Change Management: Strong Growth Was Outpacing Property Management Functions

Introduction

An international corporation and world leader in the hospitality industry was seeing steady growth. With multiple destination locations, and 50,000 seasonal employees needing housing, the company had outsourced the management of the physical property and related IT. With management fees increasing, the corporation needed to find opportunities to reduce expenditures and improve its employees’ experience.

Story

Our client, an international company and world leader in hospitality, had been with their property management vendor for more than a decade. But while their hospitality business was growing, property management issues were growing too. With multiple locations and tens of thousands of seasonal employees, property management was causing a bottleneck, expenditures kept rising and fees were continually increasing for the same service. And to make matters worse, response times to property issues were lagging and complaints regarding service were increasing. The vendor was doing a poor job of managing relations with local government housing authorities, causing strained community relations, a critical component for success in a destination-based business. And, critical also for their employees’ comfort and security in the community.

It was time for a change. But what kind of change and how to implement it without disrupting business and further straining the employee experience?

Identifying Options

Knowing they needed change, corporate executives had named a new head of employee housing. I was brought in as a consultant to identify options for solving the problems plaguing employee housing management. What needed to be done to bring property management in-house and improve the employee experience, and also, improve relations with the larger local community?

I worked with the newly appointed head of employee housing to determine viable options for taking over property management and employee housing:

Main Considerations

• The client had a one-year timeline.  What could realistically be done in that condensed period?
• Review vendor contracts to understand if there was a non-compete clause in place. Could the client hire the current vendor’s property managers as their own employees without penalty? What would go into bringing them on board?
• Research the current market rate compensation for property managers. Where did the client’s property management needs fit in the range of expected compensation?
• Would the client be able to continue to use the current third-party application if the physical property management activities were brought in-house?  If not, how long would it take and how much would it cost to source and implement a different third-party solution within a year?

After conducting an assessment two key discoveries were made. The first was that the contract didn’t include a non-compete clause, so engaging current staff as in-house employees was possible. And, doing that would retain historical knowledge and skills. The second key discovery was that third-party SaaS providers could not implement a solution in the short timeframe considering it also spanned the client’s busiest season.  

Thus, three options were provided to the client:

1. In-House: Bring all prop management activities in-house, physical and IT, and source a new third-party IT vendor.
2. Hybrid: Manage all physical property management activities in-house, while the current vendor continued to provide IT support.
3. Do Nothing: Continue to operate as is and revisit in the future

Embracing the Change That’s Possible Now

The client decided to move forward with the hybrid option. New roles were created and a market analysis for competitive compensation was carried out. The property management support staff were converted to employees of the client and onboarded.  A revised contract was approved that kept IT software management in place, and the management program was moved to the cloud for access by the newly positioned staff.

The results:

• A savings of $1.1m/yr. in property management fees avoidance
• Improved employee experience
• Improved customer satisfaction
• Complete control and decision-making abilities, which increased responsiveness to property management issues
• Improved relations with the communities in which they operated