Hotel Management: A Complete Industry Overview
Did you know that big hotel companies like Hilton and Marriott usually don’t manage their own hotels? It's ok if you didn't. The structure of hotel management companies and the broader hospitality industry is dramatically different than most industries and most employees within the industry don't fully understand how it all works. Fear not, after reading this article you'll be an expert in no time.
So what do we mean when we say that 'companies in the hospitality industry are structured differently than most other sectors'? An individual property might be owned by one party, be managed by another, and carry the brand flag of a third company - but these relationships are kept behind the scenes. This article is not meant to be advanced so we're going to leave out other stakeholders like debt holders, asset managers and special servicers (you're welcome!).
Most travelers will never even know that the front desk agent who checks them into a Hilton Garden Inn does not actually work for Hilton Worldwide! How can this be?
The world of hotel management is complex, so in this article we’ll break down the key components of this facet of the industry. We’ll dive into what exactly hotel management companies do, how they make money, and who the major players are. By the end of the article, you’ll have a solid understanding of the hotel management landscape - whether you want to start your own hotel management company, partner with one, or begin a career working for one.
Pictured: The James New York Nomad, a Highgate-managed hotel
Defining the Hotel Operations Landscape: Owners, Franchisors, and Management Companies
Running a hotel is no easy task, and to do it well, you need a diverse variety of skills and resources. To maximize performance, profitability, and the owner’s preferences, many hotels use various entities to manage different operational aspects. Hotels generally fall into one of four ownership categories:
Privately owned and operated: For the owner, this model requires the most hands-on hotel operational work. At privately owned and operated hotels, the owner takes the lead on all aspects of the business: hiring staff, maintaining the physical asset, running a hotel marketing strategy, and more. The owner could be an individual or an ownership group.
Leased: Unlike at privately owned and operated hotels, the owners of leased hotels lease the physical asset to a different company who handles all aspects of the operation. The owner simply collects rent for the building and has no involvement in the hotel side.
Franchised: Owners who want a more hands-on approach and don’t want to turn their physical asset over to someone else to operate might opt for the franchise model. Franchisors sign agreements with hotel brands for access to benefits (or limitations, depending on how you look at them) like brand standards, marketing power, reservation systems, and design guidelines. Franchisors often run the day-to-day operations themselves, like hiring employees and handling payroll, and they pay a franchise fee to the brand. Popular hotel brand franchises include Hampton, Holiday Inn Express, and Red Roof Inn.
Managed: At a managed hotel, the hotel owner signs a contract with a management company to take operational responsibilities off their plate. Unlike the franchise model, the management company handles everything related to day-to-day operations - even staffing, payroll, and marketing. Some managed hotels are branded, and the management company is then responsible for upholding brand standards. The owner typically signs the contract with the brand, though owners often include their management company in rebranding discussions. These management companies focus on growing RevPAR, NOI and EBITDA as they are paid a % of revenue and often receive bonuses based on hotel profitability. 'Corporate' hoteliers tend to focus on more analytical tasks like SWOT Analysis and setting SMART Goals while 'on property' workers focus on tactics, day-to-day management and service delivery.
Pictured: Carneros Resort & Spa, managed by Aimbridge Hospitality
Many hotels across the world have separate ownership and management entities in order to maximize the effectiveness of both components. Owners can focus on the real estate piece while management companies focus on the day-to-day operations.
What Benefits Does a Hotel Management Company Provide?
We’ve established that management companies run hotels on behalf of the owner, but what exactly does that mean? What do hotel management companies do? Depending on the specifics of the property, a hotel management company can:
Hire employees and handle payroll via a platform like Hcareers
Run all operational departments, like front office, housekeeping, sales, and food and beverage
Manage relationships and billing with vendors
Adjust room rates and run promotions
Perform preventive maintenance on the property and recommend capital expenditures
Develop budgets and produce financial reports for owners
Curate the hotel’s online presence (reviews, social media) and implement marketing strategies
In some cases, coordinate renovations or expansions
If the hotel is branded, then some of these responsibilities are handled by the brand. Brands typically provide marketing support, on-property technology for staff and guests, and guidelines for furnishings and decor.
Pictured: AC by Marriott Seattle, managed by Crescent Hotels & Resorts
Regardless of brand affiliation, the management company is usually not involved in major decisions about the physical asset. The hotel owner or ownership group (often a real estate investment group) decides when to buy or sell properties.
