In the face of rising inflation and increased interest rates, what are the projects and strategies for near-term value creation that deliver high impact in a short timeframe?
There are opportunities for creating short-term value by identifying low-hanging fruit, says Hubert Viriot, CEO of Yotel. “And there always are [some],” he says.
Niels Schroeder, managing director of hotel financial planning firm Fairmas GmbH, suggests first looking at the top line, followed by departmental profits – does it make sense to run a restaurant?
Think creatively about dead space
Then consider alternatives for dead spaces. “Just because you’ve got a kitchen in a restaurant, you don’t always have to use it as a kitchen in a restaurant and have a fully staffed brigade,” says Goldman Sachs vice president, asset management, Claire Camplisson.
At one hotel restaurant, she recalls turning the restaurant into a bar to which guests could order food through Deliveroo – eliminating a lot of the kitchen costs but retaining the ambience of the space.
Viriot is also thinking differently about F&B across YOTEL’s 22-strong estate without disregarding its importance. The group has seven hotels in the pipeline, including a new flagship in Tokyo.
“Everybody wants an experience. What they mean by experience is they want to go where the local people go and that is primarily an F&B experience,” he explains. “That experience generally is better delivered by local players.”
Optimise with technology
Technology can support optimisation across many areas. At the Belfry in Sutton Coldfield, for example, which Goldman Sachs acquired in 2021, smart meters with sensors have been installed in the bedrooms. These control the room climate depending on whether a guest is in the room or not and can be remotely accessed by the back-of-house team and Camplisson says this has reduced the property’s heating energy costs by 64% and guest complaints as well.
“The single biggest thing you can do is change the software updates, because changing hardware is hard and takes time,” adds Dimitrios Neofitidis, director at Siggis Capital, which asset manages the Virgin Hotel Edinburgh as well as Virgin’s forthcoming Glasgow hotel.
Use technology for staff optimisation
Technology can also optimise staffing. When Siggis took over the asset management of the Zetter Group, Neofitidis says four people were overseeing the operation of four hotels. By implementing a different property management system with open API that linked into Xero and Revolut, they have been able to hand over responsibility of three of the assets to one accountant, saving approximately £150,000 per year.
“Usually, staff retention issues are linked to their pay. What we try to do is have less staff but pay them more,” says Neofitidis.
It's not about replacing employees with technology, points out Viriot, but about transforming how hotels are run. “Technology allows us to create better jobs and a better experience for our customers and a cheaper cost of sales for our owners,” he explains.
Meanwhile, he stresses the importance of general managers being empowered to take a hands-on approach.
“We need to dance together,” he adds. “Good asset management brings a perspective that us as operators don’t necessarily look at: comparing what we’re doing with the rest of the market, bringing data that we don’t necessarily have access to.”
Anna Cohen, fund manager at Extendam, agrees: “We strongly believe that the budget of the hotel should be in the hands of the manager,” she says, with the asset manager challenging decisions to maximise the investment but also giving the manager the tools to do the best job.
Extendam recently signed a deal with Black Label Hospitality to open the 31-bedroom Maison Elle Amsterdam.
And then there are the teams on the hotel floor, who should also feel empowered in what the owner, operator and asset manager are trying to deliver, says Camplisson. The Belfry, for instance, has quarterly ‘listening’ sessions where staff can give feedback to senior leadership.
“They are the ones interacting on a daily, tangible basis with the guests and the property,” she says. “If you make people feel part of the business, it’s a recipe for better retention, lower turnover, better guest satisfaction.”
Quick wins that your guests don’t notice
And ‘quick wins’ don’t have to negatively impact the guest experience. “Does the turndown service need chocolates on the pillow? How much does that cost in terms of man hours and supply to do that? I personally don’t need it,” says Camplisson. “Test and trial with your guests and see what they will be resistant to and what they might not even notice that you’ve eliminated from your cost base.”
Neofitidis suggests incorporating the question about turn-down into check-in; while during the pandemic, YOTEL trialled asking guests whether they were happy to forego a daily room clean, which the group has retained.
“It’s absolutely astonishing the amount of guests who decided to take that,” says Viriot. “That has a massive impact on your cost of sales in your room department if you can clean the room every second day without even impacting the guest experience. Quite the contrary, improving it.”
Ultimately, it’s communication that can determine the success of your asset management strategy, between staff and guests and the asset manager and owner.
“We work with many owner-operator constellations and we see the most efficient ones is where the owner, operator and asset manager work very closely together and have open and honest communication,” says Schroeder. The opportunities are different for each property, but you must figure it out as a team, he says.
All those quoted in the article appeared on stage at the International Hospitality Investment Forum (IHIF) held in Berlin between May 15 and 17, in a session called: Short Term, High Impact Asset Management.