Almost every owner I sit down with asks me the same question in the first ten minutes: “Should I bring in a brand, lease the hotel out, or hire a management company?” There is no single right answer. But there is a right answer for your hotel, and it usually becomes clear once you look honestly at three things: how much control you want, how much risk you can carry, and how much of the upside you want to keep.
With a management contract, you keep the building and the business. An operator runs the hotel day to day – the team, the sales, the revenue, the accounts – and reports to you every month. You pay the costs and you keep the profit after the operator’s fees.
What I like about this model is that the interests line up. A good contract ties a large part of the operator’s fee to gross operating profit, so the operator only does well when the owner does well. The trade-off is that you carry the operating risk. In a slow season, the losses are yours.
This model suits owners who believe in their asset and want professional hands on it, without giving it away.
A franchise gives you an international name, its booking system and its loyalty members. In return you pay franchise fees and you follow brand standards – and those standards can be expensive. I have seen owners forced into renovations they did not plan for, simply to keep the sign on the building.
For a large hotel in a location where a global name clearly lifts room rates, a franchise can pay for itself. For a boutique hotel, a small city hotel or many Red Sea resorts that live on tour operators, it often does not.
With a lease, you rent your hotel to an operator and collect rent. Your income is predictable and your headaches are few. But you also give up control, and if the hotel performs brilliantly, most of that success belongs to the tenant, not to you.
A lease makes sense for owners who see the hotel as a property investment rather than a business they want to grow.
I usually ask owners four questions:
For most independent hotels I see in Egypt – city hotels, boutique properties and resorts on the Red Sea – a management contract with an independent operator gives the best balance: professional systems and strong tour-operator relationships, without brand fees or forced renovations.
If you are weighing these options for your own hotel, I am happy to talk it through. Send us a message and we will look at your hotel together.
— Maged Farid, Managing Director, LOOK Hotels International
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