Hotel Asset Management Becomes a Need – Shift in Perspective
With the intensity of the pandemic reducing, as individuals and as a business community, we are learning to live the new normal. Globally, there is a mixed bag of turbulence at play, between the war in Europe, growing inflation, economies’ attempts to regrow, and the effects of climate change. The big message is that “goal posts will keep shifting”. These events are pushing for a new world order. This will most certainly impact travel, both business and leisure. By our estimates, India should be a beneficiary.
The Chatter: hotel operators desire continued expansion of their brand footprint through asset-light models or even franchise models. Some operators are working towards bringing tech-based knowledge to influence strategy; however, adoption is slow and still sporadic. Current hotel owners are braving trickling flow-throughs. All stakeholders are realizing that agility in decision making, adoption of technology, and recognizing the new demand drivers is no longer an option, but a need.
Post the pandemic, hotel owners are faced with an additional burden of insufficient cash flow, while significant exposure to debt capital has remained a challenge. Many of the owners had to dip into past profits to keep the hotels alive, while others were less fortunate and shutdowns or partial closures were witnessed. Restarting hotel operations demand extra funds and experience, both of which are scarce.
In the interest of staying afloat, hotel operators had to let go of their most valuable asset – talent. Restructuring drove redundancy and clustering of roles. The vast majority of operators have clustered General Manager roles to manage multi-property operations, significantly bringing down payroll costs. All the above measures were self-serving to the pandemic survival strategies. As resilience grew while unpredictability was the only constant, decisions acted as a catalyst for change, providing an opportunity for realignment.
What has changed: perspectives, a desire to be purpose-led, limited experienced leadership, higher input costs, new demand drivers, domestic tourism, realistic optimism, hybrid everything, and need for specialists.
As realignment takes center stage, a new playbook is required: we would call it collaboration. Hotel owners need to consider bringing on board asset managers to collaborate with operators and bridge the knowledge gap between owners and operators. Property Advisory Leadership (the Asset Manager) is in urgent need and more relevant now than ever before.
Today, asset management needs to be purpose-built, with an enhanced focus on big data. Asset Managers have to be nimble and develop customized KPIs. They have to fill the knowledge gap with their impartial expertise and experience in areas such as operations, sales, capital expenditure, and strategic positioning. The asset manager is the most essential partner.
Gone are the days when we said a hotel is as good as its General Manager. Today, the hotel is as good as the team you build to oversee it, and the effectiveness of the team’s collaboration. Ensuring a healthy profit is nothing short of winning at an F1 race. The strategists position themselves in the pit, to guide the hotel owners. Asset Managers ensure operations oversight and navigate the asset through its life cycles. To be effective, there is a need for the right structure.
As the situation evolves, other challenges will compel owners and asset managers to think through various strategies for building resilience in the operating models. Attracting a new segment of customers, in particular domestic travelers, should be one of the priorities.
Hotelivate has managed revenues upwards of INR 4 billion, managed assets, and carried out asset reviews in 15 different markets. Hotelivate Asset management has an edge, as we have the resources to deliver this knowledge and support to our clients by resolving potential issues. We provide impartial expertise in analyzing and reporting on the historical and future performance of the hospitality industry. We also prepare a variety of benchmarking reports, as well as maintain an extensive database of hotel income statements. We are a team of experts with vast hotel operational and business performance analysis. These reports and data provide the foundation for strategic planning and give us a significant advantage in operations oversight. Hotelivate believes “only what can be measured can be improved”.
- Review the business model itself rather than location and demand generation. Understand the most suitable business model and the market to generate new business for the hotel. Reflect on the learnings and re-envision a stronger, nimbler hotel operating model.
- Diagnose by gaining visibility, determining how an asset is performing in the absence of relevant last-year comparables. In-depth business analysis, market intelligence gathering, and benchmarking are utilized to arrive at the strategy build-up.
- An impactful strategy identifying additional revenue generation opportunities, data analytics-based revenue models, and flow-through management process is built. We enable the operator to execute a new business strategy. During this process, it is critical to evaluate a more variable structure to benefit from a hybrid model before the demand grows exponentially. A new stabilized operating business model is critical.
The crisis will eventually be behind us. All stakeholders of the hospitality industry will need to prepare for when life returns to normal, and hopefully, that’s when net operating income will be maximized, the incentive fees will increase and the decision to work with asset managers will be more of a rule than an exception.