ATLANTA—Establishing the distinction between a property’s asset manager and management team is something that should be done early on, according to a panel of asset managers at the last week’s Hunter Hotel Investment Conference.
While handling of the day-to-day operations of the hotel is left to management, the asset manager is overseeing profit and loss, and managing budgets, said Larry Trabulsi, VP of Capital Hotel Management LLC, during the breakout session titled “Hotel Asset Management.”
In Trabulsi’s company of approximately 15 people, each asset manager has about five hotels, he said. CHM’s typical profile of an asset manager is someone with hotel operations experience and some degree of finance experience.
When Trabulsi and his company gets involved with an asset, the first thing they do is to ”start establishing goals for the asset,” Trabulsi said. The asset manager then has to be consistent in working with the management team to achieve these goals.
In a gaming market, such as in Nevada, it’s an important distinction because there are specific licensing requirements involved, said Steve Angel, principal of Fulcrum Hospitality, who serves as asset manager for The Cosmopolitan of Las Vegas.
An asset manager’s involvement as a more strategic and tactical component to the team is especially beneficial in a gaming market, Angel said.
When he is working with investors and people in private equity, Angel describes himself as a “liaison.”. “I speak the languages of both operations and finance.”
When working in the operations side years ago at the Ritz-Carlton in Philadelphia, Angel said he could not understand why the hotel could not replace the bedspreads and purchase new pillows when selling rooms at $225 per night.
He didn’t understand the bigger picture of finance and how ownership thought about things. Today, his role is to help both ownership and operations understand the other side, he said.
Opportunities for revenue
One of the biggest missed revenue opportunities, the panelists agreed, is in Internet sales.
“For those properties that are able to hold off and not give it away and put a revenue model in place, there’s going to be an additional opportunity,” Angel said.
With companies such as AT&T and Verizon doing away with their unlimited data plans, consumers are going to realize the Internet is not a free pipe from which to take as much as they want, he said.
If it is marketed and packaged appropriately, it could be an additional source of revenue in the coming months, Angel said. “What I mean is having plans that allow them to access the kind of content they want at a reasonable speed.”
Nickel-and-diming someone with a BlackBerry, an iPad and a laptop to pay to access the Internet on each of those devices is not the answer, he said.
Brands are starting to realize this is a cost run amuck, said Craig Mason, senior VP of asset management at Host Hotels & Resorts.
“Full-service (hotels) going free is not the answer. What has to happen is that select service has to start charging for bandwidth,” Mason said.
Marriott International, he said, is the furthest along in developing a tiered-Internet model that works.
Mason then brought up another lost revenue point. “A lot of these hotels haven’t had a lobby renovation in 15 to 20 years,” he said.
The first fact one has to accept is that a 20-year-old lobby is no longer relevant today, Mason said.
Owners obviously want to get a return on investment on any capital spent, but spending money is just part of doing business today, he said.
Mason said one of the properties he manages is now activating a space that was once considered dead space because the hotel was not making much use out of it. The area was converted into more meeting space, which turned out to be a good ROI for the property. They now are seeing higher beverage sales.
Concerns in 2012
While the asset managers said they have been able to keep certain costs down during the downturn, properties are still getting hit hard by property taxes.
“I am deathly afraid right now of property taxes as you look at what’s happening in municipalities where the revenue base is still not growing. They’re looking at a commercial base to be able help support that,” Angel said.
Everyone also is focused on where fuel prices are going, Mason said. “At this point, we don’t see it as a big threat until it starts getting at above the $4.50 a gallon range.”
The way it will manifest itself is that consumers will opt for more staycations than they did a couple years ago, Mason said. He is concerned hotels in Hawaii might be negatively impacted because of increased airfare.
Unionization in certain markets also continues to be a concern, Mason said. Non-unionized properties are trying to keep up with the unionized properties, and it is putting pressure on a lot of hotel management teams, he said.
“We need to continue to be looking at better, bigger management systems that get the right people in the right place that offer the right level of service,” Mason said.