The symbiotic relationship between hotel asset management and revenue optimization

Conversely, when collaborating with asset managers, I notice a tendency for them to step into revenue meetings without fully grasping their market context and then influence strategy decisions that may hinder the overall success of their asset performance.

That being said, as the cost of operating and financing a hotel asset continues to escalate, there is more and more emphasis on ensuring that revenue performance is at its peak. Additionally, it’s no longer good enough to say this hotel is performing well from a topline standpoint. Profit has to be on the minds of the entire executive team across all revenue centres.

As we view this unique relationship between owner representatives and revenue leaders, let’s explore why there are still silos today, discover ways to overcome the communication gaps, and better understand how the two groups can take advantage of the strengths each brings to the table to fully optimize the asset value.

What asset management/owners wish revenue optimization teams knew about unlocking a hotel’s value

Ensuring your revenue teams understand the investment objectives is really important and allows your team to better gain perspective on what they are trying to collectively achieve with the owners.

Having worked at the property level for many years and even when I worked for management companies at the above property level, I often found myself in the dark regarding the owner’s objective for their assets. It was sometimes the best-kept secret, and we were left guessing. When I moved over to the hotel asset management side, I found myself working with revenue teams to help them gain perspective on why we acquired the asset to begin with, and what we were trying to achieve.

Asset managers will tell you a lot goes into underwriting a new asset. Besides evaluating the overall asset value, owners need to demonstrate to bankers, insurance companies, and investors that the loan risk is not too great and whether the overall deal is a wise investment. This involves looking at parking, retail space, under-utilized space, optimal mix of business, optimal mix of rooms, the appropriate number of keys, rooms to meeting space ratios, expected capex required, determination of brand affiliation or operating as an independent, management companies, management teams, and more. The key objective behind all of this, of course, is to determine if there is enough unlocked value to ensure a successful acquisition and provide sustained ROI.

Investment cycles also play into enterprise goals and objectives. In general, while short-term investments focus on immediate operational needs and revenue generation, long-term investments emphasize sustainability, growth, and value creation over an extended period. Balancing these short-term and long-term considerations is essential for maximizing returns and ensuring the success of hotel investments. From a revenue generation perspective, if the investment is short-term strategies will focus more on generating cash by using the means necessary to obtain a customer base and taking advantage of the peaks and valleys in the marketplace. Conversely, over the long term, hotels may implement strategies to diversify revenue streams, such as investing in conference facilities, spas, or restaurants to stabilize income beyond room bookings.

Finally, asset managers would like revenue teams to focus on all revenue streams in a hotel. Hotel revenue optimization has traditionally focused solely on room revenue, but in today’s competitive landscape, it’s essential to consider revenue from various sources beyond just room bookings. By optimizing these revenue streams, hotels can significantly boost their overall profitability. Revenue optimization strategies that consider multiple revenue streams rely on sophisticated data analysis and forecasting techniques. By leveraging data analytics, hotels can gain valuable insights into guest behaviour, market trends, and pricing dynamics, enabling them to make informed decisions to maximize revenue across all channels.