Management Firms Tough It Out

NATIONAL REPORT— Showing first hand the pains the hotel industry has been going through, a fairly large portion of the management firms ranked in the annual HOTEL BUSINESS® Top 100 Management Companies listing reported gross annual revenues that were down in 2003 from the year prior. However, that is not to say that business was altogether bad for these operational experts. In fact, many management experts were upbeat regarding their business strategies and what they were able to accomplish in the tumultuous year, and nearly all are optimistic that 2004 will bring even better business conditions, which will likely result in more business in the form of new contracts and increased revenues at hotel properties. Rounding out the top three on this year’s Top 100 Management Companies listing were the usual suspects, however, their placement did change. The top three spots on the listing weighed out as follows: Interstate Hotels & Resorts once again claimed the top spot, making it the third year in a row with 293 properties managed in 2003, down from 390 in 2002, and annual revenue of $2.1 billion, down from $2.5 billion the year prior. Meanwhile, Tishman Hotel Corp. stole the number two spot from Destination Hotels, which held the coveted position last year. Tishman ranked number two with 22 hotels managed in 2003, up one from 2002, and gross annual revenue in 2003 of $584.1 million, up from $548.3 million in 2002. Destination fell into the fourth spot this year with 27 hotels managed in 2003, down one from 28 in 2002, and $515.7 million in gross annual revenues in 2003 versus $539.8 million the year prior. Ocean Hospitalities came in third with $580 million in revenue for 2003 vs. $510 million the year before. Once again, it is glaringly obvious that Interstate is the leader by a sizable margin. It seems the merger of two powerhouses— Interstate and MeriStar- brings sustainable size and strength, with Interstate bringing in more than double the gross annual revenues of that of the number two player in 2003. While the top 10 ranked management companies are familiar names, their lineup looks slightly different this year from last year. In searching for ways to get through a tough year, some firms saw significant growth, while others sized down a bit to keep their focus and keep things moving forward. Through the volatility came a bit of a mix up with regard to positioning, with several firms gaining holding steady from the year prior, such as Lodgian. Lodgian, held fast at number eight on the ranking this year, despite reducing the number of managed hotels to 96 hotels in 2003 vs. 106 in 2002 and gross annual revenues of $373 million from $410 million the year prior. This is a major accomplishment for Lodgian, which had been in bankruptcy in 2002 and fought its way back to profitability during one of the toughest periods for the hotel industry in recent history. For its part, Rosewood Hotels & Resorts had 12 hotels managed properties in 2003, down from 13 the year prior and gross annual revenues of $269.1 million vs. $276.4 in 2002. The company, which has overseen several capital improvement projects at a few of its luxury resort properties, is making the most of its highly unique portfolio during these challenging times. Finding a niche, either generally or on a property specific basis, is one of the keys to survival in the management arena these days, said industry experts. Knowing your limits and being realistic is also fundamental, experts agreed. Perhaps one of the toughest challenges management companies had to bear in 2003 was unrealistic expectations from hotel owners. After several years of management firms being able to cut costs and finding new ways to increase revenues, they hit an invisible ceiling in 2003. However, ownership still expected those tactics to be used to increase productivity and profitability—which most operators said was unfair since all options to do so had already been exhausted. “Management