According to Chris Green, COO of Chesapeake Hospitality, which manages more than 30 hotels in the United States, a skilled operator can produce on behalf of an owner if he is allowed to do his job with minimal intervention. Other hotel owners are not as quick to marginalize the operator; if for nothing more than there is one less thing to worry about. “Look, at the end of the day, we`re ultimately on profitability, but if someone else manages your assets, you have time to focus on other areas, so the fees are worth it,” said Heetesh Patel, a principal at Neves Investments, which manages both owner and hotel. Overall, the orientation we found was an average of 3.31 out of 5 (5 indicating a higher orientation). While it may be difficult to interpret the importance of the content of the average values, an average that is only slightly higher than the central level (as is the case here) indicates a moderate degree of orientation between the hotels included in the sample. The average hotel performance was 4.29 on a scale of 1 (low) to 6 (high). Although there was a relatively wide range of performance scores (from 1.44 to 5.81), the results indicate that our hotels selected in the sample did rather well. In order to keep the asset in a marketable state and periodically replace a hotel`s furniture, furniture and equipment (FF-E), a “declining” fund is created to raise capital for this periodic replacement of FF-E, which generally represents a percentage of gross sales and is somewhat dependent on the hotel`s positioning/level. This category includes all non-real estate items that are generally capitalized and not spun, i.e. they are not included in the operating statement, but still affect an owner`s cash flow. In general, management agreements include a reserve for the replacement of FF-E between 3 and 5% of gross turnover per month, the lowest percentage being more related to budget hotels and the higher percentage of luxury hotels and luxury hotels. This percentage often increases in the first years of the hotel`s operation until it reaches a stabilized amount, usually up to the fifth year, but sometimes only in the tenth year, as shown in the table below. “Contracts have changed,” says Juie Mobar, director of special projects for Hotelivate Council.
Prior to joining the company, she worked with her colleague Manav Thadani for HVS and worked as a director of the HVS Guide to Hotel Management Contracts. The abbreviation of room revenues per available room, i.e. the hotel`s gross room receipts divided by the number of nights available (which corresponds to the average daily rate multiplied by occupancy).