Before March 2020, hotel operations varied hugely. The sector was on a high. STR reported a record year in 2019 and, although costs and supply were both rising, it seemed that a cyclical dip was being pushed ever farther back, and the good times could continue indefinitely.
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One cloud floating on the horizon before the pandemic spread was that of costs. RevPAR growth was slowing. Revenues were unable to keep pace with growing costs and ADR was rising at a slower rate than inflation, which was being stoked by a multitude of issues, including staff wages.
Then, in early 2020, many hotels were forced to close entirely, forcing owners to face an unheard-of situation, with zero revenue. A situation few had ever modeled and one which exposed the flaws in their operations, issues which, when times were good, they may have overlooked.
The time for overlooking was now past, and we found that owners were coming to us, wanting an even closer look at every aspect of how their hotel functioned. As specialist asset managers, being those fresh eyes on a property is at the center of what we do, but it was rare that we had a chance to take hotels back to the very beginning and create a whole new approach.
The move away from thinking of hotels as just heads in beds had been in progress for some time, gradually. The growth of sectors such as co-living, co-working, and peer-to-peer lodging was driving changes in operational real estate which were being felt in the hotel sector.
Hotels were being viewed more and more as a mainstream asset class and attracting investors who were more used to less complicated assets, those with greater transparency than the hotel sector has traditionally known. The demands of this new group of investors have meant that every ballroom, every large reception area, every meeting room, must make a case for its existence.
For me, asset management has always meant managing the whole asset, not just the beds, and that thinking is now becoming the norm. Owners – and the brands – are looking afresh at what each space means, about whether it can be multi-functional and about whether it is being put to the most profitable use.