The role of the management company in the functioning of the hotel

Сases of Ribas Hotels Group

The role of the management company in the functioning of the hotel

Сases of Ribas Hotels Group

Author: Andrey Marenchuk, Executive Director of the management company Ribas Hotels Group.

A hotel is a long-term investment. And not every investor is willing to spend his time managing it, and generally has a similar experience. Often people think that a hotel is like renting an apartment for a long-term lease: come and take the money. But it’s not. This is an operational business that needs to be done every day, without days off. And not everyone is ready for it.

However, investing in hotel real estate can be profitable and certainly successful if the property is managed by a management company. And investors of the new formation understand this. The main task of the management company is to make sure that the hotel depreciates evenly. With such cooperation, the investor may well receive a guaranteed passive income.

Our management company Ribas Hotels Group works with hotel real estate in the long term in the format of receiving a percentage of net profit. The priority for us is the hotel, because the owners can change. In addition, it is up to us to monitor the hotel and receive feedback from guests. This is also our image component, so it is important for Ribas Hotels Group to keep the facilities in good condition.

We have a portfolio of many hotel cases with which we work in a similar format. Let’s talk about some of them.

Richard by Ribas

Initially, the hotel complex Richard, located at the village of Gribovka, st. Seaside, 11, managed by its owner. That is, he hired staff, managers, but they had to be directly monitored. He approached us in 2017, and after a year of work, he wanted to see if he could leave the hotel to us and move to Australia with his family. And so it happened. However, at some point he needed funds to invest directly in Australia, and he asked to organize the sale of this hotel. We packaged and sold it together with the management company.

The hotel was bought by an investor who is similarly not located in Ukraine. He acquired it as passive income. In fact, we solved two tasks for him as for our partner – we supported him at the level and generated the profit that was needed, and closed his main pain – this is that he did not want to manage this object on his own.

We are responsible for the Richard by Ribas all year round, although it is seasonal. That is, our employees come, control that the guards monitor the property, etc. And now we have been managing this hotel for 6 years. It has a fairly high rating on Booking.com – 8/10.

Data for the hotel:

Collaboration type: Management.
Average occupancy during the high season (62 days – July to August): 92%.
Average occupancy during the low season (70 days – May, June, and September): 55%.
Annual return on investment in the project: 19%.

Wall Street by Ribas

Another case is the business hotel Wall Street by Ribas, located in the heart of Odessa at 12 Vice-Admiral Zhukov Street. The owner initially constructed a business center and later acquired the building nearby without knowing what to build there: either an extension of the business center or a hotel. In the end, we convinced him that a hotel should be built there after calculating its financial model. The projected payback period at that time (2016) was around 8 years. It has been 6 years since the hotel’s construction. Our calculations were slightly affected by the war and the pandemic, but despite that, we have almost achieved the payback plan.

Moreover, it is worth mentioning that the hotel is currently in excellent condition and does not require major renovations. You can find more details about it in the video on our YouTube channel.

We initially thought of such a strategy that the owner would pay for this hotel and put it up for sale.

We participated in this project at the stage of design, financial modeling, launch and management. Completely, comprehensively.

After many years, the Wall Street by Ribas rating on Booking.com remains quite high – 9.5/10, since the object was built for us.

Data for the hotel:

Collaboration type: Management.
Average annual occupancy: 88%.
Annual return on investment in the project: 10%.

Helios by Ribas

In the first year of managing the Helios resort hotel by Ribas, located in Bukovel (Ivano-Frankivsk Oblast), in the village of Polyanitsa, Urochysche Vishnya, we achieved a good planned result. I believe that the professionalism of Ribas Hotels Group lies in our ability to consistently replicate such high results every year. If you manage to increase profitability once and then fail to do so in the following year, it’s simply a matter of luck, a random occurrence.

There are hotels under our management for 5-6 years, and they consistently meet their planned targets. Even the pandemic didn’t significantly affect these results because we believe that the task of a management company is to steadily and consistently achieve the property’s payback without sudden fluctuations. We elevate the hotel to its maximum potential and maintain its performance over many years.

Data for the hotel:

Collaboration type: Management.
Average annual occupancy: 67%.
Annual return on investment in the project: 11%.

Bossfor by Ribas

Three years ago, we started collaborating with the Bossfor hotel in Odessa, located at 24D Genuezska Street. In this project, we conducted an analysis, performed an audit, and strategized on how to increase revenues, optimize expenses, and convert non-liquid assets into liquid ones – essentially, it was standard management work with the enterprise.

As a result, we doubled its net profit in the very first year, which then became its planned indicator. And now, we achieve it every year.

By the planned indicator, we mean the results obtained at the end of the first three years. For example, the first year was represented by x, the second year by x+20, and the third year by x+20 from the previous year. We take the average figure from the first three years and make it our target.

Follow the link to read the review of the owner of the Bossfor hotel about cooperation with Ribas Hotels Group.

Data for the hotel:

Collaboration type: Operational and strategic management.
Average annual occupancy: 67%.

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