Speaking Stadia - Article 3
by Alan Patching
There is one thing hotel operators are very good at doing but drives hotel owners absolutely nuts. Hotel operators are whizzes at telling new hotel owners they want the bathroom like their property in Hawaii, the art up to the standard of their London property, the furniture similar to their New York hotel which is just sooooo successful. The 'their' amuses me as the hotels in which operators have significant (if any) equity are few and far between. Meanwhile many operators are not prepared to guarantee a single dollar in profit from the property in question – not even an income equal to that from the local motel at Oodnadatta!
A first time owner often gets hooked at first, perhaps with ego (seeking the best of kind hotel) getting in the way of judgment (seeking one that actually works financially). An experienced project manager will eventually be given the green light to tell the operator what they should have been told ages earlier. Name one from the chain you manage that you believe does not exceed the terms of the agreement we have signed, and, if we agree, we will be happy to use it as a benchmark for this project. But please don't provide a dozen specific area benchmarks from a dozen different properties. The one property that has all the features the operator seeks probably does not exist and if it does exist and makes money as well, then it is a rare commodity indeed, and one from which a new owner would probably not mind learning lessons.
I wonder if there aren't some lessons for venue owners in this story. There certainly are many parallels between hotel operators and venue operating organisations. That is not to say they do not genuinely believe that they are acting in the clients' interests in suggesting the numerous upgrades and changes that are not uncommon on major stadium projects in particular, during design and construction. I just don't believe the suggestions are always well considered or, indeed, not just as much in the operator's interest as the owner's (higher tech stadium equals more press, for example), and therefore suggested out of a conflict of interest.
I've spoken with venue owners whose operators recommended literally hundreds of changes to designs within days of signing off on those same designs and the business plans associated with them. That's a ludicrous situation. But owners want to be sure their venue has maximum chance of working and they feel they must put faith in an operator if they are investing millions in their services. What's the answer for venue owners?
I believe the following might assist any lost and/or worried owners:
- Take great care in making your decision regarding operational model (internal versus external operator (a future column will give you the pros and cons of each approach, from an owner's perspective)
- If you do decide to appoint an external operator, make sure all branding related to the venue, including the letterheads, business cards etc is about the venue. There should be restrictions on the extent to which the operator's brand appears in venue documentation. This certainly should not be to an extent it creates split branding which is never as effective as single branding
- Make sure you have a strong board/executive management team who can and will make decisions regarding which operator suggestions are worth pursuing and which are over the top
- Accept that so much of the look and feel of the finished venue will depend on operational input and this must be sought at the correct time in the development process. All operator input must be realistic and not offered for reasons other than bottom line or other tangible benefit to the owner.
- Realise the operator's remuneration structure can motivate upgrade suggestions, and consider rejecting suggestions above base business case that are not accompanied by a guaranteed return (provided by the operator making the suggestion if necessary)
These points may sound harsh, and from a purely management perspective, I believe they need to be. The ideal, of course, is to take the leadership perspective and be careful to select an operator who is very much a partner, and realises the best avenue to success of their operating business is via creating outstanding success for the owners of the venues they operate.
Successful major projects have only one owner's representative in ultimate project control. This is and always has been the foundation principle of successful project management, and virtually all project management problems follow from ignoring the principle or following it but appointing the wrong person to the key role.
Make sure your representative has considerable experience in both design and construction and in venue operations (preferably as an owner or owner's rep). All operational reports should be directed through his person until project completion, and that includes early events reports. Put another way, the project which has a close professional relationship between the operational rep and the project director or owner's rep with no doubt at all about who has ultimate say, has the greatest chance to be a winner!
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