We know and understand that a company can be owned by another, known as its parent organization. Hotels are also the same as any company. Its name can be something, while its owner, another. But there is one more entity that we may or not be familiar with. The one that manages it. It may be a shock to know that big hotel chains do not actually run their hotels, rather they outsource it to another third-party institution that handles it. These organizations are called Hotel Management Group.
How do they function?
There are a few ways a hotel is run:
- Leased
- Privately operated
- Franchised
- Managed
While the former two are understandable, the latter have minor differences. In leased properties, an individual or a company may manage it while paying a certain fee to the owner, just like renting. Privately owned properties as the name suggest, are owned, managed, and looked after by the owner itself. While, in a franchise, the certain establishment is owned by an individual but run in a manner of rules as set by the brand to whom the owner pays a certain fee i.e., one can sign a licensing agreement where a definite fee needs to be paid to the ‘name’ while the venture is run by the individual that has bought it.
Managed hotels, on the other hand, are fully operated by the management company/group without interference from the brand (depending on the clauses in the contract). They have a signed contract that explains all services they will perform for the brand.
What do they handle?
Anything, and everything. From running the day-to-day to hiring staff, managing payroll, food, maintenance, renovations, housekeeping, advertisement, and marketing. They will manage practically anything under the sun to ensure the smooth functioning of the establishment.
How do they make money?
Every management company has its own set of policies on how they function and make money, and it differs from one to the other. But in general, the trend is, management companies charge:
- A base fee when they take up a hotel to run.
- Incentive fee.
- A certain percentage from the gross revenue every year.
Now as mentioned before, not all companies charge in this particular fashion, but more often than not, this is the case. It also depends on the type, the size, and the location of the property that impacts the fee.
Nowadays, almost any named brand chooses to hire hotel managements groups to run their ventures rather than operating them themselves.