While owners pay hotel management companies for their services, using hotel management companies can save money in the long term. Hotel management companies are experts at hotel operations so they can often run daily operations more efficiently than private owner/managers - especially if the owner has little hotel industry experience.
How Do Hotel Management Companies Make Money?
As a hotel owner, one of the most important points of discussion when negotiating a contract with a management company is the fee structure. Hotel management companies make money in a few ways: an incentive fee, a base fee, and/or a percentage of gross revenue.
Depending on the type of hotel, the services the management company provides, and the owner’s goals, the management company fee structure can vary greatly from property to property. When hotel management companies receive compensation that reflects the property’s performance, they have a vested interest in running the hotel at maximum efficiency.
Pictured: Hilton Atlanta Airport, managed by HEI Hotels & Resorts
Top 10 Hotel Management Companies
There’s no “typical” hotel management company; you can find management companies that specialize in certain brands, certain types of hotels, and certain geographic areas. Some management companies operate a handful of hotels; some operate hundreds.
Let’s explore the top ten management companies in the United States in terms of number of guestrooms managed (guestroom and property counts in the US, source):
The largest hotel management company in the US is Plano, TX-based Aimbridge Hospitality, with a whopping 182,000+ guestrooms and 1,400+ hotels in their portfolio. Aimbridge merged with the former second-largest hotel management company, Interstate Hotels & Resorts, in 2019. This merger brought around 80,000 rooms and 500 properties into Aimbridge’s portfolio. Aimbridge’s hotels are mostly Marriott, Hilton, and Hyatt branded properties in US and Caribbean markets. Aimbridge is the largest operator of these brands in the world. Aimbridge recently launched the AIMClean program to ensure hotel staff are sufficiently trained in health and safety protocols. Aimbridge also provides renovation management, asset management, and consulting services.
Coming in at #2 is Hyatt Hotels. You may be thinking, “wait, how can Hyatt be on this list if other companies manage Hyatt properties too?” Hyatt actually manages about ⅔ of all Hyatt properties, with 61,217 guestrooms and 372 hotels under corporate management. Hyatt is based in Chicago, IL, and their managed portfolio includes Hyatt brands in 65 countries worldwide, including boutique hotels in the Unbound Collection and Destination Hotels portfolios.
Like Hyatt, InterContinental Hotels Group (IHG) manages some of their own hotels - 301 properties and 57,804 guestrooms, to be exact. However, IHG takes an asset-light approach and only manages a small percentage of their 5,800+ hotels worldwide, which include brands like Crowne Plaza and Holiday Inn. IHG’s headquarters are in Denham, United Kingdom.
The fourth-largest hotel management company in the US is Highgate, which is the largest hotel management company in New York City. Highgate manages 10% of the hotel inventory in the Big Apple, and that’s also where their headquarters are. Highgate’s portfolio is made up of independent and branded hotels in major US markets like New York City, Miami, and San Francisco, with a total of 142 properties and 37,307 rooms.
Crescent Hotels & Resorts takes the #5 spot, with 28,137 guestrooms and 103 hotels. Crescent is based in Fairfax, VA, and they manage Marriott, Hyatt, IHG, and Hilton brands in upscale to luxury categories, plus independent hotels affiliated with soft brands, in the US and Canada. Crescent’s portfolio includes notable independent properties like the Mayfair Hotel in Los Angeles and the PGA National Resort in Palm Beach.
Similar to Crescent, HEI Hotels & Resorts also manages Marriott, Hilton, IHG, and independent properties in urban markets and vacation destinations across the US, with 23,900 rooms and 79 hotels in total. Norwalk, CT-based HEI manages a wide range of properties from select-service hotels to luxury resorts.
Headquartered in Boston, Pyramid Hotel Group, #7 on our list, has quite an international footprint. Pyramid operates full-service, select-service, and independent hotels in the US, the Caribbean, Ireland, and the UK. The company’s portfolio includes Marriott, Hilton, IHG, and Wyndham brands, with a total of 91 hotels and 23,493 guestrooms. Pyramid has expertise in brand transitions and conversions.
