Because hotels are an operating business, asset management for hotels is far more complex than for any other real estate asset class. The role of a hotel asset manager is multifaceted and, to be optimally effective, an asset manager’s knowledge and experience must encompass a variety of disciplines including: hotel and restaurant operations, sales and marketing, real estate finance, accounting, project management, contract law, technology, spa operations, capital expenditure (CapEx) planning, and building systems management. For resorts, the level of required expertise is even greater and will often encompass for-sale real estate (whole ownership and fractional), timeshare/interval ownership, golf, tennis, ski operations, marinas, and a host of ancillary amenities.
The CHMW team comprises roughly 700 years of combined hands-on experience in all facets of the hospitality industry, and as a company, has been in existence for 20 years. The depth of our resources, both in-house and through affiliated subject-matter specialists, is unparalleled for a company of our size anywhere in the world.
CHMW approaches asset management with a focus on three primary objectives.
- Owner’s financial objectives (e.g., increasing asset value, maximizing cash flow, capital planning, exit timing/strategy)
- Owner’s indirect objectives (e.g., sale of related residential real estate, place making for associated real estate (e.g., retail centers, master-planned communities), pride of ownership)
- Risk mitigation (e.g., asset protection, financial controls)
CHMW achieves these objectives through a six-step approach: Strategy, Goal Setting, Oversight, Kaizen (constant improvement), Remediation, and Foresight.
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Strategy
A strategic plan is the roadmap by which owner investment objectives are achieved. This strategic vision must be incorporated into every aspect of asset management to ensure that all decisions made with respect to an asset or portfolio serve to achieve owner’s objectives. Strategy deals with macro factors (e.g., industry and consumer trends, the economy, the competitive landscape), individual property factors (e.g., investment objectives, market positioning/repositioning, life cycle and CapEx issues, brand/management, additions, changes of use), and marketing factors (budgeting and resource allocation, deployment, segmentation, pricing, etc.).
Goal Setting
Goal setting applies mainly to short and intermediate-term business planning. While there are multiple components and processes involved, the key ones are:
- The annual Business Plan consisting of the marketing plan, the operating budget, and the one-year capital budget.
- Periodic forecasting/reforecasting, as applicable (as operating businesses, hotels must adjust to changing business conditions and do so in a timely manner).
- Long term capital planning (typically three- or five-year cycles).
Oversight
Oversight includes more than the routine monitoring of a hotel’s operational performance and reporting variances to ownership. A key point of differentiation amongst asset managers is how information is used and applied to attain the underlying owner objectives. For instance, identifying that spa sales fell short of budgeted performance in a month is important, but identifying why and what can be done about it (besides berating the operator) is what separates the wheat from the chaff among asset managers. A good asset manager is also aware of trends and situations that could affect the property and works with the management team to develop corrective measures.
Oversight also includes monitoring the physical condition of a property and ensuring capital budgets are in balance and sufficient reserve funds are in place to cover required repairs. Simply ensuring that proposed expenditures in any given year do not exceed budget does not accomplish much in the way of enhancing asset value; in fact it could potentially have a negative impact. Re-prioritizing fund allocation to address those projects that yield the greatest financial return and minimize ownership’s risk exposure is the role of asset management.
We would describe our approach to operator oversight as collaborative. That is, we do not treat the operator an as an opposing team that must be beaten into submission. Rather, we take the approach that we are on the same team where we act more as a coach in furtherance of their success (hence, owner’s success). We have found that operators almost always reach greater levels of success from our approach which is demanding, rational, and fair. Of course, we do have a hammer in our tool box and are prepared to use it when other methods fail.
Kaizen
The Japanese principle of kaizen (constant improvement) is fundamental to how we approach our own business and it carries over into our asset management approach. That is, we are constantly looking for opportunities to improve, even when it appears that everything is going according to, or above, plan. Using our deep in-house experience and our cadre of specialized subject-matter experts, CHMW is constantly looking for opportunities to refine and fine tune performance at our asset managed hotels.
Remediation
By definition, remediation means fixing something. Even with good intentions and appropriate attention, things happen in and to complex operating businesses like hotels. With significant expertise and experience in every aspect of the hotel business, CHMW is fully capable of assessing problems that arise and implementing the necessary changes (whether through the operator, or directly). And we do so in a timely manner, thoroughly educating and conferring with an owner on changes in strategy.
Foresight
Whereas remediation is a reactive process, foresight is proactive and encompasses four key things.
- A Good Radar: Market knowledge is essential. This pertains not only to supply and demand trends is a given market, but also macro-trend analysis (consumers, lodging industry, technology, etc.)
- Good Filters: In a world awash in information, it is important to know what is relevant and meaningful to an owner’s business.
- Good Business Instincts: This entails an ability to convert knowledge into action and is generally the result of a lot of practical experience (“grey hair”) and having traversed multiple investment cycles. We’ve made – or seen others make – these mistakes, so you don’t have make them.
Why Hotel Asset Management?
Hotel owners might reasonably ask why they need an asset manager for oversight if they have a management company running the hotel. Read More
We have tailored our hotel asset management approach to meet the needs of a wide range of ownership groups, including full asset oversight to high-level portfolio management. We are highly adaptable, and can scale our services to the level of hotel investment oversight that meets specific client needs.
