run down building door reflecting importance of hotel capex to drive returns

As an asset manager, it’s my job to create and manage the relationship between owner and brand, to ensure that all parties are working together towards one goal: a profitable property. The assumption from the outside is often that my primary role is to protect the owner from the brand’s changing and often costly brand standards.

NB: This is an article from Global Asset Solutions

The news that a brand is being overhauled is never received well by owners, who fear that they will have to spend out on new amenities – mattresses were popular at one time – which are now part of the brand standards and absolutely must be acquired, at the risk of losing the flag.

Such were the perceived costs of meeting every page in the hotel brand book that, in the past, owners and investors have been tempted to move to flags with a lighter touch, distribution-only, soft brands. The collection brands have now become established in the luxury segment, eager to show off the hotels with character they have in their stables, the ones which stand out.

But even those hotels which don’t carry a distinctive neon sign or trademarked bed need investment. While I am eager to protect investors from unnecessary spending, I would be failing in my duty if I didn’t encourage creative spending.

Nevertheless some time this has to do with the operator’s inability to prepare and present the right information to the Owner and convince him about the necessity of the renovation or due to a lack of trust. As consumer needs evolve and a product life cycle comes to an end, the asset managers need to work again hand-in-hand with the hotel executive team to create a renovation project with a clear vision, all the associated costs, operator-approved projections and, of course, the return-on-investment analysis. We also recommend presenting an S&M strategic plan to support these projections, including precise marketing actions, timeline and who will be responsible. In a world where everything changes so quickly it is important to follow the flow and change. Who doesn’t change fails.

For many owners, it’s no less hard a sell than changing the font in the sign. There are multiple owner profiles, from private equity houses wanting to flip in seven years to generational investors wanting to pass an asset down. But all of them are focused on making money. And many of them see a hotel as another earning asset, with every possible piece of cash to be taken out of the business.

Read full article at Global Asset Solutions