5 big challenges for asset managers

While an asset manager's job is never easy, top line growth over the last couple of years has made it more straightforward to mitigate rising costs. That all looks set to change in 2024. How then should asset managers be thinking about their job and  what should they be focusing on?

At this year’s IHIF the Hospitality Asset Managers Association (HAMA) Europe, will once again recognise the key role played by the industry in sustainably growing asset value and driving underlying investment returns with the presentation of the Asset Management Achievement Award.

Ahead of the deadline for first round submissions is (6 February) Hospitality Investor caught up with a group of experts to discuss the challenges facing the industry at the start of 2024.

1. Slow growth and cost creep

The early signs are that growth on the top line is slowing with growth in revpar expected to be in the low single digits. We're heading back to the normality of the pre-pandemic era. The challenge is obviously predicting what's going to happen with costs, and that varies region by region. In Europe, for example, energy pricing was the big factor whereas in the US the bigger issue is around labour. So far a lot of these cost increases have been offset by rising rates, but what happens if and when this is no longer the case?

2. Deployment of capital

Here is where it can get tricky to make sure owners and operators are aligned. At the moment money is less likely to go towards FF&E but will instead be used to service debt in a high interest rate environment. That means that renovations are put on hold for the time being. That doesn’t mean it won’t happen, it just might not be this year.

3. Customer demand reset

In the early days of post-lockdown travel there was an understanding from customers that the experience they would get at a hotel wouldn’t be the same as it was back in 2019. But as those days have receded from memory. Hotels have to be able to balance the issue of costs and profitability on the ownership side with the promise to customers on the other. This is now more acute because of the price rises we have seen over the last couple of year in terms of daily rates. More and more customers are going to be asking what they are getting for their $200 or $300 a night spend.

4. AI in the real world

This year we should expect to see AI move from the theoretical to the practical. The most straightforward way this is likely to impact hotels is through the customer booking channels. We might not be very far away from the end of “search” as we know it where keywords are replaced by something very different. There’s also potential on the back end, including with payroll, staffing, training etc.

5. Bigger role for general managers

The role of the hotel general manager has evolved significantly over the last couple of years with GMS becoming more involved in asset management. There’s also a push for staff to become much more flexible within org charts. Overall there has been a much closer relationship between the GM and the asset manager, which has been helpful in driving ADR. Before, operators were thinking more in the interest of the guests and their own brand now they're really much more aligned with the with the owner.

If you are interested in applying for this year’s award, you can apply here. Submissions are invited for single assets and portfolios located exclusively in Europe. The deadline for entries is 6 February, 2024.