Hotel asset management is evolving at a fast pace, and it requires a new commercial approach, not to mention a different skill set.

Traditionally, asset managers have hailed from a finance or general manager background, and their primary focus when evaluating hotel performance has been profitability.

Of course, profitability is crucial, but it is as equally important to assess how revenues can be optimized from the top down, taking into consideration the hotel's commercial plan.

It is an area of expertise many asset managers are lacking, but there is a solution.

Bringing on board an expert in revenue-management optimization makes perfect business sense.

Bridging the gap between the asset manager and the owner, they will not only look at every detail, but the big picture, too, squeezing revenue out of every business unit.

They will scrutinize top-line revenues to see if these align with commercial planning, assess if they are adequately monitored, and consider if returns generated correlate with money being ploughed into marketing, sales and PR efforts. If not, they will suggest adjustments and fine-tuning to rectify anomalies.

All too often these functions operate in silos, leading to inefficiencies and diminished returns.

Meanwhile, owners are blissfully unaware, assuming their asset management company’s mainstream approach is sufficient, when in reality, there’s a more profitable — and innovative — path that can be taken.

This is particularly true for ultra-luxury and destination resorts, which benefit greatly from hiring an external commercial expert to shake things up and breathe new life into the asset.

With a revenue optimization pro aligning every individual, department and hotel business unit to achieve a common commercial goal, it’s a win-win for every party.

Here are my top tips to help asset managers review hotel budgets with a commercial lens.

A commercial plan is not negotiable; it serves as the blueprint for activities and activations that drive revenue across all business units including rooms, restaurants, spas, activities, retail and attractions.

Asset managers should scrutinize this plan to ensure that marketing, sales and PR efforts align with the planned activities. It's essential to measure the return on investment of these efforts and determine their impact on the hotel's bottom line.

Asset managers must examine the finer details, from cost-per-acquisition by country to carefully evaluating ROI on trade shows and conferences. The ultimate goal is to ensure strategies are reflected in the financial numbers and lead to both profitability and profit per square meter.

The structure of the hotel's individual teams and the key performance indicators of each play a crucial role in realizing the commercial plan's objectives. It's essential to align the team structure with the strategies outlined in the plan. Each team member's KPIs should correlate with the plan, ensuring everyone works toward common goals.

To prevent dilution and internal competition among departments, consider implementing joint revenue KPIs. For example, if marketing dollars are allocated to generate more revenues for the hotel's website, ensure these efforts are not hindered by specialized sales agreements or restrictions from online travel agencies. A "stop, start, continue" approach should be applied to evaluate previous commercial tactics, determine what has worked and what hasn't, and make necessary adjustments.

Repeat customers are a gold mine for hotels; they not only drive more revenues but increase the lifelong customer value. Asset managers should understand how the hotel incorporates repeat customers into its overarching strategies. Ultra-luxury hotels, in particular, should have dedicated teams to nurture and retain their high-spending clientele.

Consider whether the hotel has a strategy for customer loyalty that goes beyond traditional programs. Identify the highest-spending customers, track repeat guest numbers and evaluate whether these figures are on the rise or decline. Commercial teams invest significant time and resources in attending trade shows; it is vital to allocate time for in-market events that cater to key customers who consistently contribute to the hotel's revenue.

When analyzing commission and technology costs, there are questions to ask. Have these been renegotiated in favor of the hotel? When was the last time the tech stack was reviewed and evaluated? What is the three-year plan for technology? The answers inform your next moves to ensure the hotel remains competitive and does not incur unnecessary costs due to auto-renewal contracts. By optimizing these costs, the hotel can redirect resources to revenue-generating activities.

And here’s a thought: Consider benchmarking your asset management company against the competition. This sheds light on fee structures and help owners and asset managers understand how their fees compare.

The best-performing hotels are those that have embraced a total revenue optimization culture. Historically properties increase profits by up to 20% once the culture is embedded. This holistic approach encompasses a spend-per-occupied room strategy and the scrutiny of revenue across every business unit to keep the business agile and firing on all profit cylinders. Consider if there is as much focus on food and beverage and spa operations as there is on rooms — traditionally, there is not — and look at how these revenue streams can be better optimized. It is a team effort and ideally you need an expert to help shift the focus.

Asset managers must also consider the hotel's profitability in terms of square meters. Strategies should not stop at the EBITDA level but encompass the overall investment and market trends. It's essential to identify any underutilized spaces that could be repurposed to generate additional revenues and profits — turn car parks into pickleball courts, ballrooms into food markets and lobbies into collaborative work hubs. Dead space is out; fully optimized spaces are in.

In a rapidly changing industry, hotels must adapt to evolving trends to stay competitive. A five-year capital expenditure plan that focuses on innovation is essential, but ROI on adaptations must be evaluated. Staying ahead of the curve will maintain profitability and avoid losing out to competitors who shift more swiftly.

This asset management game plan should involve an expert in revenue management optimization who can bring a commercial lens to the table. While profitability remains a critical metric, optimizing revenues from top to bottom and making strategic decisions across marketing, sales and operations are just as essential. By following this master plan, asset managers can blitz their budget reviews and help hotels achieve sustained success, keeping their owners happy and their management contracts intact.

Asset management with a commercial lens in 2023 is not negotiable. It’s a must.

Judith Cartwright is founder and managing director of Black Coral Consulting and an associate member of the International Society of Hospitality Consultants (ISHC).

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