By Robert A. Rauch
Management Company Perspective
What key components have contributed to the growth of RAR over the last 6 months?
At RAR we are actively and continually involved in all facets of the tourism and hospitality industry. We have focused on bringing the latest trends to each hotel with a focus on driving revenue and building loyalty. After generating revenue, we concentrate on optimizing that revenue and converting it to net income. We are always cognizant of asset value and net income is what measures that value.
Innovative digital marketing and social media marketing and management helps our portfolio stay ahead of the trends and reach guests in new and inventive ways. We have also developed a successful operating strategy that combines knowledge transfer across properties and segments with agility in deploying resources. These resources are laser-focused on achieving the hotel owner’s investment and strategic goals.
When owners are searching for a management company, what are the top three things they should look for?
Common values and culture: When looking for a hotel management company, it’s important to look for a company that is aligned with your own values and company culture. Having common beliefs about how your hotel should be operated and your guests taken care of will help you be on the same page as your management company.
Management style should also be considered when looking at different management companies. Does the management company require onerous paperwork from managers, thus making it difficult to be the face of the hotel? Perhaps you prefer a company that encourages “management by walking around” rather than having managers sitting behind a desk all day. There are various styles and it is important to understand the style you are comfortable with that will ultimately provide the healthiest of both relationship and returns.
Lastly, finding a management company that provides innovative technology within the day-to-day operations should be a focus when searching for a management company today. The art of hospitality is now becoming the science of hospitality.
Staying aware of and implementing technology that will help your property increase revenue, operating profits and net income is crucial. Technology should not be implemented for technology’s sake but it should aid your hotel in staying ahead of the competition and meeting your guest’s expectations while protecting the value of the asset at all times.
As a management company, what drives your success?
Success starts with our team and the leaders we have in place. One of the keys to successful leadership is celebrating successes, even if it is a simple thank you or acknowledgment to a team member who has made a smart decision that positively impacts the hotel.
From our managers to our executives, we promote “management by walking around” which in our business refers to among other things, checking in on the restaurant, greeting guests in the lobby, inspecting rooms and working “in the trenches,” particularly during the peak periods of check-in, check-out and meal periods.
Our success is also driven by our relationships with our owners. We are owners, managers and experts that take pride in providing them with the peace of mind that their assets are reaching their full potential. We provide open communication and want our owners to feel confident that the trust they placed in us to manage their properties was a smart decision.
What outside factors could drastically impact how hotels are operated?
The sharing economy, such as Airbnb, is a new reality hoteliers are still grasping to embrace. The challenge here is that users like these services, government legislation is not generally keeping up with these rapid developments and hoteliers are unsure of how to react. Is Airbnb a complement to hotels or is it a threat to the traditional hotel model? We as hoteliers need to accept that the sharing economy is a new reality to which all of us need to adapt.
Political uncertainty will continue to be an unfortunate reality at the national level; hoteliers are impacted in many ways but most crucially in the area of healthcare. Whether or not you agree with Obamacare and its implementation, it is reality and the hotel industry must get its arms around incorporating the demands of the legislation into HR policies, legal ramifications and the impact it has on the healthcare options available to employees.
Impacted by national, state, and local politics is the living wage movement and the uncertainty of how quickly the minimum wage will increase. One thing is clear, the minimum wage is going up across the country and hoteliers need to plan accordingly.
As an owner and operator, you offer unique insight. Which markets are considered hot right now? Phoenix is one of the hottest recovery markets in the U.S. along with Denver. There are sub-markets that are stronger than others but all are seeing “lift” from the strength in both room demand and rate growth.
Should owners be buying or selling in the current market?
It will be a good time to buy hotels in 2015 in markets that recovered more slowly due to oversupply. 2014 saw strong increases in occupancy rates and average rate growth above the rate of inflation. Once occupancy levels increase, room rates grow naturally.
Further, the “hold” period that an investor desires to keep a property becomes a critical matter when the later stages of a cycle arrive. Buying a property in 2015 on a 3-5 year hold might not be ideal for return on investment if we see a soft landing or recession in two years.
Each deal must be reviewed based on everything from leverage to hold period to interest rates and return requirements. The window for an upside is closing, but there remain opportunities if you know where to look!