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THE NEWSPAPER FOR THE LODGING INDUSTRY Profiling The Ideal Management Company Thomas Latti n What would be your profile of the ideal hotel-management company of the 1990s? I posed this question to several of Coopers & Lybrand's institutional clients that have hotel portfolios. Flexibility is often viewed as a given by lenders, particularly as it relates to short-term performance standards, owner approvals and incentive-driven fees. Profit turnaround capability and a quick response when the owner has a problem also are desirable. A management company that shares ideas, offers advice anef makes decisions with the owner, not unilaterally, often scores high marks with owners. Also, one that has respect for the owner and real- izes that the owner is boss will have a leg up on its competitors. Owners ask that management companies report both the good and bad news as it occurs. Thus, a prompt, neat, monthly financial report with a narrative critique of operations can be a big plus. Also, owners want to be called; they don't want you to wait for them to call. But when owners do call, they expect to talk to the boss, not to voice mail. Owners like companies whose boss is accessible and returns phone calls the day they are made. Taking the responsibility to generate a positive cash flow was mentioned by almost all the execu- tives surveyed. The companies that hold themselves accountable for generating profits, not just · reporting revenues and expenses, stand out from the field. Experience is another key fac- tor; owners do not want their hotels to be managed by fledglings just learning the business. They like companies that have success- ful track records with similar hotels. A management company's experience as an owner or prior owner of hotels can be a plus or a minus, depending on the owner. Size is becoming more impor- tant. Owners like knowing that if a company loses a few contracts, it won't go out of business. (Size also is associated with purchasing and marketing clout.) Creativity is desirable, too. "Systems, policies and procedures are important," noted one lender, "but creativity separates the real managers from the custodians." Willingness To Participate While institutional owners don't usually need management compa- nies to fund working capital, oper- ating shortfalls and capital improvements, a management company's willingness to partici- pate in the hotel's cash needs can go a long way toward establishing credibility with the owner. Conversions, repositioning and brand production are common agenda items at ownership meet- ings. Management companies that provide both superior manage- ment and a new brand name for the same management fee as their competitors' clearly offer a point of difference. The ability to facilitate the eventual disposition of the hotel in a timely manner and at a favor- able price is another valued attribute. Experience with rep- utable brokers is very important to institutional owners. Three management-company attributes considered by owners to be less important in today's envi- ronment are: training and recruit- ing (owners don't think they're going to own the hotels long enough to reap benefits here), f&b, and development services, includ- ing interior-design capabilities. If you're a management compa- ny, how do you match up with this profile? If you're a hotel owner, how does your management company rate? My next column will focus on how to select the best management company for your hotel. Thomas Lattin is director of the Houston-based National Hos- pitality Industry Consulting Group of Coopers & Lybrand, an accounting and consulting firm. @Reprinted from HOTEL & MOTEL MANAGEMENT, March 1992