To flag or not to flag, that is the question
Discussing my #1 FAQ in my inbox.
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In today’s newsletter:
Should I hire a flag or operate my hotel independently?
What does signing an HMA with an institutional flag actually cost you beyond the headline fee?
When does independence make sense as an investment decision, and when does it not?
What do most aspiring independent hotel owners get wrong before they even start?
Dave Barry, investor in Chiltern Firehouse, The Standard, The Hotel Chelsea, and Nine Orchard, on the three conditions that have to be met before independence justifies the risk
Alex Ohebshalom of Flâneur Hospitality on what it actually takes to build a commercially successful independent hotel
David Zisser of Omnam Group, one of Europe’s most active hotel developers, on how the best hotel developers think about brand selection from day one of underwriting
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To Flag or Not to Flag, That Is the Question
One of the most frequently asked questions I get in my inbox are from people who are either considering opening a hotel or are in the process of acquiring one, and that is:
“Should I hire a third-party operator to manage the hotel? Or should I operate it myself independently?”
There is no straightforward answer. It’s a highly nuanced, and highly consequential question every hotel owner, whether it’s their first hotel, or their 50th acquisition, has to consider.
Part One: The Flag
Along the same vein, many of you who have emailed me about this topic know that the first question you are asked by lenders and equity partners is: “who is the operator?” It’s rarely asked out of genuine curiosity about hospitality philosophy. Rather, it’s asked because the answer determines whether the person on the other side of the table can slot your project into a model they already understand. Signing an HMA with a major flag or operator is a shortcut to credibility, and in many markets, it is the difference between a term sheet and a polite no.
