Developed for Hotel Executive – now shared here on RLAGlobal.com.
Reprinted from the Hotel Business Review with permission from: Hotel Executive.
Authored by Laura Dutrieux, Junior Partner, RLA Global
Picking a suitable hotel operator is a more complicated process than it may seem, partially as owners often need go beyond the obvious selection criteria to find a truly good fit for the property. The strategic alignment of long-term interests and goals is essential for a successful owner-operator partnership and can easily define the hotel’s overall performance for decades.
There is a common misconception about hotel operator selection in hospitality. Hotel investors, owners and developers often consider this process a contest of brands and fee structures, and believe it simply involves picking the best commercial offer.
What operator selection is really about is finding a long-term partner and making a long-term capital and governance decision. It is not a simple procurement exercise, but the extensive assessment of various sets of selection criteria, some more difficult to quantify than others. Owners also need to go beyond the obvious metrics to find a match.
The following article examines in detail what selection criteria hotel owners should look at and why they do not necessarily give a 360-degree view of candidates. We also discuss what alignment means between the owner and the operator and why it is crucial.
What owners want from a hotel brand or operator
Hotel owners appear to still prefer third-party brands when it comes to operating their property. Just take the example of the US, Canada and the Caribbean, where 97% of owners and developers are open to joining a brand or switching brands if the right opportunity presents itself, with 54% completely or mostly open to it, according to a 2025 survey by Wyndham. Only 3% are not with a brand and is not interested in them.
When asked what they look for in a brand, about 67% of survey respondents mentioned support from industry experts, 58% access to executive-level leaders and 31% marketing support. Owners and developers also want a proven business model, strong loyalty programs and economies of scale in purchasing and upgrades when it comes to partnering with brands, with 29% respondents prioritizing each of these areas.
Usual selection criteria don’t show a full picture
Wyndham’s findings confirm industry experience that brand recognition, track record and portfolio size as well as loyalty program strength and potential savings from centralized purchasing are among the most important criteria owners consider when selecting a branded operator (or a white label operator acting as a franchisee for brands).
Needless to say, most owners focus on management costs, as the level and structure of base fees and incentive fees can shape operator strategy. Base fees are estimated to typically range between 2% and 4% of gross revenue and incentive fees between 5% and 12% of gross operating profit, showing a relatively wide span.
Equally important factors to consider are contract length, renewal options, performance tests and the owner’s termination rights. Capex obligations and FF&E reserve requirements determine who controls the reinvestment cycle, while key money and working capital contributions can significantly influence owner commitment.
These are the criteria that usually dominate conversations during the operator selection process and the eventual talks about a hotel management agreement (HMA). They are necessary to assess in all cases and, perhaps more importantly, easy to compare, which can be a big help when evaluating submissions for requests for proposals (RFPs).
But the above selection criteria are often insufficient to fully capture the complexity of the owner-operator relationship and may fail to verify whether the operator can align positioning, distribution and brand standards with the owner’s expectations and the asset’s specific characteristics and features. The usual parameters also can’t always indicate if the operator is a good fit culturally or in terms of communication style.
Owners need to look closer to scrutinize alignment
Hotel owners and developers need to go beyond the key metrics to evaluate if the operator is a good overall match. The real complexity is in alignment, or in other words, how well the operator’s capabilities, expertise and operation practices suit the asset. This is difficult to quantify in many cases, but a thorough assessment can reveal potential gaps between what the owner wants and what the operator can bring to the table early on.
Strategic and positioning fit is one of the most important areas owners must examine. Questions to ask include whether the operator’s segment expertise matches the asset’s market positioning, as for instance, a brand focusing on upscale properties may not have sufficient experience in managing luxury hotels.
Another indicator to look at in this area is the operator’s distribution and channel strength in the specific market and the asset’s source markets, because a global footprint does not always guarantee local success. Its existing portfolio density in the specific market also needs evaluation, as heavy local presence can easily cannibalize demand.
