While label managers usually undertake their duties in concert with a franchisor which makes available to the hotel owner a well recognised brand, centralised services such as reservations and the availability of cutting edge technical support on an as needed basis. The club of white label managers in the Australian market is small but growing (think the likes of LaVie, 1834 Hotels, Trilogy, Gatehouse Hospitality, Lancemore and potentially Salter Bros). By comparison the "legacy managers" (think the likes of Accor, Hilton, Hyatt IHG, Mandarin Oriental, Marriott, Shangri- La together with the local operators such as TFE Hotels), bundle the management services offered by white label managers with all the abovementioned services provided by franchisors. In fact the legacy managers in another guise are generally the franchisors who work in conjunction with the white label managers who should not be confused with the "soft" brands used by the legacy managers (think MGallery by Accor, Autograph by Marriott and Curio by Hilton) which is a form of public facing branding used by these managers.
For the white label managers to successfully compete against the legacy managers, who after all have a well-entrenched, if not commanding, position in most markets around the world, there is a need, in our view, to identify points of difference with the approach to the major commercial terms which underpin hotel management agreements and fashion an arguably more owner friendly offering. In this newsletter we have reached out to white label managers and other industry experts as to what white label managers are prepared to agree to both in the Australian market and in the US. We thank them for their contributions to this newsletter.
Interestingly, there appears to be a realisation in the US that for hotels under 1000 rooms the white label operators are the operators of choice, perhaps because they are better suited to provide individual focus to smaller properties. For these smaller properties the legacy managers tend to focus on franchising which we are advised can be very lucrative. The exception would seem to be in the luxury space where the legacy managers, for totally understandable reasons, are only prepared to provide access to their most prestigious brands irrespective of the room count under a management model rather than a franchise model.
We will now seek to determine whether there are any meaningful distinctions to the largely universal approach adopted by the legacy hotel managers. The commercial positions set out below which are based on our exposure to hundreds of management agreements in Australia and elsewhere are in each case a "sense of the meeting" approximation – of course during any particular negotiation an individual manager may make concessions beneficial to the owner in an attempt to secure a sought after management opportunity.
Self-evidently, attractive commercial terms are only part of a compelling value offering. An impressive track record of effective service delivery, a skillful ability to control costs and a steely eyed focus on maximising profit are potentially as important if not more important than attractive commercial terms. Most of the major legacy operators have been in business a long time, have demonstrated that they can perform impressively in a variety of jurisdictions and have grown to become multibillion dollar corporations off the back of a business model which has served them and their guests well over an extended period.
As usual, the views expressed in this newsletter are those of the author alone. As with all our newsletters, we trust you find what follows informative and thought provoking. Any feedback would be appreciated.
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