Who Should Run the Beach Club: A Decision Framework for Owners

A framework for deciding who should operate a beach club or a resort F&B asset: the ownership itself, a brand built for and by the asset, or an external operator appointed under a management or licence agreement.

Version 1.0 · 16 IX MMXXVI · Luxury Hospitality Projects

I. What this document is, and what it decides

This document sets out how the operating-model decision should be made. It is written for owners, developers, asset managers and the people advising them, and it is intended to be useful whether or not its author is ever involved in the decision.

It addresses one question. Who should run this asset, and if the answer is an external operator, which one and on what basis.

A note on evidence, because it governs what follows. Where a statement rests on my own experience I say so, and it should be read as practitioner judgement rather than as a measured pattern. Where a relationship is proposed rather than established, I label it as a proposal. Where I do not know, I say so, and Section XI collects those points rather than hiding them in qualifiers. There are no prevalence claims in this document, no market-size figures and no assertions about what operators or owners usually do. I have no measured basis for such claims, and the published material on this subject does not supply one.

II. The operating-model decision in one page

An operating model is not chosen between operators. It is chosen by establishing four things in order.

What the asset is for. Standalone profit, support for room rate and occupancy, F&B spend across the property, destination relevance, brand contribution, or a stated combination with an order of priority. This is the standard against which everything else is judged.

What delivering that requires. The asset, the market, the catchment and the audience model determine what the venue has to be able to do. A property expected to produce standalone profit needs an audience that does not depend on its own occupancy. A property expected to lift rate can be a very good amenity and nothing more.

What the ownership already has. Not one capability but several, and they are separable: running hotels, running destination F&B, creating concepts, building brands, and generating demand from an audience that is not already inside the building. An organisation can hold some of these and not others.

What the gap is. The difference between the requirement and the endowment is the entire subject of the decision. It is what any operator is being paid to supply.

Each route closes that gap differently. Self-operation means the owner takes responsibility for assembling and retaining the specialist capability internally. Building an own brand means doing that and also creating concept, brand and audience equity from nothing, carrying the investment, the specialist-talent requirement, the time and the risk, and keeping what is built if it works. An external operator means accessing capability, proposition, brand or audience that already exist rather than building them, and paying for that access in fee, economics and a degree of control.

Then one thing that is easy to miss. Self-operation and building an own brand are decisions an owner can make alone. Appointing an external operator is a proposal, because the operator is running its own test on the asset and can decline. An owner who has decided on an operator has not finished the decision. They have started a negotiation.

III. What is the asset for?

Before anything else, the asset needs a stated commercial role. In my experience this is the question most often left unanswered, and leaving it unanswered has a specific consequence: the property cannot tell whether the asset is failing or performing exactly as designed.

A beach operation may be expected to produce standalone profit, to support room rate and occupancy, to lift F&B spend across the wider property, to create destination relevance the hotel does not otherwise have, to strengthen the brand, or to do several of these.

A combination is legitimate. A combination without an order of priority is not, because the trade-offs between these objectives are real and somebody has to resolve them in advance rather than nightly at the door.

The test is not whether the objective is ambitious. It is whether the objective is coherent with the audience the asset is being built or repositioned for. That is the subject of the next section, and the two questions are best treated as one.

IV. What does that require the asset to do?

A beach club or resort restaurant has to succeed twice. Once as something the resident guest uses, and once as somewhere people who are not staying choose to go. The two audiences want different things from the same footprint, at different hours, at different price points and often on different days. The wider argument about what happens when a property’s components each succeed individually and fail collectively is set out in The Destination Nobody Owns and is taken as given here.

What matters for this decision is the requirement that follows.

This is the point on which I would push hardest, and it is practitioner judgement from direct experience. In my experience, an owner frequently wants the asset to increase spend from the hotel guest and to build substantial external demand at the same time, without resolving how those two audiences share the same capacity, access, programming, pricing, arrival and guest priority. Those objectives can coexist. They coexist only where they have been designed to, and designing for both is a set of specific decisions rather than an intention.

Where the tension is left unresolved, it does not produce a compromise. It produces a proposition that satisfies neither audience properly. The resident guest can feel displaced from an amenity they believe they have paid for, and receive a compromised resort experience. The external guest can feel like a visitor inside somebody else’s hotel facility, which is a difficult feeling to charge a destination price for.

