Asset management (GA 2010)

The asset manager is the champion of a hotel owner’s investment objectives and goals.

Over the years, the need for asset management has arisen from the evolving operating structure of a hotel, characterized by the separation of ownership and management, two entities whose interests do not always align.

This created the need for a qualified intermediary who would act on behalf of the owner to maximize the profits and capital value of the hotel.

When a hotel underperforms, the asset manager’s first task is to identify the key problems:  rates strategy, sales activities, cost controls, status of the physical product, competition, leadership and others.  Once the asset manager has identified the reason, he will work with the operator, with the owner’s blessing, to rectify the issue.

The asset manager with owner and operator set the parameters of the job descriptions, i.e.:

  • Observe competitive market trends and the property financial performance.
  • Monitor the physical asset, ensuring that the physical asset is maintained at a desired level and that all major systems are in good working order and comply with regulations.
  • Support the review of the begetting process to ensure compliance with owner’s expectations.
  • Review operational performance to ensure that revenues and expenses are in line with industry benchmarks.
  • In some cases recommend the hotel operator to the owner, brand affiliations and consultants.
  • Assess market value of the property on annual basis.
  • Approve and monitor capital expenditures.

 

Today asset manager not only provide insight into a hotel’s strategic value, but also acts as a gatekeeper for the owner.  The asset manager will thoroughly review a hotel’s income statement to make sure that the operator is performing at a desired level, and that expenses are controlled within a reasonable range.  The intricacies involved in the management of a hotel demand careful analysis of all revenues and expenses, from operational items such food and beverage to ownership items such as property taxes.

It is to be noted that it is not uncommon for stakeholder’s interests to conflict in particular between operator and asset manager especially when there is expenses on operator company brand standards at the expenses of the owner.

The asset manager also plays a role to assure good relation between owner and operator.

An asset manager can also be engaged to conduct a one time review of the hotel’s operational performance and formulate strategies to enhance profitability of asset value.  Also to assist the owner when an asset / hotel is purchased or sold.