The management and control of hotel real estate is different from that of other commercial real estate, as inferred from an article by Gary Isenberg which is featured on Forbes. Given that hotels operate in brick and mortar real estate, not only do the owners own the real estate, they also manage the hospitality enterprise that the brick and mortar buildings house and are responsible for all site improvements. The expense of running the business is also borne directly by the owner in the event of a deficit in revenue for any particular period.
In a regular commercial building lease, the owner rents out the real estate, but the occupier assumes all expenses related to the business, thus relieving the owner from the concern of being able to meet staff-related and other expenses. Nevertheless, a hospitality real estate owner does not have to bear all the burden of managing the operation; he or she may employ a management company to oversee the everyday running of the business. The management company may be a major hospitality brand or a third-party management company that would be responsible for such things as recruitment and training, inventory management, and most important, a fulfilling guest experience, all within the budget furnished by the owner.
The choice of a management company is of utmost importance since it involves a long-term contract and the ultimate success of the operations in terms of profits and investment returns. In the event of bad management, the owner may be able to end the contract with the manager and safeguard his or her financial welfare based on a properly deliberated termination clause. A brand management contract incorporates two performance tests; namely, management performance as it pertains to the hotel’s gross operating profit (or the owner’s preferred return) and the industry’s operating standard of revenue per available room (RevPAR).
eCornell gives you the opportunity to arm yourself with knowledge about controlling your hotel real estate through their program in Hotel Real Estate Investments and Asset Management.
eCornell courses are approved by SkillsFuture Singapore for SkillsFuture Credit as well as by HRDF Malaysia under its SBL Scheme.