Management companies are proving their worth to owners in these stressful times.
Almost a universe away, it seems, the biggest news in property management was the Aimbridge-Interstate merger and its implications for our industry. Instead, our property-management playbook now includes everything from loan restructuring strategies, deferred PIPs, the Payroll Protection Plan and Safe Harbor to electrostatic sprayers, sanitizer formulas and contact tracing.
It is impossible to discount the immense challenges that remain for the hospitality and travel sectors given the continuing pandemic. However, property-management entities of all sizes have performed admirably during stressful times by working closely with lenders and ownership, taking advantage of government programs and addressing the needs and concerns of staff, while maintaining a safe and inviting environment for both guests and staff.
From the perspective of small- and medium-size property managers, we are seeing even stronger working partnerships between ownership groups and property-management companies. Initially brought closer by the need to apply for PPP loans, develop loan modification plans with lenders and discuss operational strategies, we are talking more than ever. As a result, many ownership groups have gained a better appreciation of the value we brought to the table while under duress, whether it was taking the initiative to consummate PPP loans, implement brand standards for cleaning and sanitation or roll out new food-and-beverage programs.
Resource allocation and labor issues
The pandemic will further accelerate many trends in property management. The first of these is resource allocation, as small- to mid-size property management companies grapple with systems integration and the technologies it takes to operate properties these days. The fundamental questions for many entities are: Do I want to be a technology company or would I rather focus on core elements of property management and consulting (which I do best)? Can we provide better service at a better price point by not bringing everything in-house?
Thus, we are likely to see continued outsourcing of accounting, administrative and revenue-management functions, many of which can present a “branded face” to investors, vendors and other strategic partners. The growing roster of technology partners for hospitality keeps pricing competitive and allows entities to mix and match from today’s best vendors, including for the urgently growing arena of guest-facing technologies.
Outsourcing is directly related to labor allocation. The pandemic has resulted in staff reductions (both furloughs and layoffs) of mid-management positions at many properties. Understandably, staffing levels will bear close scrutiny, even as we eventually return to normalcy. We expect more permanent personnel consolidation and “upstream” movement of functional areas like accounting and possibly sales, which will present cost savings at the property level.
The issues just described—outsourcing, personnel allocation, working partnerships with owners—further imply a path for smaller management entities to compete with our industry’s largest ones.
At a certain level, the largest entities may have greater economies of scale in some areas or be able to offer incentives, including room key contributions, to secure management contracts.
However, smaller entities can compete well in three key areas:
- by not imposing a wide range of add-on fees,
- by their responsiveness to fast-moving industry dynamics,
- and through superior market knowledge.
The last factor is extremely important. Property managers with great local presence can excel in quickly re-allocating resources among properties under management; in mining new user groups to help make up for the loss of business travelers and other group business; and in caring for their people. The latter includes formal Payroll Protection Program support of employees; helping with access to childcare or medical care; and keeping team members informed in a realistic, yet caring manner.
Yes, we will likely see more consolidation in property management. But the pandemic experience, if anything, has proven the value of nimble, cost-effective, community-invested property managers in serving ownership groups as we stabilize the hospitality industry.
Kerry Ranson is chief development officer at HP Hotels.
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