WHY ASSET MANAGEMENT

HOTEL ASSET MANAGEMENT is an increasingly specialized discipline and a critical component of all successful hospitality investments, requiring expertise and engagement on a micro and a macro level during the life-cycle of the investment, becoming an invaluable resource to all parties. Having competent, experienced and knowledgeable Asset Management is as important (if not more), as having competent and capable operations management.

KEY POINTS

• Professional asset management is crucial for optimizing performance and minimizing risks in commercial real estate portfolios, particularly in hospitality.

• A competent asset manager must have a thorough and practical understanding of hotel operations and commercial real estate investments.

• They must be skilled in leveraging resources and monitoring market trends to make actionable recommendations for operational improvement, CAPEX plans and marketing strategies aligned with the cycles of the asset and the market.

• A successful hospitality asset manager must maintain an equilibrium among the needs and interests of customers, employees, and investors to deliver peak performance.

• Effective asset management requires maintaining positive relationships with the brand affiliation, the management company, and the owner.

KEY POINTS

• Ideally, the Asset Manager should be involved from the beginning of the investment process, during the life of the investment, and through the exit, supporting the entire process to be most effective, as well as providing valuations or a Broker's Opinion of Value (BOV) based on financial metrics, valuation factors, market trends, and asset condition.

• A professional Asset Manager analyzes investment options, presenting recommendations using sound investment metrics and calculations.

• Asset Managers can also assist in negotiating and structuring acquisitions.

• After acquisition, the Asset Manager partners with and supports the Operator to maintain peak performance.

• A detailed review of the Asset Management Plan can inform decisions on whether to hold or sell the asset, or analytically justify CAPEX, periodically updating investment metrics.

• The Asset Manager can also support managing the disposition process.

Below is an abbreviated highlight of a sample Asset Management Plan outline. This is adapted to each asset, portfolio, and investor requirements.

KEY POINTS

• Establishing ownership investment objectives and how the capital stack is structured.

• Planning steps to acquire and absorb the asset into the portfolio and establish or reaffirm "flag" or brand affiliation.

• Monitoring and supporting performance, as well as physical management of the asset.

• Outlining an exit strategy.

• Research and data analysis are critical components, including market share and competition overviews, monitoring key performance indicators, and periodic operational department overviews.

                       HOTEL ASSET MANAGEMENT PLAN OUTLINE A-G

A. Determine ownership investment objectives

B. Structure of Capital Stack

C. Take steps to acquire and absorb the asset into the portfolio

D. Determine and/or establish "flag" affiliation

E. Review if existing, or secure new Hotel Management Agreement (HMA)

F. Monitor and influence performance

G. Exit or conclude the investment

Required Data Bank Plan Build-Up:

• Property Description Summary
• Executive Summary of Plan
• SWOT Matrix (Strengths, Weaknesses, Opportunities, and Threats)
• Priority Action Plans
• Exit Strategy Plan Summary
• Research and Data Analysis:
  • Market Overview - Demand
  • Competition Overview - Supply
  • KPI (Key Performance Indicators):  

Overall Trends and Projections, Revenue, Expense Controls, Guest Service Metrics, Associate Surveys, STR Index, GOP Variances, and Brand Inspections. 

• CAPEX (Capital Expenditures) Overview. Recent, Short-Term, and Long-Term Needs. PIP (Property Improvement Plan)
• Investment Proforma and Budget Summary
• Marketing Plan Synopsis
• Detailed Operational Department Overview: 
  • Costs of Goods Sold (Food and Beverage costs). Purchasing Systems, Procedures and Practices. Menu Costing and Development.
  • Labor Cost Controls
  • Inventory and Supplies Controls
  • Seating Capacity Analysis
  • Key Staff. Strengths and Weaknesses. Open Positions
  • Staff Recruiting, Training, and Retention.
  • Significant HR Issues
• Current or Potential Legal Exposure, Code Compliance, ADA, etc.
• Highlights and Summary of HMA (Hotel Management Agreement)
• Key Terms of Franchise Agreement
• Abstract of Financing Terms
• Equity Financing Structure and Waterfall Provisions
• Contractual Obligations (i.e. Service Contracts)
• Major MEP (Mechanical, Electrical, Plumbing) Costs and Life Expectancy
• Taxes and Insurance Summary
• Recap of Last Property Visit and Follow-Up Items
• Summary of Recalibration of Key Investment Metrics Validating Investment Window or Duration.
• Other

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ORION HOTELS, INC.  believes in providing our clients with honest advice and guidance every step of the way. Whether you're buying, selling, building wealth short-term, or investing long-term for capital preservation in the hospitality sector, we are here to support you with experience, integrity, and proficiency.