Hotel tourism and leisure -
As the commercial accommodation sector regroups post-pandemic and with property investors looking to diversify portfolios, Bayleys national director hotels, tourism & leisure Wayne Keene says how a hotel is managed is more important than ever.
“There’s so much that goes into providing a welcoming, authentic and reliable hospitality experience for guests, let alone what happens behind the scenes to make all the component parts move in the right direction,” he says.
“Owners are increasingly opting to outsource the nuts and bolts of hotel management to service providers that can deliver efficient, cost-effective and measurable benefits through the likes of white label business models.
“This third-party hotel operator or white label model is well established around the world, particularly in the US, and we’re seeing more of it in New Zealand together with hotel franchising models under global brands.
“With the expected recovery of hotel trading performance and projected growth within the commercial accommodation sector, having robust management processes, systems and personnel will be the determiner of success for asset owners and will be of real significance should they decide to sell.”
A third-party hotel manager manages the day-to-day operations for a hotel owner or investor and receives a fee or a percentage of the property performance for providing that service.
The range of services provided is diverse and can be tailored according to the needs of the owner.
Streamlining the day-to-day management of a hotel asset via a third-party operator, means property owners can leverage the experience and efficiencies that these companies can offer.
“Once an investor has assessed their short, medium and long-term objectives and established their appetite for risk, they need to consider how much operational control they would want to have and, in many cases, the answer to that question is ‘none’.
“Investors new to the commercial accommodation sector would not necessarily have knowledge across the operational, financial, health and safety, compliance, marketing or revenue management demands of a hotel or lodge.
“It makes sense to engage the services of a company that can drive efficiencies in costs and outgoings, propel productivity, and provide the systems, tools and support to optimise the value of an asset and to protect the brand within the market.”
With construction and development costs rising, a squeeze on available developable land in pivotal locations, and financing challenges for the development sector, Keene says competition for existing accommodation assets is likely to increase.
“A white label solution could assist in repositioning an accommodation property in the market – perhaps after a refurbishment, rebranding or value-add programme for example.
“White label management could also underpin an exit strategy for an hotel owner, making the asset more appealing for an investor looking for sound reporting data and wishing to remain at arms’ length of the day-to-day running demands.”
Another area that investors may not be completely au fait with, is the role of technology in the hotel sector and the way it can enable an accommodation business to be heard above the market noise and cluttered online world.
“From reservations software and room inventory management, to website and app management and customised reporting for stakeholders – there’s a technological answer, and experienced management companies can offer smart digital solutions and expertise.”
Global hotel franchise group Choice Hotels operates in New Zealand, Australia and around the world across five different brands from the full-service Clarion brand to the upscale Ascend Hotel Collection, and mid-range brands Quality, Comfort, and Econo Lodge.
As franchisor, Choice Hotels often works with white label management partners to provide a highly effective solution for hotel owners seeking to improve revenue and operational efficiencies which, as the accommodation world resets, becomes even more significant.
Leisure and corporate travel have changed markedly post-pandemic with greater complexities involved and Scott Armstrong, director of development for Choice Hotels Asia-Pac says encouragingly, they’ve seen record direct online bookings with Choice – an increase last year of 88 percent on pre-pandemic (2019) levels.
“As border restrictions and lockdowns eased in 2022, growth in domestic travel has compensated for the slow rebound from international guests, which nationally were still 35 percent lower than pre-COVID levels in January 2023 (MBIE Tourism Data).
“However, staffing shortages have put increased pressure on owner-operators and created profitability challenges in an uncertain market, and we’ve seen heightened levels of burnout amongst some owner-operators in the market.
“Many are now engaging with us to find a combination of brand and management solutions so they can retain ownership of their asset, but step back from the day-to-day operations of the property.
“We also have owners eager to expand their portfolio through further acquisition of accommodation assets and they want to leverage the efficiencies of strong branding and white-label management solutions that can scale across their portfolios.”
Armstrong says competition is tough in a tightening economic environment, and hotel owners who are out on their own are beginning to wonder how they can compete with other brands.
“Having Choice’s trusted brands and powerful national marketing behind them gives independent hotel owners confidence and a real edge and we find that our brands really stack up in the market.
“Choice offers global brand exposure, expansive revenue opportunities, and direct delivery channels, along with day-to-day management, operational efficiencies, and a profitability focus, which ultimately improves property performance and delivers strong financial outcomes for owners.
“White label management can include overseeing routine operations, staff, financial and accounting systems, sales teams, marketing support, and revenue management services.
“The relationships we have with our white label management partners give investors and owners the assurance that there is a level of professionalism and expertise in what is an incredibly fast-moving environment.”
Inherent flexibility in tailoring a white-label management tool kit gives hotel owners peace of mind that they can optimise their hotel's profitability while concentrating on their own strengths, and assuring investors that operations are well managed allowing them to grow their portfolio, and creating efficiencies across multiple properties.
White label management together with a Choice Hotels franchising opportunity ensures operational optimisation backed by strong and trusted branding and the ability to leverage group marketing, loyalty, and distribution services.
“Choice Hotels is one of the largest pure-play accommodation franchisors in the world, and while we don’t offer management in-house in New Zealand, we do have several partnerships with white-label management groups in the Asia-Pacific region that we can put forward as options for owners,” explains Armstrong.
A key attraction for owners and investors is the expert revenue management services Choice Hotels brings to the table when it partners with white-label service providers.
“Over the past few years, our revenue management offering has been a huge differentiator for properties, with hotels using these services consistently outperforming the market,” says Armstrong.
“Across 2022, RevPAR (revenue per available room) for Choice brands in New Zealand was up seven percent and ADR (average daily rates) were up 10 percent on pre-COVID figures from 2019.
“However, hotels using our revenue management services saw an 11 percent increase in RevPAR over 2019 figures, which shows that the group expertise we deliver on rate setting can make a significant difference in a tight market.”
Armstrong says he’s focused on growing Choice Hotels’ presence in New Zealand by bolstering its existing portfolio of franchisees and by having multiple Choice Hotels brands in each location it currently occupies, providing a spectrum of options for guests.
“We're also seeking new franchisees in markets where we experience high demand from our preferred corporate and leisure clients – the likes of Auckland, Hamilton, Rotorua, New Plymouth, Wellington, Nelson, Dunedin, and Queenstown.
“These high-demand locations are across all brands and market segments with our corporate and leisure clients representing a broad cross-section of the market who travel and stay at a variety of accommodation levels, depending on their reasons for travel.”
Armstrong says one of the biggest challenges for owners and investors is defining the service offerings they require and ensuring that they optimise the franchise and white label management relationship's strengths.
“Choice brings a strong brand, powerful marketing, revenue management, smart procurement solutions, global distribution, worldwide sales power, the Choice Privileges loyalty program with over 530,000 members in this region, ongoing support, and contractual flexibility.
“Because we have existing relationships in place, we can offer owners live examples to compare against, and help them define exactly what they need to create the best brand and operations model for their hotel.
“With our partners, we offer a complete solution allowing for a seamless experience for the asset owner and as the franchise agreement and hotel management agreement are independent of each other, both parties keep each other accountable, and ensure we deliver strong outcomes to owners.”