Note: This is part 1 in a series of 5 articles following our recent Hospitality Management MBA Bootcamp at ESSEC Paris. The session on Asset and Demand Management was conducted by Alex Slors of Alex Slors Consulting
Asset Management’s objective of increasing the asset value rests on three main stakeholders: the Owner, the Hotel and the Operator. Working in an increasingly complex environment and structure, Asset Managers have an ever-growing need for reliable data to ensure the three parties are working jointly to improve/optimise asset’s performance.
This means understanding the financial objectives, while working with Revenue Managers, to expound the limitations of distribution, and working closely with Marketing to increase the promotion and marketing activities to improve demand and coordinate for optimised delivery.
Hotel Demand Management is a holistic approach to finance, revenue, distribution and marketing. By properly using the hotel’s data, and aggregating it into usable and comparable data points, risks in the decision making process are drastically reduced.
Hotel Demand Management is crucial to Asset Management.
The Asset Management triangle explains the relationships that increase asset value and the key conclusion that:
“Only when all three parties function well and get a FAIR SHARE of the cake can we maximise on the overall ASSET VALUE and reach an OPTIMUM in valuation.”
The Asset Manager in the middle of the triangle needs to ensure that relationships and agreements between the Hotel, the Owners and the Operators are optimised; and to work closely to understand what is generating the demand, and how to properly cater to that demand. To do this, Asset Managers use Demand Management tools, which properly analyse data, seeing that good data reduces risks and opinions.
Understanding the three stakeholders:
The Owner/Investor invests capital into the hotel, with hopes to improve the value of the investment through an exit strategy, and expects a return on investment. Depending on the investor this can be a long term dividends strategy, or a sale/merger return.
The Hotel manages day-to-day activities in the hotel. The main objective of the Hotel and its staff is to take care of the guests. A Hotel’s executive team is concerned with profit and loss, but its main focus in day-to-day activities is guest experience and satisfaction. This tends to put some strain on the Owner/Investor and Operator relations, because improving quality often means increased costs.
The Operator attempts to increase the top line revenue by ensuring the average price and occupancy keep increasing. Experienced operators keep an eye on the bottom line. But the Operator’s main concern is often focused on the top-line through a revenue maximisation strategy and rarely a profit optimisation strategy, which again puts strains on the Hotel and the Owners, who have slightly different objectives.
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