Going without a name brand to manage a lodging property can present both challenges and opportunities for a hotel real estate advisor and their investor objectives. Part of the challenge is the associated costs of that management agreement when a hotel turnaround is necessary. The other is whether having an independent management company will be more effective than a member of the chain’s brand operating it for investors. According to Christian Salaman an attorney and partner with the Pillsbury international law firm: “Owners may turn to independent hotel managers for fewer fees, a shorter term or more approval rights. These are the obvious choices when negotiating any management contract. However, recent experiences driven by the volatile economic environment also show owners desire the flexibility (and lower costs) independent hotel managers offer for transition, technology and capital expenditures.” Still, the distribution strengths of a brand may far outweigh the benefits of going independent from this hotel real estate advisor perspective. On the turnaround side and according to hotel resort management company executive Joseph Smith with Chesapeake Hospitality: “These days it often is not enough to make gradual changes and long-term investments. Many hotel owners need results now as hotels struggle to boost net operating income.” However, the challenge in making that hotel turnaround decision to go with an independent manager is how severely the immediate sales impact will be without the chain’s larger marketing staff and support systems. Are you an owner, lender or hotel real estate advisor contemplating a removal of a hotel brand or chain operator and using an independent management company instead? If so, what is the single biggest issue that precludes making the change? Please share your comments here.
