The Benefits of Outsourcing vs In-House Management in Operating Hotels

In today's competitive hospitality landscape, hotel owners and investors face a crucial decision: should they manage their properties in-house or outsource to a professional management company? At Ammonite Hospitality, we've seen firsthand how this choice can significantly impact a hotel's performance, efficiency, and bottom line. Let's explore the benefits of both approaches and help you determine which might be right for your property.

Benefits of Outsourcing Hotel Management

Access to Expertise and Best Practices

Professional management companies bring a wealth of experience and industry knowledge. They've typically managed various properties and have developed best practices that can be applied to your hotel. They will notice areas for improvement for you business immediately and implement them efficiently. At the end of the day it is in their interest to maximise the revenue and profit of your business.

Cost Efficiencies

Outsourcing can often lead to cost savings through economies of scale, especially in areas like purchasing, marketing, and technology implementation.

Let's use the example of linen: as a small hotel you may do your own laundry or outsource to a 3rd party. With a management company, usually it is always outsourced and with that will come cost and efficiency savings. If the management company has 5 other hotel in your area for example, they will have negotiated much better rates than you as a small hotel could receive.

Advanced Technology and Systems

Management companies usually have access to cutting-edge property management systems, revenue management tools, and marketing technologies that might be cost prohibitive for individual hotels. Some management software can cost £50k and above. The benefit of this is that is can all be managed from a central location, saving time and money.

Broader Network and Resources

Established management companies often have extensive networks of industry contacts, including vendors, OTAs, and corporate clients, which can benefit your property. Usually account managers for software companies are limited to the higher value customers, your hotel will be able to benefit from these relationships

Objective Perspective

An external management team can provide an unbiased view of your property's operations, identifying areas for improvement that in house teams might overlook. With a small hotel, it often has a really passionate owner who has got the business to where it is, which is fantastic in its own right. However a fresh set of eyes on any business is a good thing. A management company should implement sympathetic changes as to not offend the incumbent owner.

Benefits of In-House Management

Greater Control

With in-house management, hotel owners maintain direct control over all aspects of the operation, allowing for quick decision making and implementation of changes. This allows the hotel to adapt very quickly to changes in market trends. With greater control comes greater responsibility, just be aware that everything falls onto the in house teams heads should something go wrong.

Brand Consistency

In-house teams may have a deeper understanding of the hotel's brand and local market, potentially leading to more consistent brand execution. The hotel might have a long established relationship with a local business and keeping the management in house, allows this relationship to continue. It might be trickier to a management company to establish these relationships as many will have been built over a long period of time.

Loyalty and Long-term Commitment

In-house staff often develop a strong sense of loyalty to the property, which can translate into better guest experiences and lower staff turnover rates. It is always nice to have a closely knit team, who will go above and beyond for the hotel. You run the risk of the community atmosphere being slightly eroded should a management company come in and take over.

Potential for Lower Management Fees

While not always the case, in-house management can sometimes result in lower overall management costs, especially for smaller properties. This is only the case if the property is very small and doesn't have stand alone teams (marketing, accounts etc.) This generally falls to the owner, who by our experience isn't paying themselves market rate for a general manager of a hotel.

Key Considerations for Making Your Decision

Property Size and Complexity

Larger, more complex properties often benefit more from professional management due to the breadth of expertise required. Smaller properties can also benefit by becoming part of a group. It is all down to the individual hotel as to whether a property management company is right. From our experience, 10+ bedrooms is where is becomes beneficial to outsource to a management company.

Owner's Experience and Involvement

If you have significant hospitality experience and time to dedicate to the property, in-house management might be more feasible. Hotels require a lot to run and manage so you must make sure that you have to time to "get stuck in". If you want a more hands off, looking form the sidelines approach, get a management company involved. It will be significantly less stressful doing it that way.

Financial Resources

Consider your ability to invest in necessary systems, training, and personnel for effective in-house management. To get the most out of your team, they need to be doing specific roles within your hotel. For example, you will need someone in marketing who will create all the content. You will also need someone in accounts to make sure everything is paid. These roles all cost money, so it is down to you as an owner as to whether the hotel has the resources to fun this.

Growth Plans

If you're planning to expand your portfolio, a management company might offer valuable scaling opportunities. You get to focus on more acquisitions and let the experts run your property.

Market Conditions

In highly competitive or volatile markets, the expertise of a professional management company can be particularly beneficial.

Actionable Steps to Take

1. Conduct a thorough cost-benefit analysis of both options for your specific property. Include everything you do and attach a value to it. Assign an hourly rate as an owner (£30 for example) and log every hour that you work on the business.

2. Speak with other hotel owners about their experiences with both management approaches. In your local market there will be hotels run by both, getting the opinions of both sets of owners is invaluable.

3. If considering outsourcing, research potential management companies and their track records. Request meetings to discuss a potential working relationship.

4. Assess your current in-house capabilities and identify any gaps in expertise or resources.

5. Consider a hybrid approach, where certain aspects of management are outsourced while others remain in-house.

Conclusion

The decision between outsourcing and in-house management is not one-size-fits-all. It depends on your unique circumstances, goals, and resources. However, in our experience at Ammonite Hospitality, we've seen many boutique hotels thrive under professional management, particularly in today's rapidly evolving hospitality landscape.

As experts in boutique hotel management, we at Ammonite Hospitality offer a tailored approach that combines the benefits of professional management with a deep respect for your property's unique character and vision. We understand that your hotel is more than just a business – it's a passion, a dream, and often a significant investment.

If you're considering your management options or simply want to explore how professional management could benefit your property, we invite you to reach out. Our team would be delighted to discuss your specific situation, answer any questions, and provide insights based on our extensive experience in the boutique hotel sector.

Remember, the right management approach can be the difference between a good hotel and a great one. Let's work together to unlock your property's full potential.