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A Word to the Wise Regarding Asset Management

Kenneth Greger

How to Avoid Sticking that Sharp Pencil in Your Eye

As an industry advisor and in a position to see all components of the hotel world – the property, the team, the guests, the brand, the management company, the ownership and capital partners – it’s amazing how a group of very smart people seem to regularly overlook key fundamentals, and that is the Asset Managers. Of course, this doesn’t pertain to all Asset Managers, but those of you reading this article will know if you’re being described. Before presenting the issue, first a review of the business. It’s not rocket science. There is a point to made, so please read along: Hotels exist to host people who are away from home, or who come in for meetings, meals or entertainment. There are several types of hotels, from budget to luxury, and the pricing reflects that. Hotels succeed by taking care of the people who come in, whether local or overnight guests. The customers have many choices, so if the hotel fails to deliver, they won’t come back. Worse, in this age of social media, many will post comments directing others to avoid the hotel altogether.

How the hotels take care of customers is through the team of associates who work there, from the General Manager and his or her executive committee, to the many employees who give of themselves every day to make the guest experience a good one, from cleaning rooms to doing dishes, laundering linens, parking cars, providing spa and salon treatments, serving food, and so much more. Without these people, the hotel can’t function. And if not for these people, there would be no brand or delivery on the promise.

How hotels make money is to optimize occupancy and rate, as well as by driving guests and locals to dine in, conduct business meetings, partake of entertainment and spa salon services, and whatever else the hotel or resort offers. Of course, it’s the team of employees who deliver all these services, the quality of which determines whether or not the guests will return. And the happier the employees are, the better the guest experience. So retaining a great team that delivers excellent service and experiences creates repeat business and positive reviews – including social media – which are key to a successful, profitable hotel business model. Clearly, the preceding is fundamental and, of course, Hotel 101. But it’s been reviewed here because there are a multitude of Asset Managers who seem to be clueless or to have disregarded these fundamentals altogether in the name of a sharp pencil. This author is a CPA with experience in two of the Big 4 accounting firms and can certainly appreciate the fact that hotels are businesses and ownership has every right to expect an ROI. Without the ownership, the employees would have no jobs, so it’s a marriage. But for a marriage to be happy and lasting, it takes two, not one.

And that brings us to the issue with Asset Managers, whether independent or on the owners’ team: Many are sticking that sharp pencil in their own eye and making it much harder to achieve the desired ROI. How is this happening? It’s really simple, and it’s all about that marriage, which is also known as a partnership.

When an Asset Manager makes operational mandates to the property GM, and/or creates an environment where the Asset Manager’s tone and demand for reports sends a message that what he or she wants is more important than anything else, it erodes the marriage. Not only does this cause the partnership to become woefully one-sided, it disrupts the entire business model – fear creeps into the equation and creates an “us-them” environment. Employee morale, attitude and trust are shredded and – undeniably – guest service is severely impacted. Essentially, this injects a tsunami of negativity into the property.

From where this author sits, the evidence is abundant. Like guests, hotel GM’s and associates have a choice as well. There are some great properties out there that would look very good on a resume, but the A-players won’t touch them because the owning REIT or 3rd party asset management company has a negative reputation that represents too much career risk. They are smart enough to avoid being set up to fail. We recently saw a GM resign from the top property in his market due to the asset manager’s style, and – because the GM is highly regarded by his industry peers – none of them will touch the job. So who loses? Everyone, including the guests, the hotel team and the owner.

Let’s face it, many Asset Managers have never worked in a hotel. If you’re in such a role and arrogance has crept in, replace it immediately with serious emotional intelligence. If you’re expecting the hotel team to deliver great hospitality, why aren’t you treating them the same way you expect them to treat guests? How can there be a double standard? Be self-aware – how is your behaviour and style impacting others? Once again, all of the players involved are vital to the ROI you’re supposed to help achieve, so demonstrating respect for the importance of the marriage will bring greater long-term success, including the attraction and retention of top talent. Hitting people with a hammer has never motivated anyone; they may do what’s asked because it’s their job, but you won’t hold onto anyone good. And remember, social media can come back to haunt employers as well, such as www.glassdoor.com.

So instead of sticking that sharp pencil in your own eye, remember that it’s the hospitality business. We’re supposed to make people feel good. Think about it!

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About the Author

Kenneth Greger, Partner

+1 (503) 803 2300

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