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Owners brand equity vs operator's brand equity?

Experts agree that smooth functioning of a hotel depends on this fundamental balance. Hotelier India brings you excerpts from a recent forum and comments from experienced hoteliers on how to ensure fair play in these relationships.

Bones of contention
Hoteliers agree that most of the differences are thrashed out at the management contract stage but even at this stage, there remain a large number of issues where the hotel owner and the management company tend to end up at loggerheads with each other.

Some of these include executive committee appointments, naming of the property and co-branding rights – which emerged as the single largest owner-operator issue in our poll on hotelierindia.com, territory restrictions, indemnity, implementation and re-implementation of changing brand specs and rights of refusal.

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The most foolproof way of ensuring fair play remains getting a hospitality consultant to map the way forward but it continues to remain significant keep abreast with industry norms.

This is how we do it When it came to control over executive committee appointments, owners suggested that since the hotel is their investment, they should be able to select the general manager and chief financial officer – particularly the CFO so as to ensure a certain level of bilateral trust.

Accor head of development in India, InterGlobe CEO, Uttam Dave said at a HIFI 2010 panel discussion also featuring Fairmont Raffles senior vice president Asia Pacific James Kaplan and Economic Laws Practice partner Suhail Nathani, “We allow for the owner to control the selection of the financial controller but usually not for the general manager.”

A few years ago, owners were rigid on this point, but today most are open to allowing the management company its discretion on the appointments.

“Hyatt brought in its choice of executive committee appointments. If you’re relying on their management expertise, why not agree to welcome the experienced talent that they could bring in,” Hyatt regency owner Sandeep Gupta tells us. Gupta is managing director of Edenpark Hotels, promoter of Inovoa Hotels & Resorts, and executive director, Asian Hotels (West).

Dave said that in some exceptions Accor allows the owner to select between shortlisted candidates also for the general manager. Gupta seconds this saying that often brands do offer owners this courtesy.

Sarovar Hotels managing director, Anil Madhok comments, “As an operator, we’d like for our general manager and the owner to be on agreeable terms with each other but we’d expect the owner to have a justifiable reason for rejecting a general manager and other executive committee appointments.”

Kaplan said that it might be fair to give the owner three opportunities to select a general manager and if none of them work out to the brand’s standards, the brand should take a call on appointment henceforth.