This is not a marketing problem and it is not purely a commercial-role problem. Reducing it to either is how it survives unexamined. It is a question about what the asset is, and it has to be answered before the question of who runs it can be answered sensibly.

The requirement specification that comes out of this section is concrete. Whether the venue needs an audience independent of hotel occupancy. Whether it needs to hold a price position against every alternative available that evening to somebody with a choice. Whether it needs to trade outside the hotel’s own seasonal curve. Whether it needs a proposition legible to a person who has never been and is deciding from a phone.

V. What does the ownership already have?

The third question in the sequence, what the ownership already has, is an audit of the ownership, and it is the question that decides the whole framework, because a route can only be chosen sensibly against an honest account of what is already in the building.

The audit fails when capability is treated as one thing. It is at least five things, and they are separable.

Hotel operating capability. The ability to run a hotel to standard. Real, valuable, and not the subject here.

Destination F&B operating capability. The ability to run a restaurant or beach club that people travel to, night after night, through a season and outside one.

Concept-creation capability. The ability to decide what a place should be, for whom, and against what else is available, and to hold that decision through a design process.

Brand-building capability. The ability to build recognisable and repeatable codes and standards that survive a season, a change of management and a second location.

Demand generation for an external audience. The ability to build and sustain demand from people who are not already staying in the hotel. This is distinct from having a hotel marketing team, because a hotel marketing function is generally built to convert demand for rooms rather than to create a destination audience for a standalone proposition.

This is the point I would press hardest in Section V, and it is practitioner judgement from direct experience. In my experience, organisations frequently assume that the capabilities that make them good at hotels are the capabilities required to create, brand, market and operate destination F&B. They are not necessarily the same capabilities, and the assumption is rarely examined because it is rarely stated. Some hospitality organisations are built the other way round, with the F&B or lifestyle proposition coming first and the hotel proposition growing out of it, and those organisations hold specialist F&B and lifestyle capability because it is what they are. That capability is an organisational competence in its own right, and an owner auditing itself should assess it as one rather than assume it comes attached to hotel competence.

Two further tests sit alongside the five.

Appetite. Whether the ownership wants to hold these capabilities. An owner who could assemble them and does not want to should be treated as an owner who does not have them. Capability nobody intends to build or exercise is not capability.

Control. How much control the owner needs to retain, and specifically over what. Concept, brand, pricing, programming, capital decisions, key personnel and the ability to change direction are separable, and they are surrendered to different degrees under different structures.

One further question belongs here: whether an existing owner or hotel brand should be carried by the venue at all, and whether carrying it strengthens the venue or dilutes the brand. The answer is not automatic in either direction. The output of this section is not a score. It is a list of which capabilities are present, which are absent, and which the ownership is willing to build.

VI. Three routes, and what each one is actually buying

The difference between the requirement in Section IV and the endowment in Section V is what is being bought. Each route closes it differently, and each is paid for in a different currency.

I. Self-operate. The owner takes responsibility for assembling and retaining the specialist capability internally.

This route does not require the owner to hold every capability already. It requires the owner to accept that acquiring and keeping them is now its job: hiring people it does not currently employ, holding standards once the opening team has moved on, and sustaining external demand generation year after year rather than at launch. The requirement does not reduce, it relocates onto the owner’s organisation, and it stays there permanently. The currency is sustained senior-management attention, particularly through creation, opening and stabilisation, and it never reaches zero. This is the right route where the gap is small, or where the owner is genuinely willing and able to close it and to keep it closed.

II. Build a brand that belongs to the asset. The owner does the above and also creates concept, brand and audience equity from nothing.

This route builds something rather than renting it, and the owner keeps what is built if it works. It is also the slowest, the least reversible and the most specialist of the three.

Choosing this route does not mean the owner possesses the capability to create a brand. It means committing to acquire that capability. The cost is specific and it is not the cost of operating a venue: concept development, brand creation, specialist lifestyle and F&B talent who are not currently on the payroll, audience development, marketing, systems and standards, organisational capability that outlasts individuals, continued senior attention, and time and capital across all of it. The owner retains the resulting equity if the brand succeeds and carries the cost and the risk of building it from zero if it does not.

