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The Evolution of Asset Management into a
True Value-add to the Hotel Investment
 
 
Joseph S. Bello, CHA, July 2010

Back in the early 90’s, I had the pleasure of managing a wonderful hotel in the Walt Disney World area of Orlando.  The hotel was located just outside the Main Gate of the park, and enjoyed a thriving business from domestic and international tourists.

When I accepted the assignment as General Manager of this fine hotel, I was informed that the ownership was a REIT.  At the time, frankly, I was not familiar with a REIT, nor had I ever been involved in the management of a hotel that was owned by a REIT.  My Regional Director brought me up to speed on “how things would work”, and handed me the card of a gentleman who would be my “Asset Manager”.  More explanation followed, as I had reported to regional managers, district managers and other management company leadership folks, but I never had an Asset Manager to deal with.

Soon, my Asset Manager paid me a visit.  He was a likeable person, quiet and studious.  His background was accounting, and he had never actually managed a hotel himself, but had certainly taken a  few vacations with the family. 

For two solid days, we pored over the P&L.  Line, by line, by line.  As I answered all questions to the best of my ability, my Asset Manager took copious notes.  To wrap up the visit, on day 2, we took a quick spin around the hotel, looked at the pool, a room, the tropical lobby and the health club.  We shook hands, and, off he went back to his REIT headquarters.

Five days after the visit, my immediate supervisor received a lengthy letter from my Asset Manager, describing everything I was not doing correctly, and how the hotel, financially, could certainly perform better. 

For each quarter for the next 3 years, the Asset Manager visits pretty much followed that pattern.

WOW!  How things have changed!

After being an Asset Manager now for seven years, and having been involved in every type of hotel from small limited service properties to large resorts, it is amazing to me how this critical position has evolved.  As my career prior to Asset Management involved General Management, Regional  Operations and Regional Sales responsibilities,  I feel as though I have a unique perspective on the importance of the relationship between the ownership and management of the hotel asset.

Here are a few points that I would like to share, knowing that our industry, and the role of Asset Manager, has evolved into a true value-add to the hotel investment.   Before getting started with sharing a few ideas, let me say that the first thing Asset Managers need to know is this simple mindset:  First and foremost, the Asset Manager is not the “Manager Police”

This may seem like a fundamental point.  However, there is sometimes an air of “us vs. them” when it comes to ownership relationships and opinions of the management company representatives or the leadership teams at the hotel.  This attitude fosters distrust, negates any possibility of harmony and mutually beneficial business synergies, and flat out takes the fun out of our business. 

The management agreement notwithstanding, there are a variety of ways to foster and forge a partnership whereby the combined energy and resources of both parties work together to ensure that the hotel performs to its absolute peak.  Some of those strategies are in the next bullet points.

  • Set Clear, Concise Goals:  This does not refer to the annual budget.  Let’s face it, this annual ritual we all go through every year is absolutely necessary on several levels, cash flow and FFO projections being one of them.  But more importantly, it is vital that after the three-hole punching is all complete, and the document is in the binder on the bookshelf, that the activity of monitoring and benchmarking becomes a fluid, 24/7 culture that involves continuous communication and teamwork.  What we thought in August 2009 regarding June 2010 doesn’t really matter much right now, does it?  Our industry had a stronger first half than expected…..any manager or asset manager who didn’t completely revamp their thinking on rate strategy and market segmentation missed the boat.
  • Have some fun, darn it!  Dust off the Amex, make that reservation, and have some fun together.  Take the team out for a congratulatory dinner for a great quarter and recognize the management company regional team for their persistence and strong leadership that got the results. 
  • Look at the same reports:  I spend as much time on the managers (and major Brands) websites as the hotel and regional teams do.  GSS Scores, Scorecards, Flash Reports and STR Reports….the asset manager should be living it with the managers.  Become fluent in all technology related to the hotel, its social media and internet presence, and the tools that are available.  How else will success ultimately be achieved if only one of the partners has the knowledge and wherewithal to ask the right questions?
  • Understand the manager’s business objectives:   The Asset Manager, often, is not the person “with the checkbook”.  However, a good asset manager is an advocate for the hotel team, and a conduit to the people who do have the checkbook.  It is extremely important that, the more the Asset Manager understands the goals, strategies and needs of the hotel, the better capex decisions can be made and deployed.  Ultimately the asset manager has a fiduciary responsibility to his or her employer, and making the right investment decision when it comes to capital expenditures is critical to the overall returns of the investors.
  • Reward, Reward, Reward:  Yes, the ownership, whether it be a REIT, private equity or a publicly-traded company, pays the manager according to the management agreement.  And in some cases, the Incentive Management Fee becomes a reward on a higher level.  For the Asset manager, I am referring to something more basic.  It is easy to become “disconnected” when you are no longer a part of the hotel team, as your role is not to be “the manager” as you are representing the ownership interests in the hotel investment.  One simple way to ensure that you are not viewed by your hotel teams as “the police”, is to do the following:  At month end, separate all of the “good” P&Ls, STR Reports, GSS, etc and the “need attention” hotels.  Send the General Managers of the “good hotels” your appreciation for their efforts…and copy their boss!.  There is plenty of time to visit or make a phone call to strategize with the hotels that may be falling short of budget, or losing market share.  Recognize the performers and thank them for their efforts.  In due time, you will have a portfolio of hotels, with a multitude of managers, that is exceeding your investors expectations!
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Contact: 

 Joseph S. Bello, CHA
VP, Asset Management
Inland American Lodging, Inc
200 S. Orange Ave, Ste 1200
Orlando, FL 32801
bello@inlandgroup.com
 

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