The selection of a hotel operator, brand and management agreement can be a complex and lengthy process for owners.

The outcome of this process must be the appointment of an operator that adds value to the owners’ development and boosts its performance through its image, branding, reservation network and global profile.

There are typically three main scenarios for operator selection. These involve an owner with land upon which it wants to build a new hotel; an owner with a pre-existing hotel for which the incumbent management agreement is about to expire; and an owner-operator with a pre-existing hotel for which it is seeking an external operator.

Many hotel owners opt to engage hotel asset managers to advise them in these situations. Seasoned hotel asset managers can help simplify the operator selection process for owners; match their asset with an appropriate brand; and ensure they obtain the best possible terms and conditions.

Hotel asset managers understand firsthand the implications of every clause in a hotel management agreement; the owner’s rights that must be preserved to achieve the investor’s goals; and the importance of striking the balance of interests required for a successful long-term partnership.

Additionally, a hotel asset manager’s first-hand experience in asset-managing hotels managed by any potential brands/operators gives them the visibility into operators’ true strengths and weaknesses, including their ability to achieve their proposed proformas.

A hotel operator or brand selection process typically involves the hotel owner/investor engaging a hotel asset manager to find an operator and/or brand that aligns with their long-term strategic goals and to negotiate key agreements on their behalf.

The hotel asset manager collates pre-marketing materials and prepares the RFP and additional documents needed to submit the opportunity to an operator. They then present the project parameters to potential operators; gauge the level of interest; assess whether they would be a suitable fit; identify an appropriate brand to match the opportunity; and negotiate the best possible commercial terms on behalf of the owner.

Managing expectations between owners and operators is a common challenge during the operator selection process. A strong asset manager will bring experience and reason to critical negotiation components even in the initial phase of the operator/brand selection process. With an operator sometimes presenting a brand that does not meet the owners’ desired profile, the hotel asset manager must provide impartial expertise and mediate between the two parties and help them reach an agreement.

Hotel asset managers can also provide solutions to hotel owner-operators considering engaging a third-party operator to take over the management of their asset. As part of an RFP process, hotel asset managers conduct a survey of the property; analyse trading performance; and identify suitable operators that could boost total revenue while continuing to ensure the asset remains profitable.

For an existing hotel, oftentimes this process requires the hotel asset manager to negotiate a Property Improvement Plan (PIP) setting out the steps needed to improve the property to meet the required brand standards.

This is a critical component on the rebranding of any asset, as the incoming operator will require the owner to invest in new hardware, physical and soft branding elements and technology to successfully rebrand, reposition and uplift the property. An asset manager can help ownership achieving important PIP reductions; prioritise the PIP components; negotiate its implementation timeline; and rightsize the overall investment to maximise the project’s ROI.

Hotel operator selection is set to take on even greater importance in the immediate future as owners and investors target upgrading opportunities, particularly at the higher end of the market. Respondents to CBRE’s 2025 Asia Pacific Hotels Investor Intentions Survey identified hotels in the upscale and upper midscale categories as the most attractive asset types for investment in 2025.

This choice was informed by the prospects this category offers for brand and operational upgrades, which can provide investors with a greater scope of value-add opportunities. Investors who choose to engage skilled and experienced hotel asset managers to oversee operator selection and other related processes will command a distinct advantage in the marketplace.

Chris Ely, Head of Asset Management, Asia, and Ananth Ramchandran, Head of Advisory & Strategic Transactions, Asia - CBRE Hotels & Hospitality.

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