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What is a Hotel Management Company? How Do They Work?

A hotel management company is a management firm that helps hotel owners to manage all aspects of their hotel’s operation, such as its financial performance, guest services, housekeeping, food and beverage services, upkeep, as well as its human resources.

This company will coordinate the many departments within a hotel to make sure that the hotel runs effectively and successfully, while also keeping up with high standards of quality and customer satisfaction.

Once contracted, these companies that work with a team of experts will be tasked with overseeing the day-to-day operations of the hotel, along with putting together and implementing strategies to bolster the hotel’s activities and profitability.

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It becomes their duty to foresee and respond to every swinging needs and preferences of the hotel’s guests, coupled with making sure that the hotel maintains a positive reputation in the industry.

How Do Hotel Management Companies Work?

These companies work the same way as the internal team of just about any well-functioning hospitality business. They are more or less a third party that is tasked with overseeing the everyday operations of a hotel, either for an incentive fee, a base fee, or a percentage of gross revenue.

Most times, they are contracted at the very beginning of the hotel business, and in other cases long after the hotel has been established. If the owner or operator of a hotel does not want to employ a general manager as well as other necessary hotel staff, they can decide to contract a hotel management company to carry out these vital tasks.

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The management company will enter into an agreement or contract with the owner, and from that moment become in charge of directing the long-term vision of the hotel, and working to ensure that both staff and managers provide optimum services. Howbeit, note that the management company is usually not involved in major decisions regarding the physical asset.

Factors to Consider Before Using a Hotel Management Company

It is important as a hotel owner that you understand that management companies vary in the services they offer as well as their expertise.

You also have to understand that there is a vast difference between taking over the management of a five-star all-inclusive hotel and overseeing an economy motel in a rural area. Owing to that, here are factors to consider before using a hotel management company.

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1. Services

It is important to reiterate that different hotel management companies will offer varying services, and the one you choose should depend on what services you want for your hotel.

While operational services might all be the same, you will find management companies that offer services that generate and manage revenues and profits, such as sales, promotion, revenue management, bookkeeping, receivables, billings, finance, reporting, etc.

Aside from that, you will also find that some management companies offer services that bring on eligible workers by taking charge of recruitment, training, compensation, and ensuring a people-centric culture in the company. Owing to that, it is recommended you take your time to understand what you need and ensure you choose a company based on the services your property needs.

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2. Track Record

This is also another factor to take into consideration before contracting any hotel management company. It is pertinent you understand how the hotel management company you intend to work with has been performing. However, don’t forget that the main thing is to learn about performance not just in terms of success but also its failures.

This will give you a comprehensive idea of how the company handles its daily operational processes to bolster long-term performance.

Ideally, the perfect hotel management company will never miss the opportunity to boast about their achievements, as such don’t neglect to request specifics regarding how they enhanced their indicators. Make sure to verify that the company won’t compromise its service or overload its employees.

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3. Values

It is imperative you understand that the hospitality industry is one that is overly dependent on people and how they feel about anything.

You have to realize that value is everything in this line of business, and as such it is pertinent you only work with a hotel management company that you can trust, one that is well renowned for its commitment and respect. It is important you do not neglect these traits when seeking a management company for your hotel.

Owing to that, when making the decision or picking from the many hotel management companies available in today’s market, ensure you find everything you can regarding each company’s owners and main figures.

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What are the values they eulogize? What are their relationships premised on? Do you all share the same beliefs and values? What are the vital tenets you expect from the partnership? Immediately you have these answers, you can then make your choice.

4. The Contract

Just as was noted above, the management company will put pen to paper on an agreement or contract and from that moment become in charge of directing the long-term vision of the hotel. Owing to that, it is important you consider how long you will want this agreement to last.

You will find management companies that offer three-year contracts, and you will also find those willing to provide one or two-year deals. These sorts of deals are necessary if you are not so certain of the services they offer and how they will manage your hotel.

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Pros and Cons of Hiring a Hotel Management Company

Same as with every other thing, there are pros and cons that also come with hiring or working with a hotel management company. They include;


  • Hotel management companies are known to be quite experienced when it has to do with managing hotels. They come with experts who have a deep understanding of the operational and financial aspects of running a successful hotel.
  • These companies tend to have properly established networks and access to resources that would otherwise be out of reach of a private management team. This most often includes marketing and sales channels, procurement relationships, and training programs.
  • Hiring hotel management simply means that as the property owner, you can shift your attention to other aspects of your business or personal endeavors knowing fully well that your hotel is in capable hands.
  • There are management companies that boast of solid affiliations with renowned hotel brands or operate under franchise agreements. Have it in mind that this connection will most definitely ensure that your hotel will benefit from brand recognition, loyalty programs, and centralized reservation systems.
  • Most often, management companies are expected to meet stipulated performance metrics. This will give you a sense of assurance that the management firm will do everything within its power to attain those goals.
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  • You have to understand that the services of these experts don’t in any way come cheap. Although the fee structure will differ from one company to another, it will all still fall as an expenditure for your business.
  • Hiring a hotel management company means handing over control of your property and business to a third-party company. Although this will ensure that you have more time to focus on other endeavors, note that it means that some of the business decisions, if not a good part of them, will not be made by you.
  • It is also possible for your long-term goals for your hotel to vary from that of the hotel management company. The company might be looking to bolster and maximize its own revenue and profitability, and this may not fall in line with your own objectives.
  • Also, have it in mind that the process of transitioning to a new management company can come with its own mishaps. In some situations, it will necessitate changing staff, systems, and operational procedures. Truth be told, all these can negatively impact your business.
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Deciding to hire a hotel management company is a tough decision. If you align with one that is perfectly matched for your business, they will grow your hotel to become one of the best places to stay in the area. However, if you make the mistake of hiring the wrong one, your business will suffer the consequences long before you realize it.

Regardless of if you already have a hotel or you are just looking into establishing or purchasing one, a hotel management company can be a very good choice. Howbeit, ensure to contract a company whose ideals match yours.