Why do I, the hotel owner, need a professional hotel management company?
Almost all materials of our site answer this question: in the sections About the company, to the owners and investors and others. But briefly, in order to get the best results. Improving efficiency is achieved through the use of the management company’s well-established strategies, organizational and operational technologies and best management practices. The involvement of an external professional management company for the management of the hotel industry is a common practice throughout the world and in Russia. When a hotel is not a profile business of the owner, attracting a professional management company allows him to concentrate on managing his core business. If you are interested in independently managing operational processes, learn from your mistakes, and if all of this has resources, then most likely you do not need a hotel management company. In fact, there are many independent and quite successful hotels in the world. Many of them do not even think of entering the hotel chain.
If you want to own a profitable business, have the time and money to develop other projects, including hotel projects, then it makes sense to think about attracting a management company.
What are the main advantages of the hotel management company IFK Hotel Management?
IFK Hotel Management is the only Russian hotel management company on the market that has the authority of an international hotel chain. This distinguishes us from others and gives us the following advantages:
- Self-reliance and efficiency in decision-making
- Excellent knowledge and understanding of the market and its features
- The ability to maintain a reasonable balance and flexibility, adapting global international experience to local business practices
- The possibility of a personalized approach to each partner project and the uniqueness of management decisions for each of the projects
In addition, in cases where this is dictated by the specifics of the project, as an independent management company, we can manage the hotel without involving brands.
What kind of agreements do I need to sign with the hotel management company?
The classical scheme of cooperation is as follows:
Based on the results of the exchange of basic information, if there is mutual interest, the parties decide on the continuation of the negotiation process. Sometimes, at the request of one of the parties, at this stage may be concluded (1) Confidential Agreement.
After receiving all the necessary information on the project, the management company prepares a proposal for cooperation, including the basic conditions for cooperation, a brief description of the possible forms of interaction, the basic concept of the facility and other necessary information. After discussion and coordination of all details of cooperation, the parties sign (2) the Letter of Intent (Letter of Intent or Letter of Interest, the so-called LOI). It reflects the main parameters of future cooperation: all parameters of technical support contracts, management (rent), franchising, payment structure, planned hotel brand and so on. LOI with the management company is a document that fixes the agreements reached by the parties regarding future cooperation. For the owner, who intends to look for external sources of financing for his project in the future, this document is especially important. Typically, investors have a greater degree of confidence in the projects they finance, if there is a signed with a well-known hotel operator LOI.
3) Technical Services Agreement (TSA)
Within the framework of this agreement, IFK Hotel Management accompanies the hotel project at the stages from design and construction until the opening of the hotel. The main objective of the cooperation of the parties under the technical support agreement is that the hotel be designed, built and equipped «correctly», in the project (and in the future at the existing facility), functional zones will be reasonably allocated and reasonable spatial planning solutions will be applied, logic of interrelations of various operational processes. The contract is necessary so that the constructed and open facility can provide comfort and effective operating activity corresponding to its category. Our ultimate goal is management, and we are interested in managing a competitive hotel, and it is important for the owner to create a quality, modern and competitive product.
4) Hotel Management Agreement (HMA)
The hotel is properly built, all technical issues are solved, the systems are connected — it’s time to start the management contract. There are several forms of the contract, and we will coordinate the concrete variant that is right for you. But in all of them the most important parameters of cooperation are determined: the rights and obligations of the parties, the validity period (usually 15-20 years with subsequent prolongation), all payments and their terms.
5) Franchising Agreement (FA)
Finally, if the owner wants to enter the international network, then simultaneously with the management contract with the company IFK Hotel Management, FA is subscribed with the chosen brand.
This is an ideal scheme, while the management company IFK Hotel Management is ready to enter the hotel project at any stage. At the stage of idea, concept, design or construction — it does not matter. We cooperate with existing hotels. The main thing is that the main parameters of the hotel project meet certain requirements, first of all, security and comfort or could be changed in accordance with them.
How do you calculate the remuneration of the management company IFK Hotel Management?
The fee for managing the hotel consists of two main payments:
1) Base Management Fee is the basic payment that makes up a fixed percentage of the total revenue of the hotel facility (Total Revenue). That is, the revenues for all services provided by the management company: the sale of hotel rooms, bars and restaurants, the organization of events, additional services and so on.
2) Incentive Fee — this payment is tied to the performance of the hotel management company and depends on the total operating profit of the hotel (Gross Operating Profit or GOP).