In this issue, we offer two perspectives on hospitality real estate, which has evolved from a specialist asset class to become a key component of many investor portfolios. Here Jonathan Humphries, who heads our International Hotel Development and Finance Bachelor’s specialization, argues that in a fragmented, post-Covid commercial landscape hotels must show total flexibility in their approach to market. And who sits at the center of delivering this ‘agile state’? The asset manager.
Who holds the influence in a hotel? The General Manager? The brand which has its name above the door? The owner of the bricks and mortar real estate?
In my view the hero of the story, and the one person with the means to bring all those differing – and sometimes competing – interests round the table, is the asset manager.
For anyone unfamiliar with the role, the asset manager is the guardian of the financial investment in a hotel or other hospitality-related property. He or she is responsible for ensuring the right choices are made to maximize the value of the asset, at every stage of the cycle from initial purchase to eventual disposal.
And this matters more than ever, when placed in context of an explosion of interest in hotels as a commercial real estate asset class. Once seen as the playground of the specialists, in recent years hotels have increasingly been acquired by insurance companies, pension funds, sovereign wealth managers, family offices and pretty much every other type of professional investor.
The numbers are eye catching. In Europe alone, hotel investment transactions¹ grew from €6.5 billion in 2010 to a record high of €27.1 billion in 2019, the last full pre-pandemic year. And though the Covid-effect has since forced transaction volumes lower, the overall outlook remains strong. For example, advisors Cushman & Wakefield recently published research² in which over a third of major hotel investors said they wanted more European hotels in their property portfolios, with only 21% planning to scale down their investment activity.
“Once seen as the playground of the specialists, in recent years hotels have increasingly been acquired by insurance companies, pension funds, sovereign wealth managers, family offices and pretty much every other type of professional investor.”
The game changer
This flood of new money into hotel real estate has been a game-changer for asset managers. Not only has it increased demand for professionals with this skillset; it has also given much greater visibility to the importance of the role, and its unique position as the glue that holds the asset management strategy together.
As if that wasn’t enough, the shock of the pandemic has left the hospitality sector in an unprecedented state of flux, placing even greater expectations on asset managers while at the same time giving them an extraordinary opportunity to make the difference between ultimate success or failure.
If that sounds overly dramatic, consider this. We still have no idea of the long-term effects of the pandemic on tourism and hospitality. We do not know which segments are coming back, let alone how they will come back. There are so many as-yet-unanswered questions around hybrid working, meetings and incentives, corporate travel, and leisure travel, that hotel owners and operators need to be ready for whatever turns up.
How can they do this? By making the guest space more customizable, more flexible and more easily adaptable to rapid market shifts. It’s simply no longer feasible to establish a positioning and say ‘that’s good for the next 10-15 years’ when you don’t really have a clue what the market segmentation is going to look like over the next 12-18 months.
Moving from a fixed-state to a dynamic-state approach is highly challenging, and of course there’s always a chance you read the trends wrongly and miss the target. But in our present, highly volatile marketplace the risks from simply staying the same are, for me, significantly higher. And in any case part of the built-in benefit from being agile is the ability to right any wrongs fairly quickly.
I mentioned the increased demand for asset managers who have the specialist knowledge to work within a hospitality context. And by that I mean not just hotels but also the many other operational assets that fall within the broader hospitality definition today – such as co-living, branded residences, serviced apartments, youth hostels, and so on.
When it comes to fulfilling this demand, the major hospitality business schools – like Glion, where I teach – are on the case.
When it comes to fulfilling this demand, the major hospitality business schools – like Glion, where I teach – are on the case. In this, we are working closely with HAMA, the Hospitality Asset Managers Association. This group, which started in the United States, represents the world’s major owners of hotel and hospitality real estate. And each year it runs a competition, in collaboration with a member company, for hospitality students to test their asset management skills on a live consultancy project relating to a real-life hotel property.
For the 2021 competition we are working with Starwood Capital, one of the world’s leading owners of hospitality real estate, and I am also pleased to say that the competition has expanded to involve four major European hospitality schools, including – for the first time – Glion’s sister school, Les Roches.
The high status conferred on this competition is exemplified by a prize that includes the opportunity to present the winning concept at the HAMA Annual Meeting in Berlin. It’s a clear signal of how the hospitality asset management industry recognizes that it’s waging a war for talent.
If investors want to make the most of the post-pandemic recovery, in whatever form it takes, then it’s essential to have a strong pipeline of talented individuals who can combine knowledge of hospitality operations, financial nous, the bravery to try new things and the all-round soft skills to bring different factions together and ensure everyone is aligned and on the same pathway.
There really is nobody else who can perform this role like the asset manager. Without them, we won’t emerge from the Covid quagmire with the hospitality assets we want to offer – and more importantly that customers want to experience – in the future.
Main image: Yuichiro Chino/Getty
“Make your choice” image: Tetiana5/Getty
Be wise, specialize
International Hotel Development and Finance is among the final semester specializations offered by our Bachelor’s in International Hospitality Business. Click the link to discover more.