Are you thinking about investing in a hotel and wondering about the different types of hotel ownership? You might envision yourself at the helm of a successful B&B operation or walking the halls of your own hotel. There are several types of ownership models and methods to achieve your dream. There are two primary kinds of hotels: independent and chain. That doesn’t mean that if you own a hotel you can’t be part of a popular chain. Within the two designations are several options for ownership.
Privately Owned Hotels
Although one person or company is named as the owner, there may be several investors in this ownership model. The advantage to an independent hotel is that you will have autonomy in management decisions. You can decorate your bed and breakfast however you like or tailor your hotel to accommodate the personality and customs of the community where it is located. You may have to have a consensus of your investors to make some decisions, but the day-to-day operations are up to you. One disadvantage to this setup is that you or your company will have to pay for all advertising and there is no central purchaser of things like linens and other supplies so you won’t have a volume discount. Another downside, according to the Texas Education website is that most travelers prefer to stay in chain hotels because they have an expectation of the quality.
In this arrangement the private owner of a hotel leases it to a corporation or chain. The lessee is responsible for all the finances of the hotel. You, as the owner, may agree to be paid a fixed rent. This represents the safest course. You might elect, however, to ask for a share of the revenue. This involves some risk because if the hotel does poorly, you will receive less money for its use. The lease method that contains the greatest risk is for you to receive a share of the revenue after expenses. Many leases do have a minimum payment, but you would have to decide which of these options, or a combination of the options, you want to include in your lease contract.
If you invest in a hotel property but have limited or no experience in the hospitality field, you may decide to hire a management company. As the owner you have the financial obligations of day-to-day operations such as salaries and maintenance, but the management company takes over the responsibility of actually making management decisions.
According to the website ehow.com, three quarters of hotels in the United States are franchises. In this model of hotel ownership, you pay a fee to a regional or national chain to use their logo, their name and their management protocols. The advantage to this type of ownership is that travelers will seek out your hotel because they have expectations of the quality and amenities the brand offers. A problem with this is that if the chain image suffers, your establishment will suffer also, even though it may maintain the strictest standards. An example in recent years is Motel Six. Its reputation was tarnished as the budget hotels became targets of crime and many of the hotels were not properly maintained. The chain underwent a massive restructuring, renovation program and re-branding to improve their lagging ratings and revenue. In addition, if you own a franchised hotel, you must adhere to the chain’s standards, practices and often their decorating and floor plans. You are not autonomous in the management decisions either. Still, this model offers the advantage of affiliation with a well-known brand, central procurement of supplies and some support services.
Although there may be other models, these represent the most prevalent. As a prospective owner, you will have to research the options carefully, including the capital that you have available for your investment. Choosing the right model of hotel ownership might spell the difference in a rosy financial future or in a stressful venture.