Asset management in hotels
With the advent of new age real estate developers and private investors in the hospitality industry other than the existing hotel giants, the emergence of asset management vertical has become imperative.
In the last two decades, there has been a significant growth in international branded hotels in India along with emergence of new domestic, mid and economy hotel brands. Industry has seen a burgeoning growth in branded hotel rooms in India in the last decade. More recently, institutional investments have also entered the hospitality segment in India. Today, Indian hospitality space has eclectic mix of ownership from old Indian institutions such as house of Tatas, ITC and Oberoi to new age real estate developers and now more recent addition of institutional/private equity investors likes of Goldman Sachs, GIC, Forum Partners, etc. Hence, the emergence of the discipline of asset management in Indian hospitality industry.
The purpose of asset management is to work with operators and owners to ensure best interest of the hotel asset are met, leading to improved yield. A typical value chain of the asset management function includes capital raising, acquisition and de- velopment of asset, operator selection, operation management and the Capex cycle.
Another significant trends that has emerged, is the increasing number of conversions/rebranding of existing hotels. The conversions help create value in the hotel by rebranding and repositioning the asset. This trend strongly points towards the rising significance of asset management within the hospitality industry.
A hotel asset management company provides a balanced long term approach that comprehends the ownership strategy and the operational needs; supporting the objectives of both sides. As the owner's representative, they play a critical role in ensuring a consistent growth trajectory, along with liaising with the brand. The clear strategy is to align revenue and profits from operations with investment goals, that gives way to a more proactive and analytical approach. The tactics involved lays a higher emphasis on growing ADR and stabilising rate integrity vs. short term occupancy, and harmonising segmentation to ensure that the most profitable and sustainable mix of business is achieved.
An asset management company has a thorough knowledge of the industry owing to their line of business that encourages them to work with various hotel brands, operators and markets, and that gives them all rounded perspective. Given the plethora of new tools and strategies, working with an asset manager as a resource with experience beyond a particular brand family, or management company, can prove valuable. The asset management discipline encourages knowledge share and leads to transfer of best practices across portfolio of hotels. The team also analyses the life cycle of the physical asset.
The operator typically looks at the short term goals of the asset and the owner analyses the long term goals. This well-established practice in mature markets is increasingly becoming the need of the hour in the Indian context as well.
SAMHI Hotels is a hotel investment and development company. It has world class shareholders that include Sam Zell led Equity International, Goldman Sachs, GTI Capital Group & IFC (member of the World Bank Group). Hotels owned by SAMHI are operated under partnerships with Marriott, Starwood, Hyatt and Accor. Currently it has 16 operating assets in the country and another nine in various stages of development. ( The views expressed are solely of the author. The publication may or may not subscribe to the same.)