Property management: Where has all the profit gone?
Part one: Lifestyle AND profit – the good old days.
It’s difficult to ignore the fact that over the last few decades, the accommodation industry has evolved drastically.
With the introduction of various new business strategies and technologies, it can sometimes seem like an entirely different industry altogether for property managers and owners.
What once was a profitable business opportunity which, in many cases, came with the promise of an attractive work/life balance, has now turned into a fast-paced, technology-driven and consumer-controlled industry, making it difficult for the traditional business owner or property manager to stay afloat.
In many cases, the evolution of the industry has brought more players into the game looking for a piece of the pie, which has created the illusion that profitability has magically disappeared.
This begs the question, “Exactly where has all the profit gone?”
In order to seek an answer to this mystery, it’s important to begin by taking a walk down memory lane to get an idea of the way things used to be. Back in the 80s and early 90s, before the introduction of the internet, wholesalers and travel agents were the kings of the accommodation castle, so to speak. They played a major role in the overall success of a business.
Allotments and rack rates were given to the wholesalers by the owners typically 18 months in advance.
It was a simple process that required no technology, and the business owners usually had good relationships with their wholesalers and agents. Consumers had to book their holidays six months in advance or run the risk of there being no rooms available.
Property managers ‘back then’ were typically middle-aged couples that focused mainly on keeping the property looking good and making sure guests were happy, while someone else (usually the wholesaler or travel agent) took responsibility for marketing and selling the rooms.
The managers commissions basically covered them to play “mine host”, while the body corporate salary covered the time it took to properly maintain the building.
Managers often came with good hospitality backgrounds and had the ability to turn their hands to little maintenance jobs that came along from time to time. Computers weren’t being utilised quite yet. Instead, the operators would have a big red book that sat diligently on the reception desk, along with an accounting ledger of sorts. They would have a phone and a sharp pencil nearby, waiting for an agent or future guest to call with reservations. Businesses thrived in what was “back then” a genuine service orientated industry.
Life was good, and the business owners and property managers seemed to get exactly what they had signed up for – a profitable lifestyle and a great work/life balance!
So, what specifically has changed to cause a once sure-fire, profitable industry to become overly saturated and highly competitive? Why does the industry seem to demand more from the owners and property managers these days, yet reward them with less money in their pockets?
Stay tuned next month for the second part in this four-part series as we dive into the challenges that sprouted within the industry with the introduction of the internet and online distribution, as we move closer to figuring out where all the profit has gone for property managers and owners.
