Earlier this year, the hotel sector’s steady growth came to a screeching halt. I recently spoke with Ben Godon, my colleague from London and director of asset management for Colliers EMEA, about the crucial role hotel asset managers now have in facilitating the comeback of this sector – which until recently had seemed indestructible.
Thanks to the strong increase in international travel in recent years, the hospitality industry’s healthy profit margins, and the professionalisation of hotel contracts, hotel real estate has become more and more attractive to both domestic and international investors. Long gone are the days when hotels were seen as an “alternative” investment option. Nevertheless, it remains a unique sector within real estate investment, which is why a thorough understanding of hotel operations is crucial – and that’s exactly where the added value of hotel asset managers lies.
Hotels need to offer more than just lodging
The importance of asset managers has increased considerably over the past several years. Their responsibility is to ensure that owners don’t have to worry about the most complex aspects of hotel operations, and that every last penny is well spent. Another important task that asset managers have taken on recently is maximising per-square-foot revenue.
In this fast-changing sector, providing lodging is no longer enough to be successful. Hotels need to optimise revenue from their restaurants, bars, and spa & wellness facilities, because that’s where the difference is made nowadays. Another trend we’re seeing is that more and more hotels are also offering workspaces for rent – a development that’s been accelerated by the coronavirus crisis.
Covid is a wake-up call
So far, 2020 has proven to be an extremely challenging year for lots of companies, and the hospitality industry is no exception. The coronavirus pandemic has shaken the sector to its core: many hotels were forced to close their doors, and those that managed to stay open had to operate at limited capacity. Turnover plummeted while rent and salary payments continued, as did technology and supplier costs. Asset managers were able to drastically reduce cash burn in a short period of time, safeguarding cash flow for owners.
As it turned out, however, many hotel management companies were not agile enough to make the necessary changes. Stuck in old routines, they were reluctant to switch to a trial-and-error approach. But in times of crisis, proactivity is a must for any hotel owner. They simply cannot afford to be passive right now. Those who are unable to change their ways will be replaced by new, enterprising management companies that can quickly respond to fresh opportunities – companies that aren’t afraid to invest in modern technology and communication.
A good asset manager is always thinking two steps ahead
International leisure travel is slowly starting up again, and most hotels have reopened, but hotel asset managers will continue to play a key role. Now is the time for bold entrepreneurship. This also means we need to be critical. Is the hospitality industry future-proof? Are hotel management companies able to offer the kind of help and flexibility we need in leaner times? If not, they need to be replaced with more enterprising parties that can offer more flexible contracts.
Experienced asset managers with good track records and lots of local market expertise are uniquely qualified to help owners navigate the industry’s risks and opportunities. Because a good asset manager is always thinking two steps ahead. This is why asset managers will continue to play an incredibly vital role – even after this crisis is over. Those who are able to get their house in order now will be ideally positioned to hit the ground running post-Covid, while those who can’t will be left behind.