The advantages of operational asset management for Hotels
Asked to prepare a lecture about the difference between asset management and operational asset management for graduates of a hotel school in Belgium, I thought the question was an interesting one.
Aside from the gut feeling I had, that experience mattered over mere numericals, it forced me to delve deeper into the subject and compare past experience with some of my dealings with asset managers from generic consulting companies that offer hotels asset management services.
Operational asset management (OAM) in hotels generally outperforms traditional or "just" asset management from a financial perspective by integrating experience in day-to-day operations with long-term asset value strategies. Fair to say that operational asset managers generally have a number of years of experience in operations, whereas financial asset managers generally have little to no real operational experience. I approached a friend of mine, regional director in one of the big consulting companies and we exchanged on the subject and in broad lines we agreed on the following :
1. Revenue Optimization, Not Just Cost Control
OAM focus: Actively questions and challenges revenue streams (e.g., room pricing, F&B profitability, event space usage), sometimes in real-time, often with some delay (weeks generally).
Traditional asset management: Often focuses on long-term CAPEX planning, maintenance, and cost reduction.
I have always been a keen defender of topline. There is much more fun, more creativity and more lasting results in the development of topline, than there is on focusing on cost reduction. Having worked in 2 different organisations where the focus was so much on cost cutting (cost obsession) that all perspective for topline growth was lost I observed the best team members became demoralised and eventually these companies entered a vicious circle of having to cut costs further as there was no revenue generation.
Impact: OAM drives top-line growth while maintaining asset value, boosting EBITDA more effectively.
2. Dynamic Alignment with Market Trends
OAM considers market data, guest behaviour, personal experience, updated forecasts and operational KPIs to adjust strategies frequently.
Traditional AM is slower to respond and may rely on static or quarterly reports, in some cases even yearly reports.
Impact: Quicker adaptation leads to faster reaction, potentially leading to higher occupancy, ADR (Average Daily Rate), and RevPAR (Revenue per Available Room).
Due to the nature of the business (seasonality, volatility and low margins) agility is key and operational experience will allow you to gear differently and rapidly.
3. Improved Operational Efficiency
OAM will understand and consider cross-departmental synergies (housekeeping, maintenance, front desk) to reduce downtime and inefficiencies. Better understanding of respective contributions to flowthrough (or profit conversion/loss contribution)
Traditional AM might overlook these micro-level inefficiencies when looking at individual revenue or costs centres.
Impact: optimise operating expenses (OpEx) and better flow-through to the bottom line.
4. Real-Time Capital Planning and ROI Tracking
OAM can prioritize CAPEX projects based on ROI tied to operational needs (e.g., upgrading HVAC to reduce utility costs), experience is key attribute. Guest feedback, future trends, also taken into consideration
Traditional AM may prioritize based on lifecycle or aesthetics with less clear ROI ties.
Impact: Guest beneficial investments with faster payback periods and improved asset utilization.
5. Guest Experience and Brand Value
OAM focuses on delivering consistent guest experiences that match brand standards, directly impacting guest satisfaction and loyalty. Reputation is key.
Traditional AM may underappreciate the ROI of service quality improvements, as these are not always immediately profitable.
Impact: Higher guest retention, better online ratings, and pricing power.
6. Data-Driven Decisions
OAM leverages property management systems (PMS), CRMs, and predictive analytics for fine-tuned operational strategy.
Traditional AM may rely more on manual reporting or lagging indicators.
Impact: Better decisions drive higher margins and faster adaptation to economic conditions.
Summary Comparison:
With Orizon Advise, we bring first-hand experience to hotel asset management