Internal vs external hotel asset management by Mariano Faz, TFG Asset Management

The demand for comprehensive hotel asset management services has increased in the last five years. It has also become increasingly important for owners to assess whether they should hire an in-house manager or appoint a specialized, third-party company.

The hotel sector is one of the world’s most competitive industries. The number of hotel owners correlates directly with the number of hotels, the vast majority of which are managed by large corporations. In regions such as the US, branded hotels comprise more than 80 percent of supply.

The same trend is evident among hotel owners in the Middle East. Given the highly competitive nature of the market, hotel owners are required to understand every aspect of the hotel and the idiosyncrasies of the hotel operator. They need to protect their interests, while the hotel operators endeavor to secure their returns. A hotel owner would be well advised to hire a professional hotel asset manager to ensure that both sets of interests are represented fairly. A hotel owner’s responsibilities include positively challenging the hotel operator and, in this situation, hiring an in-house asset manager can provide a partial solution.

The asset manager will be able to represent the hotel owner’s interest, but it will not be possible for that person to challenge the multiple complexities of a hotel, such as understanding new technologies, sales skills, segmentation, operational requirements, F&B, financial analysis and maintenance issues. Hotel asset managers must have sufficient, extensive operational experience, as well as strategic and revenue knowledge, to protect the owner’s investment. Very few asset managers – in fact, almost none - can claim that they have experience in all the required areas. Individuals might have great expertise in certain areas, but it requires more than one person to be at the forefront of the industry in advisory terms.

The hotel asset manager should constantly challenge the hotel operator. If the asset manager fails to stay up to date with industry trends, they risk losing the respect of the hotel operator. This is a major challenge in the hospitality industry, which is constantly being disrupted by new technology and trends in guest satisfaction.

Hospitality REITS are able to set up a multiskilled asset management team in-house to manage the spectrum of hotel assets across their portfolio because they have a sufficient number of rooms to support the team. However, the hotel industry is not solely owned by REITS. The vast majority of hotels are owned by private individuals who do not have the capacity to set up large teams of asset managers.

A third-party asset management company will be able to provide the best advice and assistance to those individual owners. These companies tend to have a team of professionals specialized in different areas of the hotel, where the owner is guaranteed to receive the best advice.

In conclusion, owners would be well advised to employ third party hotel asset management firms if they are intent on maximizing the efficiencies and profitability of their hotel investments. The industry is so challenging and dynamic that a single person is not able to process so many changes and such diverse information single handedly.