Management Contract Property

A management contract property, a hotel that is operated by a consulting company that provides operational and marketing expertise and a professional staff, is similar to a referral property. There are several management contract organizations that develop business relationships with existing hotels and operate the hotels as their own. Their business relationship requires financial accountability and profitability. Management contract companies may choose to operate each hotel as a member of a franchise or as an independent.

Independent Properties

An independent hotel is one that is not associated with a franchise. It provides a greater sense of warmth and individuality than does a property that is associated with a chain. Independent hotels have particular characteristics, which include an owner who functions as a manager, room rates similar to chain properties, rooms decorated in different styles, and inviting dining rooms. These hotels may be residential or commercial, with locations in the center city, suburbia, along the highway, or near an airport. The number of rooms can range from 50 to 1, 000. They may offer full services to the guest, including suites, dining room, room service, banquets, gift shop, beauty shop, athletic facilities, swimming pool, theaters, valet services, concierge, and airport shuttle service. Some older independent hotels have refurbished their suites to capture their share of the all-suites market. With all of these advantages, why aren’t all lodging properties independent? The answer lies with the U.S. economy. The development of large chains and of smaller properties often brings tax advantages and improved profits to investors. Millions of dollars in capital are required to develop a 2, 000-room full-service property. Business, financial, and managerial expertise is more readily available in a company in which there is a pool of skilled experts. Large corporations can also offset financial losses in certain fiscal years or from certain properties against financial gains of other companies or properties in their diversified portfolios.

The independent entrepreneur operates his or her business without the advantages of consultation and assistance. This person may have worked for a large chain or gained a great deal of operations and development experience in the industry. He or she may also purchase a hotel property to balance an investment portfolio. As with any financial investment, the entrepreneur will seek a professional to manage and operate the establishment.The person chosen for this job must manage all aspects of the business—room, food and beverage, housekeeping, security, maintenance, parking, controller’s office, and marketing and sales. All business decisions on expenditures must be coordinated with a profit-and-loss statement and a balance sheet. Every sale of a guest room, every guest purchase of food and beverage, occurs because the management of that property has been able to market and manage the property effectively. The challenge of managing an independent property can be overwhelming. It can, however, also offer enormous satisfaction and financial independence.