Good things come in threes
Roya International hospitality consultant Turab Saleem talks tiers in asset management
Why is hotel asset management important? Simply put, with the ever increasing cost of hotel development, increasing operating costs, intense competition and over-supply resulting in the threat of diminishing returns, hotel owners and investors are demanding a more hands-on involvement in the management of their assets.
The role of hotel asset management is critical in ensuring that the maximum return on an owner’s investment is achieved, that property values are enhanced and the business realises its optimum performance. Hotel asset managers serve as a conduit between owners and operators to ensure that targets are met and profit assurance plans are in place.
Hotel asset management can be a complex process but at the end of the day there is one key objective: to ensure the hotel owner’s strategic objectives, financial and non-financial, are met. It requires working closely with the owner and hotel operator to ensure the financial performance, sales and marketing efforts, service quality, asset maintenance/enhancement and capital expenditure are aligned with the owner’s objectives and hotel management agreement. If it doesn’t tick these boxes then it runs the risk of creating more damage than good for all parties involved.
In order to have better understanding of the various facets of hotel asset management we need to unravel it layer by layer. I have divided it into three tiers, each to be understood separately although they all work in tandem. They are: understanding hotel operations; micro aspect — know your competition; and macro aspect — overall economic facets.
1. Understanding hands-on hotel operations
It may seem obvious but a real, hands-on understanding of hotel operations is a key element to successful hotel asset management. I have come across a large number of hotel asset managers who are restricted to the board room and only respond to periodic reports that keep them far away from the on-the-ground realities. A once-a-year check-up attitude does not work and never will. Hotel asset management is an ongoing process.
Every day is a new day, and every new day has its own set of new challenges. Nothing can be taken for granted — for example, an award won last year by one of the hotel’s restaurants does not mean that it provides guarantee of success this year, as a matter of fact it increases market expectations and the team has to be more focused and committed than ever. We need to be inquisitive, investigative and consistently evaluating existing systems in order to achieve improvements.
2. Micro aspects — know your Competition
In order to better understand your own environment and your product, it is imperative to thoroughly know your competition. Even before you try to know your competition one has to identify the real competition — competition should not be chosen just for the sake of looking good with some third rated entities, one has to look up rather than looking down when choosing the competitive set.
It is your competitive set that will prove to be the genuine barometer rather that chain wise comparison or year-on-year comparison of your own figures; one cannot look into the mirror and keep praising and analyzing without a true competitive analysis. Prepare an in-depth analysis on each and every aspect of the hotel, for example; condition of rooms, meeting facilities, banquet room features, recreational services, menus, pricing and so on, against your competitive set.
This will allow you to measure and rank your offering against the competition. At least twice a year this analysis needs to be updated in order to gauge overall performance.
As with your own hotel, the competition will change in line with market dynamics. We need to keep our finger on the pulse to make sure we are one step ahead of the curve rather than laggards. New arrivals to the region, refurbishments, upgrades, re-positioning and so on, will continue to dominate the hospitality industry and we will need to be on top of these continuous changes in order to remain competitive. Only then will we have the credibility to advise our clients with the proper consultancy they seek.
3. Macro Aspect — Overall Economic Facets
It is vital to take a step back and look at the big picture; understand the stage of the current economical cycle, GDP growth, airline performance, currency valuation or devaluation, import and export deficit and infrastructure spending.
An airline’s performance plays a vital role in driving a country’s economy and in particular its hospitality business. It is an indirect barometer to predicting hospitality performance. The poor performance of an airline is bad news for hotels.
For past and future predictions of GDP growth, we need to get a pulse on the factors and triggers from both a national as well as regional level and how these are linked to international economic trends. Currency fluctuation also help us to understand which feeder markets will be more attracted to our given destination and which other destinations are more competitive and compelling.
The Three tiers
Based on all of this, a hotel asset manager needs to look to the future and provide a direction that can prolong the life of the asset, improve ROI and strengthen investor and operator relationships.
Some of the qualities that successful asset managers need to possess are:
- To quote Jack Welch, in brutally competitive environments, have a sixth sense for market changes as well as moves by existing competitors and new entrants.
- Successful policies from one season do not necessarily ensure success for the next, you must keep evaluating and re-inventing.
- Anticipate future needs and fine tune plans and policies accordingly.
- Do not go with the flow, look for untapped markets, be creative
- Differentiate your product and services; it is a resource allocation.
- Finally, have a clear cut idea of your strengths — that’s where you want to differentiate and stand out.