What an asset manager 'audit' can reveal about your hotel

With the increase in the number of fund-owned hotels in recent years, the industry has seen a spike in the number of hotels with asset managers. Acting as the middleman between an ownership group and a hotel’s operations teams, an asset manager’s job is to maximize the hotels profit by increasing revenues and improve operating efficiencies. The introduction of new ideas and strategies from the asset managers can often lead to tension or resistance from a hotel’s operations team.

As someone who has worked both on the operations side and on behalf of ownership groups as an asset manager, I have seen and experienced the strengths and weaknesses of each party. While owner-operated hotels are able to respond to trends and guest issues much more quickly than large brands and institutional owners, making them more adept at customer service and guest experience, frequently properties overseen by asset managers are better positioned to maximize profit through new revenue streams and cost controls, as asset managers bring their knowledge and experience from other hotels to the table.

To prevent owner-operated hotels from missing out on revenue opportunities, they should consider engaging an asset manager every year or so to audit their properties. Their objective expertise may reveal opportunities to increase revenue and efficiencies that the owner had not considered. Whether ownership decides to implement the suggestions or not, as they are under no obligation to do so, they still walk away with a fresh perspective from the review.

While conducting a few property reviews for colleagues of mine, we found a few of these potential areas of improvement, which I’ll share to give a few examples. Most recently, while assessing a hotel and looking over its F&B program, we noticed that margins for alcohol were significantly smaller than other properties, as wine offerings were priced at least 30% below that of its competitors.

In exploring the reasoning, we learned that team members did not want to increase prices for fear of upsetting their loyal repeat guests. They also did not realize just how much lower their pricing was, as the hotel had not conducted a competitive analysis of its food and beverage pricing in several years. While increasing the price of wine to the standard industry price would have very minimal impact on guests and likely would go unnoticed, the loss of revenue was significant for the hotel.

During a separate review, we saw an opportunity for a hotel to increase the ADR of a set of guest rooms simply by elevating and repackaging them as spa rooms. The rooms, which surround the property’s sought after-spa, were not being priced or distinguished from the same rooms located elsewhere on the property despite a high request rate from spa guests. However, the hotel could easily sell the rooms as a high tier, with minimal investment to make the rooms more “spa.” Guests would be willing to pay a premium for the location and the property could increase the ADR of the rooms by well over 10%.

While those examples won’t apply to every property, they just demonstrate the possible benefits of bringing in a new set of eyes to look at a hotel. What are your thoughts? Should owner-operators engage asset managers for ideas?