Who Owns That Hotel and Why It Matters.
Many businesses have a clear ownership. Sometimes it is an individual, sometimes it is two or more partners. Some companies have stockholders who technically own the business but the day-to-day operations are managed by others, the employees. The hotel industry is probably unlike any other business you have come across in that there are so many different combinations of the ownership / management structure, it can make your head spin. You may not think it will make a difference when it comes to contracting a hotel for your next meeting or conference but it can. Here, I will try to explain in the simplest terms, some examples of hotel ownership and how their business model may affect your group.
Disclaimer: I am not an employee of nor do I represent any of the hotel companies mentioned in this blog. All of the statements and examples provided here are just those…examples. They are my own opinions based on my personal and professional experiences and knowledge and should not be considered “the standard” with any and / or all of the hotel companies mentioned.
1. Corporate Owned and Managed by a chain brand:
This is when the hotel company, for example Starwood or Marriott owns the hotel and also has control of the day-to-day operations of the business. The employees are paid by the hotel company and they receive the corporate training and abide by those corporate policies and procedures. With a national or global chain, there are usually national sales offices (NSO); sales people who represent all the hotels in the chain, not just one specific property. These NSO contacts are a great support system if you run into problems at the property level when it comes to contracting, planning or even the execution of your meeting. A “pro” for this ownership model is that in the event your meeting cancels, you may be able to negotiate to relocate a cancelled meeting to a different hotel within their chain or get a credit of your attrition dollars paid to be used at a future meeting at another one of their hotels. The levels of service and hotel product will also have great consistency. Potential “con” for this is that sometimes we all know a very large corporation can take a long to time make a decision when asked to have an exception to the standard practices. This can hold up negotiations.
2. Privately Owned and Corporate Managed by a chain brand:
Some companies are in the business of owning hotels but they do not manage them. In this case, the employees would receive their training, pay and benefits from the hotel company, such as Starwood or Marriott. This is often a franchise situation where the owners of the building have paid the hotel company a fee to “fly their flag” and carry the brand name whether that be a Westin or a JW Marriott. Under such an arrangement, you are assured the consistency in the level of service and the hotel product as you would find in a hotel that that brand would own and manage. A potential “con” to this structure is that the owners usually have the final say with anything that has to do with money. So if a renovation or upgrades to the meeting space need to be done, it is up to the owners whether or not to invest money into the property. As a franchise, they must maintain certain standards to keep the name and also their diamond /star ratings. Also, the ownership may not own other hotels in the same chain so the potential to rebook a cancelled meeting or negotiate attrition as described in #1 would not apply. The owner wants all the money to stay at their hotel, not go to another one that they do not have a stake in.
3. Privately Owned and Privately Managed as Franchise of chain brand:
This is like taking example #2 and adding one more degree of separation. For example, ABC Company owns the hotel, and they manage it – the employees are trained and paid by ABC Company. ABC Company has paid a franchise fee to Hilton Worldwide to “flag” the hotel as a Doubletree. Other than the Doubletree flag out front and you being awarded your Hilton points, the corporate folks at Hilton will not have much to do with this hotel. The National Sales Office will send group leads to them and individual guests can use Hilton central reservations but if you run into any problems with the hotel, you in all likelihood would be dealing with someone at ABC Company to resolve the situation, not Hilton Worldwide.
4. Privately Owned and Privately Managed – Independent hotel:
The best example of this hotel would be a “mom and pop” owned hotel. However, some of these are VERY nice mom and pops. Some of the best, most exclusive hotels in the world have this ownership. An example would be the Broadmoor in Colorado Springs, Colorado. Nothing wrong with that hotel, I can say from personal experience it is truly one of the best. Pros for this business model are that they have tremendous flexibility with rate, concessions and contract terms. They can also run any type of promotion they want and do renovations when and how they prefer. A potential con for this one though is the lack of support you would get from a national chain. It is just you and hotel.
5. Privately Owned with Management Contract – Independent hotel:
There are companies who are in the business of managing hotels. They will manage a chain brand hotel or an independent hotel; they are not too choosy. When ABC Company owns a hotel that they do not want to manage, they hire XYZ Corporation to be the management company to run the day-to-day operations. This ownership structure has many of the same pros and cons as #4 but the actual owner is one step removed from the day-to-day operations and decision-making process.
Here are two examples in the Orlando area (where there is no shortage of hotels!) that don’t fall into any of the above….just to make it even more confusing!
Universal Orlando – there are three Loews hotels (Portofino Bay, Hard Rock and the Royal Pacific). Their ownership / management set up were described to me by an employee as:
“A joint venture with three hospitality brands, include one chain brand. The chain brand manages the three hotels.”
Here is another:
Reunion Resort and Club, A Wyndham Grand Resort – this resort has an owner, who has hired a management company to run the day-to-day operations. The owner also recently franchised the resort to be part of the Wyndham Grand Resort collection but Wyndham has no part in the operation of the resort. Wyndham is really only there in name….
The bottom line is that you can never really know who owns and / or manages the hotel you are about to contract with. If after reading this blog you feel that it is important for you to know this information, add it to your RFP so you know from the get go, and always have a change in ownership / change in management clause in your contracts. You just never know what will happen to that hotel between contract signing and when your group arrives.