#AHC2014: The pros and cons of being an owner-operator

While providing hoteliers with advantages such as a short decision making process, flexibility, and the ability to implement best practice across a portfolio easily and rapidly, being an owner-operator has its limitations.

“On the development side, the disadvantage is in terms of risk. You take on the risk all the way through, so what we try to do is deliver value on the assets. 

“The other thing is that in order for us to expand we’re at the point where we’re quite a large organisation and we’d like to compete with the big guys, but we will need to restructure in order to do that, and maybe look at franchising,” said John Connolly, head of UK development at Dorsett Hospitality International.

Expansion and recruitment​

For Richard Grimes, managing director of Paragon Hotels, expansion is also an issue, but in terms of management costs.

“Our challenge is that we need to increase the number of our hotels, but the cost of our in-house management team is quite substantial. We’re very restricted on what we can afford to expand our team for.”

He added that recruiting the right people can be harder than for large organisations.

“The only disadvantage is trying to attract the right people to come work for us because as a small owner operator, we don’t have huge career progression. That restricts the quality of people who want to come and work for us. 

“What we are able to say is that we don’t have reorganisations, no restructurings, no changes to how we operate. Our teams remain constant,” he pointed out.

Time management​

According to Sophie Gregorios Pippas, managing director of Red Lion Leisure, which owns a Holiday Inn Express and outsources management from Interstate Hotels, the biggest advantage of a partnership is that the owner can focus on development and acquisitions, while the operator can deliver a better performance.

“It frees me up to use my time in a more strategic way, instead of having to follow every single audit that goes on at IHG. But we still have out monthly management meeting to go through all this.

“Interstate tracks which hotel is opening where and how that impacts the market, and what we should be about it. A general manager doesn’t have time to do that, which is why we tapped into Interstate and their resources. This gives us a lot of comfort.”

Grimes agreed, explaining that keeping himself informed of market trends and changes can be challenging as an owner-operator.

Bank reassurance​

Gregorios Pippas added that at the time of purchasing the hotel, having outsourced management also comforted the banks, making it easier to get a loan.

“It’s perhaps different in that we are a much smaller company and maybe when you have that track record the bank wouldn’t need that reassurance,” she said.