Hospitality Asset Management:
Finding the Right One for Your Specific Needs

POSTED ON: 06.10.2014
By Harley Mayersohn

Asset management, broadly defined, refers to any system that monitors and maintains things of value to an entity or group. It may apply to both tangible assets such as buildings and to intangible concepts such as intellectual property and goodwill. There exists public asset management, corporate asset management, financial asset management, infrastructure asset management and enterprise asset management. Ultimately the asset managers are responsible for proactively increasing the value of the asset for which they are responsible.

Ok so we all agree on these points and everyone involved in this business will nod their heads and say, “yep, that’s what we do” and as a practical matter that is in fact what all asset managers do to one degree or another. Everyone of the asset management firms in our industry categorically state that they exist for one reason and one reason only and that is to elevate asset values on behalf of ownership. Maybe you’re a lender who has taken back an asset and need help positioning to sell. Or, here you are, the proud new owner of an asset you’ve just acquired for what you believe is a good basis, have a good management company but think on some level you need someone in your corner. You are correct. The truth is that you probably could have used an asset manager to help select your management company because in fact not all are created equal. Given a specific circumstance any one manager is very likely to be better than another. And remember, the brands exist for their needs and interests and while they are earnest in them telling you they work hard for you to improve business, the fact is their interest is really focused on their brand. And that’s precisely as it should be. The asset manager’s role is to be your advocate, to be 100% aligned with your interests which for the most part is the enterprise value of your property on exit.

The question facing you then is how to choose an asset manager when in fact they all kind of sound alike? Your first filter of course is personal experiences or experiences you can garner from colleagues in the industry. Absent those filters, what then should be in your selection criteria list. I’d opine you want to explore the following:

• What specific experiences do your candidate firms have that are as close to your situation as possible? It matters little if you have a destination golf resort and your asset manager list has current and past clients that are primarily urban commercial hotels. Or if you have an independent city-center boutique hotel and your candidates are heavy on brand experience
• Ask your candidates to define for you four or five revenue enhancing initiatives they brought to the table and were able to get implemented. Not just “raise your rates” but real, value-add concepts or initiatives that made a difference. For example, did they secure a major revenue generating tenant/partner? Have they identified new business lines that added value to the asset? Have they pushed programs that resulted in major share shifts? Did they conceive of new best use of space that resulted in elevated revenues? Have they conceived and developed new lounges or restaurants that caused dramatic lifts in food & beverage revenues and perhaps reposition the property?
• You need also ask for specific examples on expense management, for example, have they been able to help bring down the cost of goods in all operating departments? Have they been able to get savings on taxes, insurance or utilities? Were they able to find ways to shave points of labor costs?
• Your asset may be in a position to add more rooms and other facilities so it’s very important you learn of your candidate’s experiences and depth of talent in the area of project management that can run with or guide the entitlement process.
• In many cases when a new owner acquires an asset there is some level of capital required to either bring the asset up to market or enhance it to seek to gain greater profile in the market. Either way it’s important your asset manager have great experience in managing and executing on capital projects.
• Ask your candidate for any examples of past experiences of taking on a new asset at its current value and what the value of the asset was at disposition.
• And finally, and perhaps most importantly your asset manager can best serve you if they have some level of experience as an owner themselves so they understand from your vantage point what the true issues are as an owner.

Frankly, lots of people can analyze a P&L and ask very good questions as to why the variances are happening. But absent having been in an owner or operators shoes, they can’t possibly know what the answers should be. And unless they can give you real, ‘boots on the ground’ examples of past experiences as noted above you may not have the best partner in your corner.