HOTEL ASSET MANAGEMENT
What you need to know about
Now, in Africa, hotel asset management is attracting increasing interest from developers and owners and is set to grow in importance as the number of hotels continues to grow rapidly across the continent.
What is hotel asset management?
To nd a denition that covers all aspects of hotel asset management is not easy. One example is the denition used in the book Accounting and Financial Management, Developments in the International Hospitality Industry, by Harris & Mongiello: 'The commitment of resources for the purposes of enhancing value and maximizing owner's returns'. This denition and indeed hotel asset management, generally, presupposes that ownership and operations are vested in different parties. Another good example of a de nition of hotel asset management is given by senior lecturers Humphries and Judge, who developed the brand new module Hotel Asset Management (HAM) at the Ecole Hôtelière de Lausanne (EHL) in Switzerland. They look at it as a closely intertwined set of denitions:
This denition looks at all aspects of hotel asset management, not just at trying to increase the numbers on the bottom line of an operating statement. The asset manager aligns objectives between hotel owner and hotel operator, manages the relationship, and sets goals, monitors them, and reports.
Why does a hotel owner need a hotel asset manager?
You could also ask, why worry as a hotel owner about details and specications if you like to look at the big picture? Perhaps the big question of any hotel owner would be why they would out source this responsibility to a supposedly better prepared professional. The answer is that an asset manager can free up a hotel owner's time by taking on those specic tasks, such as:
· Managing a refurbishment
· Renegotiating a contract
· Monitoring monthly operating statistics
· Ensuring that the hotel is reacting to changes in the market
· Maintaining a sustainable and excellent relationship with the operator
· Optimising the use of available space
· Creating revenue-generating initiatives that do not involve extensive additional cost – ow through to GOP
This detailed research and monitoring requires certain skills an owner may not possess, but which they can acquire through an asset manager. This way, an owner can focus on the big picture and at the same time make informed decisions to drive revenue. To give you an example, we worked as the asset manager on the owner's side for a 1,000- room four- star central London hotel undergoing complete renovation. One of the tasks was to dene and monitor the budget for small operating equipment, which for a hotel with 1,000 rooms, several restaurants, and a large meeting space was signicant. The owners, a large bank, had no experience ( and really shouldn't have to either)in furnishing a hotel with thousands of cups, teaspoons, and other bits of small operating equipment. By keeping both owner and, most importantly, the operator updated on spending progress, we maintained the budget and saved the owners' time. The owners, through the involvement of the asset manager, maintained an excellent relationship with the management of the hotel.
An asset manager can be
on a monthly basis –this is the most used form of contract due to the monthly reporting requirement of hotels. In addition, they are also used on an ad hoc basis, for example, during a refurbishment, whilst building an extension, or in a hotel's development phase. If an owner needs monthly monitoring of a hotel, an asset manager should ideally be appointed for a minimum of 12 months, as suggested improvements may take time to come into effect. For example, if an asset manager sees an opportunity to increase revenue by sourcing outside membership for the hotel's health spa, it will take at least six months for the new sales strategy to fully reect in terms of membership numbers.
Source: Ecole Hoteliere Lausanne, Humphries & Judge, 2015
The asset manager could be remunerated with a xed fee per month, or with a xed fee supplemented by a variable element depending on the success of the asset manager's involvement.