Ignoring the operator selection process can be costly
Having joined PKF hotelexperts in October I have learnt a lot which has not been part of my previous life as a hotelier. Many hotel deals are being concluded on our continent, the majority of them being with branded properties. I ask myself whether these actually involved one of our core services, operator selection. Or did the deal seem too sweet that it was decided to rather not go the route of operator selection with the involvement of a consultant?
The power of the brand is real and is giving owners and developers confidence in pushing their developments over the line. They enter into long-term relationships with pretty strict terms, but on many occasions, they are not completely aware of the consequences. To get out of these contracts is often more difficult and costly than a divorce. So, my question is, are these marriages always the best fit? Are they really a match made in heaven? Whilst holding on to the analogy of marriage, after all, most agreements are for 15 years and longer, I wonder whether the search for suitable partners is as detailed and as focused as it ought to be. Let’s be honest, you really want to be with the right one for this long-haul journey.
With many years of experience in finding the right partner for the right project, we have assisted a long list of clients avoiding the pitfalls and the agony of having to live with regrets. Usually, based on the recommendation, that comes from our feasibility study, we seek to find the right match. This of course is done in close consultation with the client and whilst taking his/her wishes and aspirations into consideration we aim to do what is best for the project itself. Not always is the five-star dream of a client the right fit for a project that is located in a non-five-star location. To show that the opposite can also be the case, I recall a client in a southern European city. This client was in advanced discussions with a two-star brand when we approached him. We offered our operator selection services. He was at this stage negotiating a lease agreement. We had to try hard to get the job as the client was quite happy with the deal, he had negotiated thus far. Having succeeded in getting the order, we proceeded to look for the right partner for the project. After a few weeks and dealing with 17 interested parties we eventually managed to secure a lease with a five-star operator. The lease we subsequently negotiated, brought the owner approximately 250% more than the one he originally discussed with the two-star operator. Which goes to show that if you have the advice of a well-connected and experienced consultant you are in a far better position than negotiating on your own.