The question of when an own brand is worth something beyond the venue itself is worth stating precisely, because it is often answered with a number of years and years are the wrong unit. The useful test is transferability. An own brand begins to have value beyond a single successful venue when it has a concept that can be articulated independently of the original location, recognisable and repeatable brand codes and standards, evidence that demand attaches to the proposition rather than to the hotel’s captive audience or to the address, repeatable marketing and commercial systems, operating know-how that can be documented and transferred, and organisational capability that outlasts the individuals who created the first venue.

The question to ask is whether the concept could move to another suitable asset and still mean something. If it could not, the owner may have built a successful venue. They have not yet built a brand. That is practitioner reasoning rather than a measured industry threshold, and it is offered as a test rather than as a rule.

III. Appoint an external operator. The owner accesses established capability, proposition, brand or audience rather than building all of it internally.

What is bought is some combination of the capabilities in Section V, already assembled and already working, rather than built from zero. What is paid is a fee, a share of the economics and a quantity of control that has to be specified rather than assumed.

An external operator is not automatically an upgrade. It is the right answer where the operator brings something the asset cannot efficiently build for itself: a differentiated brand, an audience that already exists, a commercial ecosystem, a specialist capability, or market pull strong enough to justify what the owner gives up. Where none of those holds, the owner is paying a fee and surrendering control for a brand the market may not be choosing and an audience the property could have built.

VII. Which of these can the owner decide alone?

Two of these routes are decisions. One is not.

Self-operation and building an own brand are within the owner’s gift. They require capability, capital and patience, but they do not require anybody else’s agreement.

Appointing an external operator requires an operator to agree. The operator is running its own assessment of the asset, against its own criteria, and it can decline. It can also agree on terms that reflect what it thinks of the asset, which is a softer version of the same answer.

This matters once an owner begins comparing external operators. An owner establishes that an external operator is wanted, and then compares operators. But the choice of route has not actually been made at that point. It has been proposed. Until at least one operator the owner would genuinely want has indicated it would proceed, and on what basis, the external route is a hypothesis rather than an option, and the other two routes should stay open.

Which raises the question of what the other side is assessing.

VIII. What does an operator assess before entering?

This section is written from the operator side of the table. Over a decade at Nikki Beach Hospitality Group, most recently in a senior global business-development and strategic-projects role, I was involved in assessing assets and structuring the agreements that followed. What follows is the mechanism as I saw it. It is practitioner judgement, and it describes principles rather than any particular transaction.

One fact belongs here because it determines whether the rest is worth reading. This practice is paid by its client. No payment, commission or other consideration is taken from an operator or an operator candidate, and there is no arrangement that would make any operator a more convenient answer than another.

Several things can end an operator’s interest rather than merely make the terms harder.

Physical capacity and layout. Whether the hotel has an alternative beach or pool proposition for its resident guests, or whether the beach club’s footprint is also the hotel’s primary guest amenity. Where the same finite capacity has to serve the resident guest and a meaningful external audience, there may be a structural ceiling on external sales before the business has opened. An operator whose model depends on external volume will find that ceiling early.

Access. Whether an external guest can arrive, enter and leave without compromising the resident-guest journey. In my experience, a separate entrance is valuable out of proportion to its cost, because external volume is difficult to build where every non-resident has to move through the hotel as though they are entering somebody else’s amenity.

Location and demand generators. Destination history, surrounding traffic drivers, accessibility, the visitor and local catchment, and whether the site can realistically attract an external audience at all.

Counterparty credibility. Owner and developer credibility, realistic expectations, the ability to make and hold decisions, funding and capex commitment, and whether the wider hotel organisation can support the concept in operation. This is assessed as seriously as the physical asset, and it is the part owners tend not to realise is being assessed.

Brand fit. A strong asset can still be the wrong asset for a particular brand. Where the site, audience, capacity, positioning or wider resort proposition cannot carry what that operator needs its brand to be, declining is preferable to pricing around it.

These are mechanisms I have seen operate. They are not a universal or exhaustive list, and different operators weight them differently.

