Until recently, you wouldn’t think to book a privately-owned apartment for an upcoming holiday, nor could you expect to fly internationally for three or four hundred dollars and explore your destination with interactive GPS guides on your phone.

The changing face of travel opens up new horizons to the public and it allows hoteliers to create new types of guest experiences in both new and established markets. And it draws sharper lines between hotel ownership, branding, and management.

Hotel operators, for example, have been around a long time – but as the competition heats up, the way owners and operators work together has to become more focused. The basic reason for the partnership is clear – one party owns a property and the other knows how to deliver a hotel product – but it’s easy for the interests of owners and operators to fall out of alignment in practice.

Closer scrutiny of owner-operator relationships then is a logical outcome of the need to optimise performance in a highly-competitive travel market.

Enter the hotel asset manager

Asset managers have been around for a long time also, but as more and more new Australian developers and owners enter the picture, this role is becoming even more important. Technically of course, the hotel operator and the asset manager both work for the owners. Both should have deep expertise in hotel operation and market dynamics, but the asset manager has a more focussed interest – that is, purely to maximise the value of the asset on behalf of the owner.

Now whilst operators also have that interest, they also have a complex range of obligations to the operating company, the brand, and a range of other issues that may or may not add value to the individual owner.

In other words, unlike hotel operators, asset managers do not have a complex internal set of concerns. They are free to provide the owner with completely independent advice on how to fully leverage the owner’s specific property/ies and whether the manager is delivering on that. They represent an independent, objective source of expertise.

Of course, that expertise is only as objective as the asset manager’s strategic powers allow it to be. There are several key areas that make or break an asset manager’s value to the owner, and to the hotel operation at large.

Translating the owner’s objectives into action

Investors buy into hotel real estate for different reasons. Some want to hold a property over the long-term where the priority is establishing good cash flow and an improved asset value. Others are focused on a faster turnover of assets, where developing then selling properties is the priority and so they need to create value quickly.

The asset manager’s first objective then is to understand the owners’ goals and develop a plan to translate those goals into meaningful action. The strategies for a long-term hold are different to those preparing a hotel for sale so it is important to establish these objectives quickly.

Aligning the interests of owners and operators

Whenever a hotel brand does not own the property (and the number of owner/operators are dwindling), the value of that property cannot be maximised unless the interests of the owner and operator are maximally aligned. The asset manager builds a plan to align these interests in a comprehensive way. This is a formidable task; it involves a broad and detailed understanding of hotel operation.

On a detailed level, the asset manager holds regular meetings with the operator to review day-to-day operations, marketing strategies, capital projects, revenue streams, and other performance metrics. On a broad level, the asset manager needs a strong understanding of local and global hotel markets, digital booking trends, and financial forecasts in order to build strategy that will serve the owners’ interests. They also need a good understanding of international hotel groups and the strategies they are employing and be able to translate that to the owner.

Common pitfalls

There are several common pitfalls in the practice of asset management, and these are constantly changing. One is to take an immediately adversarial approach to the operator. Whilst sometimes there may be cause for concern, most international operators are professionals who are successful because they know what they are doing. Occasionally there may be mistakes made or the wrong people in the wrong role but the role of the asset manager is to identify these early and work with the operator to address them sooner rather than later.

Focusing too much on the minutiae can also be the wrong approach. Hotel operators don’t work well with someone looking over their shoulder every day and very few companies make money purely by cutting costs – there needs to be a combination of improved sales, cost cutting and improved strategy. The good operator will communicate this effectively so that everyone understands what is being done and the good asset manager will get out of the way when things are working. Asset managers certainly need to be firm but more importantly they need to be clear in their communications and hold the operators accountable as needed.

Trying too hard to minimise capital expenditures can sometimes cause owners to overlook investments that will translate to greater profit as well - the role of the asset manager then is to assess these aspects (or initiate them) to assist owners understand how they can maximise their return.

A fluid approach

The role of a hotel asset manager is unique in the world of hotel operation. It bridges the complex relationship between owner and operator. It demands a deep and ever-evolving perspective of the industry and its many moving pieces.

As owners and operators seek to recalibrate their partnerships in a way that works for everyone, hotel asset managers are a potential key to success – but as with everything in this business, it comes down to finding the right people. If you want an attack dog, by all means employ one as an asset manager, but realise that the relationship with the operator will likely deteriorate and performance will suffer at the same time.

If on the other hand, you are looking for a long-term enhancement of both your relationship with the operator and your investment, then the asset manager has to have all the skills outlined earlier as well as the emotional intelligence to find a way to deliver a win-win for all parties.

Dean Minett - Director | Founder
Graduating first from William Angliss Institute in 1982, Dean took on his first General Management role at the age of 22. Since then, he has worked in, managed or consulted to hotels, motels, resorts, restaurants and casinos across Australia and Asia.

This industry longevity and breadth of experience gives Dean an unparalleled edge in his work with owners, operators, developers and purchasers of accommodation hotels, serviced apartments/residences, motels and restaurants as well as general Management consulting. Dean applies these skills, knowledge and experience to support clients throughout the entire engagement process and, through his extensive network, connects them to the right people and opportunities.

Offering a full range of services to executives in the hotel and hospitality industry, Dean provides expert advice on development and operations as well as training and outplacement coaching.

Dean is also a published author, writer and proud family man whose commitment to service and results really is unsurpassed in the industry.

www.minettconsulting.com.au