Who truly holds the influence in a hotel? The general manager? The brand that has its name above the door? The owner of the bricks and mortar real estate? In my view, the hero of the story and the one person with the means to bring all those differing – and sometimes competing – interests round the table, is the asset manager. For anyone who is unfamiliar with the role, the asset manager is the guardian of financial investment in a hotel or other hospitality-related property. This person is responsible for ensuring that the right choices are made in order to maximise the value of the asset, at every stage of the cycle from initial purchase to eventual disposal.
And this matters more than ever, especially when placed in the context of an explosion of interest in hotels as a commercial real estate asset class. Once seen as the playground of the specialists, hotels have increasingly been acquired by insurance companies, pension funds, sovereign wealth managers, family offices and pretty much every other type of professional investor.
The numbers are definitely eye-catching. In Europe alone, hotel investment transactions grew from €6.5bn in 2010 to a record high of €27.1bn in 2019 – the previous full pre-pandemic year according to HVS. And though the Covid-19 effect has since forced transaction volumes lower, the overall outlook remains strong. For example, in 2021 advisors Cushman & Wakefield published research in which over a third of major hotel investors said they wanted more European hotels in their property portfolios, with only 21% planning to scale down their investment activity.
New money, new game
This flood of new money into hotel real estate has been a game-changer for asset managers. Not only has it increased demand for professionals with this skill set, but it has also given much greater visibility to the importance of the role and its unique position as the ‘glue’ that holds the asset management strategy together. As if that was not enough, the shock of the pandemic has left the hospitality sector in an unprecedented state of flux, placing even greater expectations on asset managers while at the same time giving them an extraordinary opportunity to make the difference between ultimate success and failure. If that sounds overly dramatic, it is important to consider the fact that we still do not fully grasp the long-term effects of the pandemic on tourism and hospitality. We do not know which customer segments will come back, let alone how they will come back. There are so many questions around hybrid working, meetings and incentives, corporate travel, and leisure travel that remain unanswered, and hotel owners and operators need to be ready for when the time comes to tackle those questions.
How can hotel owners and operators do this? By making the guest space more customisable, more flexible and more easily adaptable to rapid market shifts. It is simply no longer feasible to establish a positioning and say ‘that’s good for the next ten to 15 years’ when you do not really have a clue what the market segmentation is going to look like over the next 12 to 18 months.
Adapt to thrive
Moving from a fixed state to a dynamic-state approach is highly challenging, and of course there is always a chance that you have read the trends wrongly and miss the target. But in our present, highly volatile marketplace, the risks from simply staying the same are, in my opinion, significantly higher. And, in any case, part of the built-in benefits from being agile is the ability to right any wrongs fairly quickly.
I mentioned earlier that there has been an increased demand for asset managers who have the specialist knowledge to work within a hospitality context. And I do not mean just hotels by that, but also the many other operational assets that fall within the broader hospitality definition – such as co-living, branded residences, serviced apartments and youth hostels.
When it comes to fulfilling this demand, the major hospitality business schools – like Glion, where I teach – are on the case. In this, Glion is working closely with the Hospitality Asset Managers Association (HAMA). This group, which started in the US, represents the world’s major owners of hotel and hospitality real estate. And, each year, it runs a competition in collaboration with a member company for hospitality students to test their asset management skills on a live consultancy project relating to a real-life hotel property, giving them valuable experience in simulating reality.
For this year’s competition, we are working with Starwood Capital, one of the world’s leading owners of hospitality real estate, and I am also pleased to say that the competition has expanded to involve four major European hospitality schools, including – for the first time – Glion’s sister school, Les Roches. The high status conferred on this competition is exemplified by a prize that includes the opportunity to present the winning concept at the HAMA annual meeting in Berlin – a great way to not only honour the winners, but to showcase their talents and feed their ingenuity back into the industry. This is a clear indicator of how the hospitality asset management industry recognises that it is waging a war for talent.
If investors want to make the most of the post-pandemic recovery, in whatever form it takes, it is essential to have a strong pipeline of talented and appropriately trained individuals who can combine knowledge of hospitality operations, financial nous, the bravery to try new things and the all-round soft skills to bring different factions together and ensure everyone is aligned and on the same pathway.
There is nobody else who can perform this role in the same way or with the same level of sophistication that the asset manager can. Without this specialised class of management, we will struggle to emerge from the Covid-19 quagmire with the hospitality assets we want to offer – and, more importantly, that customers want to experience – in the future.