While some management companies work with a full spectrum of hotels, Island Hospitality Management’s portfolio of 177 hotels and 22,811 rooms include mostly select-service brands, such as Residence Inn and Homewood Suites. Island operates Hilton, Hyatt, IHG, and Marriott properties across the US, and the company is based in West Palm Beach, FL.
Crescent’s Fairfax, VA-based neighbor, Crestline Hotels & Resorts, takes the #9 position, with 118 hotels and 17,250 guestrooms in its portfolio. Crestline manages Hilton, Hyatt, IHG, and Marriott properties across the US that range from select-service hotels to high-end boutiques. Crestline has won numerous awards, including Marriott’s “Renovation of the Year” 3 times!
Another Texas-based management company, Remington operates primarily Hilton and Marriott properties, all located in the US, with their headquarters in Dallas. Remington’s portfolio includes 16,918 guestrooms and 86 hotels - all of which use contactless key systems.
As you can see from this list, no two management companies are the same. Each one has their own strengths and advantages, which means owners can choose a management company that closely fits their needs.
How to Choose a Hotel Management Company
Hotel management companies vary greatly in terms of the services they offer, the relationships they have with brands, and their specific areas of expertise. As an owner, you’ll want to partner with a management company who has expertise related to your specific hotel asset and your goals. Are you planning a renovation? Then you’ll want to choose a management company who has experience with renovations. Do you own an independent luxury resort? Then you might not want to partner with a management company whose portfolio consists of only Residence Inns and Hamptons.
Pictured: Residence Inn Orlando Lake Buena Vista, managed by Remington
When comparing hotel management companies, we recommend comparing a few specific areas:
Brand relationships: Is the management company a preferred partner of the brand you want to work with? Management companies that have built strong alliances with brands know the ins and outs of the brand standards, are well acquainted with the brand’s key team members, and can help new owners navigate the branding process.
Services and expertise: Besides day-to-day operations, do you want the management company to take on additional responsibilities? Some management companies also offer services like asset management, renovation management,
Portfolio composition: What kinds of hotels does the management company have in its portfolio? If the hotels in a management company’s portfolio are similar to yours (and are generating good results!), then you can be confident that the management company will do a good job with yours. Look at not only the hotel brands, but also the geographic locations (urban vs. rural, coastal vs. midwestern), the ages of the properties (historic vs. brand new), the target guest segments (business vs. group vs. leisure), and property amenities (pools, golf courses, spas, restaurants, etc.).
Performance: Does the management company actually deliver results? Management companies should be forthcoming with case studies and testimonials from properties in their portfolio. Based on these documents, you can better assess whether the management company is the right fit for your business goals.
An Overview of Hotel Management Careers
Looking to build a career in the hotel industry? Perhaps you just finished your bachelor’s degree at a top hotel school and want to reverse engineer your path towards lucrative management jobs or maybe you’re an industry veteran looking for professional development opportunities to get you into corporate America and off property. In addition to working for the big brands like Hilton and Marriott, management companies offer some compelling career tracks for professionals with a variety of goals. Hotel management companies hire employees to work on-property in all hotel departments, and they also hire corporate employees who often work at their corporate headquarters.
Hotel management company jobs on the corporate level include:
Financial management analysts
Human resources managers
Area directors or cluster general managers
Hotel managers (GMs)
Restaurant management and food service (often multi-unit)
Event management and sales professionals
Unlike on-property employees, corporate staff typically oversee or work with multiple properties at the same time. It’s not uncommon for corporate positions like revenue managers, sales managers, or IT managers to oversee dozens of properties - possibly scattered across the country.
If you’re drawn to the hotel industry to build relationships with guests and enjoy the on-property camaraderie, note that corporate positions at hotel management companies are often very different than positions at the hotels they manage. The corporate roles are usually based in an office and reflect a typical office culture. On the plus side, corporate employees typically work standard business hours and receive time off on holidays, while on-property employees work less regular schedules and often on holidays.
The travel industry and more specifically the hotel sector is filled with a variety of rewarding career paths from event planning to the culinary arts. Whether you're new to the industry, a hospitality student at Cornell University of even a Marriott International veteran of 20 years - there's always something new to learn in this dynamic and rapidly evolving space.
Whether you’re researching hotel management companies to find your next business partner or to find your next career, you can surely find one that fits your criteria. Do you have any questions that we didn’t answer? We’d love to hear them!