PRINCIPLES OF CHOICE
The investment market in the hospitality industry in Ukraine is developing, as strange as it may sound in today’s reality. For investors and buyers of hotel properties, much more comfortable conditions have been created than just a couple of years ago. Hotel operators and management companies have emerged, ready to work with hotels and provide owners with opportunities for passive income. There have been more cases where having a hospitality property under the wing of a reputable management company became the main criterion that led to a successful sale. We share such an experience in this article.
Vitaliy, the owner of Richard Beach Resort (Hrybovka).
— When I was acquiring the hotel, it was crucial for me that the property be under the management of a hotel management company. I watched the video of the company’s experts, read articles on the corporate blog and all-Ukrainian resources, then phoned the representatives of the management company. If up to this point the management company had not been involved in the life support of the hotel, I would have to think about how I would deal with this myself. The presence of the Criminal Code was a weighty argument in making this decision. Theoretically, I could handle the tasks myself, but there are a few key “buts”:
I live in a different city.
I have my main business that keeps me operationally occupied.
I didn’t want to delve into all the operational complexities of running a hotel. I needed an additional profitable business asset.
Similar “”pain points”” of entrepreneurs who would like to generate profits from their investments but not get involved, sacrificing time, efforts, and priorities, are very common in the business environment. Approximately 93% of the owners of properties that are part of the Ribas Hotels Group network cited the same reasons for deciding to seek the services of a management company.
ENTERED THE SEASON WITH ONE OWNER, AND EXITED WITH ANOTHER
The purchase-sale deal took place in early August, almost at the peak of the high season. Interestingly, the hotel’s operations were not affected by the change of ownership. Most of the staff did not even notice the transition. If there were a guidebook on a seamless transfer of ownership from one owner to another, Ribas Hotels Group’s top managers and marketers would say that the internal process handover went “”like clockwork.”” However, there was no guidebook.
“”We entered the season with one owner and exited it with a different owner of the same hotel, delivering profits to the new hotel owner,”” emphasizes Andriy Marenchuk, the Executive Director of the management company.
«I SELL THE HOTEL TOGETHER WITH YOU»
Of course, this transition would not have gone so smoothly if the company’s experts had not built all the operational and business processes while working with the first owner. That is why, when the previous owner of the hotel complex Richard left for Australia for permanent residence and opened a new facility there, he told the leaders of the Ribas Hotels Group:
— I am selling the hotel, but only together with you!
The new owner of the property has not yet made a final decision on whether to keep the hotel under the management of Ribas Hotels Group.
Despite this, the company’s specialists provided detailed consultation, shared contacts of contractors, and left expert advice regarding the directions for future work:
What are the primary control points in managing a hotel complex;
what to agree upon with the management company and key contractors ‘on-site’;
how to monitor the work of the staff without exerting excessive control, etc.
— In the course of negotiations with the CEO of the company Artur Lupashko and representatives of top management, I got the impression that our views on doing business are similar, — Vitaliy shares his impressions of the first meetings with representatives of the management company.
EVERY YEAR WE START FROM ZERO
If the profit in the very first month of cooperation seems like an outstanding achievement to the owners themselves, for the management company, it is only proof that the established system is working smoothly.
For Richard (as well as for other resort properties of the Ribas Hotels Group), every year at the beginning of the season, the entire structure of the property is built from scratch.
By the way, no Ukrainian management company takes on seasonal properties. It is extremely difficult to launch a hotel every year: assembling a new team, carrying out repair works, purchasing tableware, decorations, updating furniture, etc. For Ribas Hotels Group, the start of the season and launching resort properties is a routine part of their regular list of services provided by the management company.
For instance, currently, the company’s specialists are launching a new hotel in Bukovel called Ribas Karpaty. This launch is not remarkable within the context of their established processes because they are accustomed to opening new properties every season. They analyze past season’s mistakes (if any), make necessary purchases, update the room inventory, and so on. This process is routine for them.
PROFIT IN THE FIRST MONTH AFTER ACQUISITION
The advantage of working with a management company is also that certain business processes can be split between two objects.
For example, in Hrybovka, right next to the Richard hotel complex, there is the Ensenada hotel. Ribas Hotels Group has streamlined the processes in such a way that one manager could oversee both properties. They established a shared F&B (Food and Beverage) service for the restaurants, technical, security, and other departments between the two hotels.
Thus, we reduced the cost part at one facility; optimized costs by dividing operating processes.
This union resulted in a several-fold growth for both hotels. If Ensenada operated as a separate entity, such a structure would have been unattainable for it. Moreover, Richard’s structure would not have been as efficient. If another hotel is added to the network in Hrybovka, it will also be considered as part of the existing structure.