What becomes a term, and what becomes a decline. There is no universal first lever. Fee level, term length and conditions are the obvious negotiating variables, and in my experience exclusivity is usual with a branded operator. Depending on the opportunity, capex contribution and obligations, performance conditions, territory, approval rights and exit or break provisions can all move.

The more useful distinction is not which lever moves first. It is this. A weakness the operator believes it can price or protect against becomes a term. A weakness that undermines the proposition itself becomes a reason not to proceed. An owner who understands which category their asset’s weaknesses fall into will predict the conversation more accurately than one who is trying to guess a fee.

IX. If an operator is the answer, what are you comparing?

The common error at this stage is to compare operators against each other. The comparison that resolves the decision is between each operator and the gap between what the asset requires and what the ownership already has, established in Sections IV and V.

What an operator supplies falls into a small number of categories. A brand the market already recognises. An audience that already exists and already travels. A commercial and operating system. A specialist capability. Market pull strong enough to change what the asset can charge. A candidate that supplies something real but not the thing that is missing is a good operator and the wrong answer.

Two tests are worth applying to each candidate. The first is what this operator requires from the asset in order to work: a capacity profile, an access arrangement, a positioning, a level of capital commitment, a degree of control. Those requirements are as much a part of the proposal as the fee. The second is what the owner holds on the day after the agreement expires, which differs significantly between operators and between structures, and is worth asking at the start rather than in the final year.

Legal documentation and legal negotiation belong with the owner’s legal advisers. This framework is about the commercial decision that precedes them.

X. How each route fails

Failure in this decision is rarely dramatic or immediate. It tends to emerge over time as a pattern rather than an event. These are patterns I have seen. They are offered as diagnostics, not as frequencies.

Self-operation fails quietly. The venue works and fills when the hotel fills. Occupancy tracks the hotel’s occupancy closely enough that nobody separates the two numbers. The attention that made the opening successful moves to the next project, standards drift by degrees, and the external audience that was supposed to arrive never does. Note that this is only a failure against a commercial role that required an independent audience. Against a role of supporting the resident-guest experience, the same pattern is a success.

The own-brand route fails in two ways. In the first, the organisation was good at hotels, assumed that was the relevant competence, and produced a competent restaurant that never became a destination. Nobody in the process was a specialist in creating, branding and marketing one, and no external judgement was brought in to say so. In the second, one site works but the concept was never articulated independently of its location, the codes were never documented, the demand turned out to attach to the address or to the captive guest, and the capability sat with three people who have since left. The owner holds a good business and not a transferable asset, and discovers this at the point of trying to move it.

The external route fails in two directions. In one, the owner pays a fee and surrenders control for a brand the market in that location is not choosing, and for an audience the property could have built itself. In the other, the fit was wrong from the start, the operator’s requirements and the asset’s reality never reconciled, and the relationship consumes management attention that self-operation would have consumed more productively.

The failure that crosses all three routes is the unresolved audience model. The resident guest feels displaced from an amenity they believe they are paying for. The external guest feels like a visitor inside somebody else’s hotel facility. Neither is properly served, the price position becomes difficult to hold, and the operating model is blamed for a decision that was never made in the first place.

XI. What this framework does not tell you

Five things are genuinely unresolved, and stating them is more useful than answering them with numbers nobody can trace.

How often each route is chosen, and how often each succeeds. I am not aware of a published study that counted. Any figure offered here would be an impression presented as data.

The horizon on an own brand. Section VI deliberately replaces a number of years with a transferability test, because the years vary with the market, the asset and the owner’s investment, and I have no basis for a general figure.

Comparative financial outcomes across the three routes on comparable assets. This would be the most useful evidence in the entire subject and it does not exist publicly in a form that controls for asset quality, market and commercial role.

Whether a separate external entrance is decisive or merely material. I have seen it matter consistently. Whether it is a threshold condition or one factor among several is a proposal rather than an established relationship, and it likely depends on the target external volume.

Whether own-brand equity survives a change of ownership or a change of the individuals who built it. The transferability test in Section VI is designed around this uncertainty rather than resolving it.

This framework sets out how the decision is made. Operator Selection Strategy describes how this practice works on it alongside an owner. Background: Gretel Kutan.