What Do Hotel Management Companies Do? [+ Whether You Should You Use One]
Hotel management companies can significantly improve a hotel's performance and profitability, turning struggling properties into thriving businesses through expertise and strategic oversight.
Owning a hotel involves complex operations; management companies can alleviate the stress of daily tasks for owners who prefer to focus on bigger picture concerns.
Having a knowledgeable management team can provide valuable insights and strategies that enhance a hotel's operational efficiency and guest satisfaction.
The right management can convert a poorly performing hotel into a sought-after destination, leveraging their experience and resources to maximize potential.
Hotel owners can dedicate more time to broader goals, relying on management experts to handle the nitty-gritty details of hotel operations.
Running a hotel is a complex business, and not every hotel business owner wants to (or knows how to) handle the day-to-day grind. That’s where hotel management companies come in. I’ve worked in this industry for decades, and I’ve seen firsthand how the right management team can turn a struggling property into a high-performing asset.
In this article, I’ll walk you through what a hotel management company actually does, why they matter to the hotel industry, and how to know if hiring one is the right move for you.
What’s a hotel management company?
A hotel management company (HMC) is a professional team that takes over the operations of a hotel on behalf of the owner. The owner still owns the property, but the HMC runs it. It’s used by owners who lack the time, experience, or desire to handle daily operations.
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What do hotel management companies do?
A hotel management company’s role spans daily operations, staffing, financial performance, strategic marketing, and delivering an exceptional guest experience. Here's a closer look at what that involves for your hospitality business:
Hotel Operations & Management
Hotel management companies handle hotel operations from top to bottom. This includes day-to-day hospitality management tasks such as staffing, maintenance, and vendor coordination. They focus on boosting operational efficiency to reduce costs and improve service delivery.
Core management services often come outlined in a management contract, which details roles, responsibilities, and compensation structures like a management fee or a base fee. Some agreements include incentive fees, rewarding the company for hitting performance targets.
They also manage food and beverage operations, plan renovations, and serve as the primary liaison between the property owners and the on-site team.
Finance & Performance
A hotel management company is tasked with improving financial performance while maintaining high-quality standards. They oversee financial reporting, tracking expenses and revenues in detail to ensure accountability and transparency.
By analyzing profitability, gross revenue, and operating profit, they uncover opportunities to boost income and cut unnecessary costs. Regularly reviewing metrics helps them stay aligned with business goals and identify areas for improvement.
Staffing & HR
A critical part of hotel success lies in its people. Management companies oversee human resources functions like hiring, training, and developing talent. Their goal is to build strong, service-oriented team members who enhance the guest experience and contribute to a positive work culture.
Marketing & Strategy
Effective marketing strategies are essential to a hotel's visibility and success within the hospitality industry. Management companies develop campaigns that align with brand standards, ensuring consistent messaging across all channels.
They work to optimize online presence, promotions, and booking funnels—often leveraging real-time data to refine tactics and drive more direct bookings.
Guest Experience
Ultimately, a hotel’s reputation is shaped by its guest experience. Management companies focus on delivering exceptional guest services that meet or exceed guest expectations.
Maintaining high service quality not only increases satisfaction and loyalty but also leads to better reviews and stronger brand recognition.
5 Benefits of Working with a Hotel Management Company
From my experience, the biggest benefit is expertise. Most hotel owners aren’t hospitality experts, and they don’t need to be. A good HMC brings proven systems, trained professionals, and industry know-how. Here’s what you get:
- Professional Operations: Staff training, SOPs, quality control, and compliance.
- Revenue Management: Pricing strategies, inventory control, and distribution.
- Sales & Marketing: Digital campaigns, OTA strategies, and local outreach.
- Financial Oversight: Budgeting, forecasting, and cost controls.
- Access to Talent: Strong HMCs recruit and retain better staff.
All this usually leads to better guest satisfaction and stronger bottom lines.
Do You Need a Hotel Management Company?
Not every hotel needs outside management. But here are four questions I ask owners who are on the fence:
Are you struggling with day-to-day operations? If managing staff, guest complaints, or vendors is overwhelming, it’s a red flag.
