A Management Relationship is a Lot Like Marriage: Rattan Keswani
Deputy Managing Director, Lemon Tree Hotels and Director, Carnation Hotels spoke to us on the occasion of Sandal Suites, an all suite property operated by Lemon Tree Hotels in Noida.
LEMON TREE Hotels announced the opening of Sandal Suites, an all suites property operated by Lemon Tree Hotels. We spoke with Rattan Keswani, Deputy Managing Director, Lemon Tree Hotels and Director, Carnation Hotels (the part of the business which deals with the management side of the business) and began by asking him what is the difference that Carnation Hotels brings to the table for owners who may be interested in signing a management contract with them.
“The first thing is to tell them is Carnation is an organisation which would work with or without Rattan Keswani, you're (the hotel owner) signing Carnation, which is embedded into Lemon Tree , the majority owner. Unlike most management companies, Lemon Tree Hotels owns and leases hotels, therefore we understand the pain and the needs of Owners.
“Third, a lot of the distribution and advisory comes from Lemon Tree team. Fourth, when we the hotel gets attached to our central reservation partner, our vendor partners, distribution partners, we don't contract through Lemon Tree or Carnation. We ask the Owning company to directly contract with them, so there is no suspicion for lack of transparency or inequality,” he began by telling us.
Keswani added that daily reports which are sent to him are also available to all owners, all they need to do is ask. Lemon Tree has an internal auditor who also checks management processes as well as audits them financially. “We ask the hotel owner to contract with them, which means the owner is the buyer. The auditor will address the report to the owner and copy me, so no one can colour it,” he said.
“I tell Owners we am running 41 hotels as a company, which hotels financial results do you want to see? For which year and which month? It's in the system. If I am saying I do 45 percent GOP we will can show it to you. Ask other brands to showcase it. I challenge you, they will not ” Keswani told us.
For Keswani, a management relationship is a lot like marriage. “ Just like a arranged marriage, where you audit or conduct a due diligence through a family and community networks, we recommend to the owners that they check our antecedents diligence/ethics/reputation/partner relationships, . Once we decide to do a 'engage”” as a term sheet, then we are committed towards a mutually rewarding relationship. Between the term sheet and the management contract discussions we try our best to explain the business to owners and wherewe may err or need help, or where you may have a problems. We clarify as much as we can. When we sign the management agreement, we just went and consummated the marriage. Let's understand that we have got into it like we get into a marriage, and work on it together,” he said.
Asked whether the management route was a faster path to growth and expansion, Keswani began by saying that though the risk is lower, time to market theoretically can be shorter. That however, does not mean, the management route is easier than the owned path. “It is actually much more complicated, because there are individual challenges, individual contracts, individual lawyers, and relationships. It would be quickest if I took over a running hotel and work a quick property improvement plan that the owner agrees, because then in three to four months, I get a flag on market,” he told us. There are problems that would bound to happen when it comes to refurbishment changes though. The owner may or may not agree with the changes because they may not have the investment appetite to do it. So far, Keswani said he had been able to keep the sanctity of the brand standards from Jaipur to Chennai, Ahmedabad to Sikkim, but there have been cases he has had to walk out of properties before flagging them, even though they were in great locations because he didn’t agree with a particular aspect of how the property was being run.
As far as a brownfield or greenfield property, it’s just like any other owned property, according to Keswani, though the risk is not the company’s. “The time to market for the property is probably longer because owners may not always have the same bandwidth to get everything organised and put the product together (to Lemon Tree specifications). In Lemon Tree owned hotels, you work with owner consultants and PMC. If I am taking a hotel from someone, they bring in the architects, interiors etc we have to reintroduce them to Lemon Tree standards and specifications and ensure they follow them,” he explained.
Keswani hoped to see more hotels under Carnation (as in managed). “The ramp up took a little while, in the first year-and-a-half, it was introducing the relationship and management capability pan-India-now we are on a bit of a roll.
Keswani refused to be drawn into commenting on the public offer which is slated to be launched at the end of this year, simply adding that more details of the same would be available after a month or so and the target for the offer remained end of 2017.
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