Asset management adopts holistic, educational role

BERLIN—Asset managers in the hotel industry must have eyes on every aspect of a property to develop successful strategies for managing the evolving relationships between investors, owners and operators.

This holistic approach is not unlike what’s expected of the sister discipline of revenue management, according to speakers during a session at the recent International Hotel Investment Forum titled “Improving performance: The rise of the asset manager.”

“Revenue management is a mindset, and includes the need to look at the asset from a holistic basis,” said John Brennan, chairman of Amaris Hospitality, which owns 30 hotels across several brands around the United Kingdom and Ireland.

“We have had to delineate that function, and we expect that same mindset to permeate the whole business, through multiple lenses, including CapEx and operations. … The goal is move all the levers to maximize values,” he said.

Gaël Le Lay, deputy CEO of Covivio Hotels, agreed. Covivio recently bought a portfolio of 14 hotels in the U.K. from Starwood Capital Group for £858 million ($1.14 billion).

“Revenue management is the key to develop value,” he said, but success requires a manager to “understand operations, the overall business and to divine the exit strategy.”

It’s all in how a hotel company or property defines key roles, said Ömer Müftüler, partner at Odien Group, which has a real-estate portfolio across several asset classes, including a flagship resort on the coastline of Croatia.

“The role can mean different things in different situations, maybe as a management consultant, a coach for management of the hotel, even when we switched from a management contract to a franchise,” he said.

What it takes The time for thinking in silos has passed for asset managers, panelists said. Instead, the discipline requires a broad range of skills to focus on results and earnings before interest, tax, depreciation and amortization improvements.

“They must also have some soft skills,” Le Lay said, “in order to bring others with them.”

Brennan added: “This is not just regarding one person. It takes a team, as there are other disciplines and experiences that feed into the asset-management plan.” “The ultimate goal is to get things done by working with different owners and people. It starts with being strategic, but work on any opportunity often becomes granular—granularity on costs, but strategic on acquisitions and where you want to take them,” he said.

Asset managers should push operators In the numerous cases in which there are both operators and owners, or brands, owners and third-party management, the role of the revenue manager and their interactions with owners and asset managers can become more complicated.

There might be more than one revenue manager at any one property, or revenue managers who spread their attention between clusters of properties.

No matter the configuration, panelists said, the essential piece is that view from the ground, with a manager on property.

“On any day, you might say you would like to get rid of one of the three components, but most times things are pretty aligned,” Brennan said.

Panelists said overall the more it is possible to push the operator, the more value can be driven.

“You must expect the asset manager to push and challenge operators. After all, they do bring a lot of operational know-how and can see and identify potentials for improvement where it is more difficult for a local manager to see,” Müftüler said.

“Hire an operator, but then overlay that with an asset manager. You can convince operators with results,” he said.

Le Lay said flexibility is key in this relationship.

“The overall business can and does change, from lease to management, for example, but there is a role for (asset) management in any business model,” Le Lay said.

Managing the cycle Panelists said revenue management must act as a guide from pre-opening through operations and on to the exit.

“From a pure value perspective, start revenue management from the pre-opening plan, although, that said, some of the critical delivery of revenue management can be in the crisis situation,” Brennan said.

“The most value they bring might not be monetary but perhaps with cost-savings,” he said.

Another consideration is CapEx, Le Lay said.

“CapEx is one of the ways to create value. Is it defensive CapEx or offensive CapEx? Is it better to sell to a buyer or do it yourself? Think in terms of risk across the life cycle of the property,” he said.

Müftüler said asset managers also must have a role of educating management on all the possible realms of possibility in any business.