self-management will depend on the level of service provided and the property's size and location.
2. Third-party management: This option involves hiring a professional management company to handle the day-to-day operation of the hotel. The management company will typically charge a management fee, which can range from 3% to 5% of the property's gross revenue, as well as additional fees for services such as marketing and technology.
3. Franchise: This option involves partnering with a hotel brand to operate under their established name and systems. The costs of a franchise can include an initial franchise fee, ongoing royalty fees (typically between 3% to 5% of gross revenue), and marketing and reservation system fees.
4. Management contract: This option involves hiring a management company to operate the hotel under a specific set of guidelines outlined in a contract. The costs of a management contract can include an upfront fee, ongoing management fees (typically between 3% to 5% of gross revenue), and additional fees for services such as marketing and technology. The management company may also receive a portion of the hotel's profits.

It's important to note that these estimates are just general guidelines and may vary greatly depending on the specific details of each arrangement. It's recommended that hotel owners thoroughly research and negotiate the costs and terms of each management option before making a decision.