Top Questions Owners Should Ask Hotel Management Companies

In Hotel Management by Ashley Harbin

Looking for a professional company to operate your hotel and maximize your investment? Make sure you ask these questions when screening hotel management companies to help you find the best fit.

So you’ve decided it’s time to hire a hotel management company, but how do you determine which one is best suited for you? Start by conducting thorough research and evaluating the top hotel management companies based on your specific needs and objectives. Here’s our checklist of questions to ask hotel management companies:

Organization and Experience

1. What hotel segments do you currently operate?

2. What is the RevPAR Index (RPI) or Revenue Generating Index (RGI) of those hotels?

3. How many people are in your company and what is the organizational structure? How much access will I have to the top executives?

4. Where are you based and where is your nearest local office?

5. Who in your company will handle the day-to-day interactions with the general managers and hotel owner? What is their experience level?

6. What is your relationship with franchisors? How do you stay current with brand standards?

7. What experience do you have managing hotels during extensive renovations?

Process and Potential Investment

8. How much interaction with the hotel property do you allow the owner to have? (Most companies do not want the owner interfering with operations.)

9. How much input will I have in hiring key positions?

10. Do you invest either key money or equity in the hotels you manage? 

Operations

11. What are some recent improvements at hotels you operate (i.e. Increased occupancy, ADR, GSI, NOI? Be as specific as possible.)

12. What are typical expense percentages at your select and full-service hotels?

13. Review an example strategic annual plan. Is it well thought out, realistic, and achievable?

14. What reports do you provide and how often?

15. How do you hire staff? (Staffing is a critical issue these days.)

16. What QA and GSI scores are your current hotels achieving? Are any in the red zone? 

Management Contract

17. What is your management base fee? Is there an incentive fee and how much? Are their additional accounting fees? Are the fees negotiable?

18. What is the length of your contract? Most owners prefer not to have more than one year, with renewals. Many large companies require a several-year contract.

19. What type of termination clause do you implement?

Conflict of Interest

20. Do you currently operate or own any hotels in the same market as my hotel? If so, where is the nearest hotel to mine that you operate? 

Once you have answers to these questions from the top hotel management companies on your list, see how they stack up to each other.

Which hotel management companies best match your specific needs as the hotel owner?

Hotel Needs

  • Location – Where is the hotel in relation to where the management company is based? Segment – Does the company have successful experience in this segment?
  • Business Model – Are you looking to maintain performance at the hotel or grow it?
  • Personnel – Has it been stable or churning and how will the company perform in each scenario?
  • Technology – Is the company tech savvy?
  • Hotel Condition – Does the company know how to maintain and improve hotel conditions as needed?
  • Franchise or Independent – Does the company operate both types successfully?

Ownership Needs

  • Reporting – Do you want weekly detailed reports or monthly summary reports?
  • Involvement – Do you expect to provide input on how to get the best performance from the hotel or be more hands-off?
  • Capital Investment – Does the company suggest (or require) you make capital improvements for them to achieve their pro forma projections?
  • Responsiveness – Do you expect immediate answers or are you the type to patiently await responses?
  • Personality and Integrity – Is there a fit?

You are going to be entrusting your multi-million-dollar hotels to one of these hotel management companies and working closely with them on a daily basis, so make sure you hire the company that matches your hotel needs and objectives. Don’t hire the least expensive just to save some money if it is not the best fit for you.

Every company has its own personality and way of doing business. Our goal is to make your hotel as profitable as possible while continuously improving guest satisfaction scores. Contact us today to learn how HMG Hospitality can maximize your investment by driving more profit to the NOI line.