Do you lack hospitality experience? Hotels aren’t like other real estate. If you’re coming from a different industry, you might benefit from expert support.
Are your financials underperforming? If your RevPAR or occupancy is consistently below market, a seasoned HMC might turn things around.
Do you want to scale or step back? Owners looking to grow a portfolio or take a hands-off approach need a trusted partner to carry the load.
How to Choose a Hotel Management Company
Here’s your content formatted as a clear, professional chart:
| Criteria | What to Look For |
|---|---|
| Track Record | Proven results with properties similar to yours, whether a boutique hotel or a set of enterprise branded hotels. |
| Cultural Fit | A management style and philosophy that align with your vision and values. |
| Fee Structure | Transparent terms; know what you’re paying and how fees are structured (base + incentive). |
| Support Services | Access to full-service offerings like marketing, HR, IT, and procurement. |
| References | Strong feedback from current and former clients—essential for vetting credibility. |
Costs and Pricing Structures of Hotel Management Company
Hotel management companies typically offer custom pricing to accommodate various business needs, sizes, and circumstances. Providers generally work within one of the following pricing structures:
- Subscription-based: Clients pay a recurring fee, usually monthly or annually, for ongoing services.
- Project-based: Pricing is determined by the scope and duration of a specific project.
- Scope of work (SOW): Costs are based on detailed specifications and deliverables agreed upon in advance.
- Commission-based: Fees are a percentage of the revenue generated through the management services.
- Tiered pricing: Different levels of service are offered at varying price points to meet diverse client needs.
Key Factors That Influence Hotel Management Company Pricing
Beyond the specific pricing model, here are some additional factors that can influence the cost of hotel management companies:
- Customization required: The more tailored the services are to a hotel's specific needs, the higher the cost may be.
- Number of properties managed: Managing multiple locations can increase costs due to the complexity and resources needed.
- Level of service: Basic management may be cheaper, while premium services with more features will likely cost more.
- Industry regulations: Compliance with local and international regulations can add to the overall cost.
- Technology integration: The need to integrate with existing technology systems can influence pricing.
Being aware of these factors before you start seeking out custom quotes from providers helps you get a sense of what to expect, and compare and contrast quotes more effectively.
My Hotel Management Company Recommendations
Hotel Management Companies FAQs
Here are some questions people also ask me about hotel management companies:
What is the role of a hotel management company?
A hotel management company oversees the day-to-day operations of a hotel on behalf of the owner. This includes staffing, budgeting, marketing, revenue management, guest services, and ensuring brand standards are met. Their role is to maximize profitability and operational efficiency while maintaining a high level of guest satisfaction.
How do hotel management companies make money?
Hotel management companies make money by charging management fees, usually a base fee plus an incentive fee. The base fee is often a percentage of the hotel’s gross revenue, while the incentive fee is tied to the hotel’s profitability. Some may also earn revenue from centralized services like marketing, accounting, or procurement.
What types of hotels do hotel management companies typically manage?
Hotel management companies oversee a wide range of properties, including independent hotels, select-service models, and various hotel brands under different types of hotel categories. Their portfolio might include a hotel property operating without a major flag or a successful hotel that’s part of a large franchise system. These companies often tailor their strategies based on the positioning and service level of each property, ensuring brand standards and profitability goals are met.
What role do hoteliers play in partnership with hotel management companies?
Hoteliers are often the on-the-ground leaders who execute the vision set by a hotel management company. While the management company provides operational frameworks, revenue strategies, and brand alignment, hoteliers are key to maintaining service quality and day-to-day leadership. Their collaboration ensures that hotel operations align with both ownership goals and guest expectations.
How do hotel management companies handle day-to-day hotel operations?
Hotel management companies are deeply involved in day-to-day management of hotel properties, from staffing and guest services to revenue management and maintenance. Their goal is to ensure every hotel property operates efficiently while meeting brand or ownership standards. This hands-on approach helps optimize performance and elevate guest satisfaction across diverse property types.
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