Owners should also check if the underlying assumptions of the business plan regarding ADR, RevPAR growth or stabilization timeline, among others, align with what the operator is ready to commit to. Mismatches here can result in structural problems later.
Governance and operational control is also something owners must carefully think through when selecting an operator. Essential issues here include which parties have budget approval rights, how much the owner can influence major operational decisions, such as appointing a general manager or signing off on investment projects, as well as what reporting requirements and discipline the owner can set for the operator.
Owners must weigh the potential benefits and drawbacks of centralizing purchases and sharing services within the operator’s hotel portfolio. While these practices can generate significant savings, they can also lead to the partial loss of control over the asset.
Last but not least, it is also essential to evaluate how much flexibility the owner has to deviate from brand standards if it is necessary on the local market. Some brands allow properties to adapt to potential market changes to a certain extent, but others strictly enforce maximum consistency among member hotels, regardless of demand shifts.
In terms of governance and control, it should be also noted here that owner-operator dynamics can differ depending on geographical market. Owners in Europe tend to analyse operator performance more in detail and are ready to push back on capital and brand requirements, according to LHC International, an executive search firm specializing in hospitality and real estate. It has found that hotel owners in Asia Pacific are becoming more experienced in asset management, while their peers in the Middle East drive vision and positioning and leave execution to operators within well-defined frameworks.
Red flags to watch for in operator communication
Owners typically select operators for long-term partnerships, with HMA terms often covering 10 to 20 years or more, so cultural and relationship fit matters at least as much as the commercial or financial aspects of the partnership. This can be the hardest area to quantify during the selection process, but can greatly impact the asset’s success.
Frictionless and effective communication is imperative, and responsiveness, overall communication style and problem-solving approach can play a great role in elevating the owner-operator partnership. Early-stage signals that can predict a difficult relationship later include rigidity in negotiations, slow response times and lack of transparency.
Investors with extensive portfolios often rely on professional owner representatives to assist not only with operator selection, but with relationship building too. Owner’s reps increasingly focus on improving communication with operator teams and can also flag potential issues in this area early on and recommend various steps to resolve them.
Just how important communication is for owners is perfectly reflected by the results of the previously mentioned Wyndham survey. Access to the executive-level leaders and support from the industry experts of the brand ranked the highest among the priorities of respondents, followed by marketing support by a relatively significant margin.
Operator search with long-term partnership in mind
Owners should remember that selecting an operator for their asset is not simply buying a service, but, just to reiterate, finding a partner and aligning long-term interests, risks and incentives. This principle should be reflected already in the search process.
Operator search is a strategic exercise, which normally starts with identifying candidates, soliciting detailed proposals and evaluating them against the owner’s requirements. The challenge lies in seeing past presentations, and assessing genuine operational capability, cultural and relationship fit, and willingness to structure terms favourably.
Engaging with multiple operators without letting them know that a competitive process is underway requires owners to manage confidentiality and tone. Candidates should know their proposal is evaluated based on merit, and is not used as negotiating power against other bidders. But competition does create pressure, and owners should balance this potential leverage against the risk of appearing strictly transactional.
A well-structured business plan or financial model allows owners to compare multiple operators on equal footing, and assess how each candidate interprets assumptions or expectations and build operational strategies and forecasts around them.
Market evolution will support strategic alignment
The owner-operator relationship has never been more important in hospitality, as hotels are becoming increasingly complex real estate assets and operational environments are getting more and more volatile.
Operating models are diversifying, with traditional structures, such as HMAs, now often replaced with alternative and hybrid arrangements. Owners are taking a more active role and track operator performance more closely, and investors want more owner-friendly and flexible HMAs in many markets.
These shifts support the conclusion that owners investing more rigor upfront in evaluating alignment with operators will be able to reduce risks through the entire lifecycle of the asset. The long-term success of hotels will depend on whether owners and operators build their relationships on alignment.
