Marshall-Alan Associates: Understanding Asset Management

While hotel demand is still strong in many markets, profits in some regions are in slow decline and asset values are also at risk. Hotel owners who take action to restore or maintain balance use asset mangers to asses risk and ensure individual operators understand and stay focused on the owner’s goals. This dependency on asset managers to stabilize floundering properties or improve ones which are doing well dates back to the 1980s and ’90s, when overbuilding of hotels met a slowing economy head on and travel slowed during the first Gulf War. Damage control was the first priority, followed by preventive assessment to keep such dips in the industry from recurring.

Today, most asset managers provide full oversight of the operation and physical assets, as well as maximize property value. The asset management function is very owner specific, and the scope and depth of the assignment will vary in respect to the type of property on the abilities of the owner.

Hotel owners should look for an asset manager who has independence from traditional hotel consulting companies as well as from the owner, to limit the risk of loss of objectivity or the leaking of  financial information for superior results. This third-party can be specifically tied to the oversight of a particular asset, directing much of their attention to the following goals:

  • Maximizing current revenue
  • Controlling expenditures
  • Increasing value
  • Positioning the property for a transaction is needed

The ideal candidate for the role of asset manager should have extensive experience in the finance and financial consulting fields, and valuation.

A good asset manager provides the information tools to ownership to make appropriate decisions, and assures that the property is handled and maintained as an investment. Advice is given to the operator, hotel management teams are educated on profitability, cash flow and ROI, and reports are delivered to the owner including:

  • Operational and financial reviews
  • Capital expenditures
  • Sales and marketing figures

If operators are having difficulty managing cash flow, capital expenditures and on-going maintenance programs, are accumulating large unnecessary inventories or mishandling the marketing budget, the asset manager can step in and evaluate where improvements can be made, this information can help a hotel owner or developer provide guidance to the operator – or in some cases provide the evidence needed to terminate a relationship and fill the position with someone more capable or trustworthy.

An Asset Manager’s prime responsibility is to assist hotel owners and developers in realizing their investment goals. Asset managers will often act in a supervisory capacity; supervising a hotel pre-opening, supporting the development of new operations, and then providing conventional long-term asset management (especially for branded chains).

 

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