The Future of Hotel Asset Management in the Hospitality Industry
By Tom Baker, Managing Principal
It is no secret that continuity plans are subjective to changes in the travel and tourism industry. Given the volatility brought on by Covid-19, many savvy hotel owners know that the ongoing support of a hotel asset manager is crucial. But what exactly does asset management have to do with the hospitality industry? Everything.
Simply put, a hotel is a property, property is real estate and rest estate is a distinct asset. The role of a hotel asset manager is to ensure that the property reaches its full potential, resulting in increased returns in the long term. Managing your hotel’s assets can give you a clearer understanding of the types of property that continue to be in demand. It is also a good way to learn the best practices to sell your property at its peak value. So, how is hotel asset management set to change in a post-pandemic world?
The hospitality industry continues to persevere by repurposing their resources and revisiting pricing models to ensure that money is being put where needed and saved where possible. The focus of hotel asset management has now shifted from cost control to optimizing top-line and bottom-line revenues. This means that the priority now is to manage cash flows and optimize capital expenditure while also taking actionable steps to improve property valuation. This is why early involvement with hotel asset managers can prevent future conflicts down the line with investors.
Here’s what they can do to ensure the long-term profitability of your hotel properties:
1. Re-evaluate Your Enterprise Risk Management Framework
A risk management framework is used to identify potential threats to an organization and define a strategy to minimize these risks. Hotel asset managers, in particular, should know how to handle market volatility and have an action plan ready in case the market priorities and consumer behavior shift again.
Many asset managers often begin their careers as hotel operators, but some start as consultants. They are experts at analyzing strategic issues and making operating recommendations that can improve the value of a hotel asset. This gives them the innate ability to understand the inherent risks of your industry, also making them uniquely capable of mitigating these threats for your business.
2. Bolster Continuity Plans
COVID-19 compelled businesses to adjust their operating processes and quickly put their continuity plans to the test in an effort to survive the economic calamities. Bolstering continuity plans entail resource identification, plan implementation, and team communication. A hotel asset manager can play a vital role in all three practices. In fact, they communicate those plans and all contingencies to critical internal and external stakeholders to promote trust and transparency and help alleviate additional damage. They are also crucial in the drive to ensure the sustainability of a business while also restoring normalcy to operations within the hospitality industry.
3. Reassess Your Valuation Process
A thorough valuation process enables hotel asset managers to determine the current and projected worth of the asset, which in this case is the hotel. This is a crucial step top uncovering how much the investment is worth should the hotel owners want to put the property up for sale. Placing value on the hotel means looking at the operations, the composition of its capital structure, the prospect of future earnings, and of course, the market value of its assets. Additionally, valuing real estate can be challenging as different properties have different features such as location, floor plan, amenities, etc. But ascertaining the value of the hotel property can give the owners a better understanding of hotel assets and resale value.
The AHA Takeaway
It is imperative to prioritize hotel value enhancement while maximizing the performance of the hotel asset. A successful asset performance management strategy is also critical to your success in the hospitality industry of the future. Things are looking up as the hotel industry continues to adjust its policies and risk management systems to fight the pandemic-led recession that has gripped the world. Keep your eyes on the prize and partner with the right people and processes to see the value of the hotel assets grow. It’ll also pay in the long term to be a part of discussions around the impact of the pandemic as industry experts offer forecasts and guides to overcome the challenges prevalent today.
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– Tom Baker, Managing Principal