Selecting an asset manager for your hotel involves a process of evaluation and investigation, which will pay off in the long run.
The final topic of discussion in this series of articles on hotel asset management is focused on the criteria owners should look for when selecting an asset manager.
Part I outlined the reasons for why an owner would look to have an asset manager in the first place. Part II offers clarity on those characteristics that serve to define “best-in-class” asset management firms and key considerations for selection.
Here, in my view, are some specific characteristics that define “best-in-class” asset management firms:
- Deep, multidimensional hotel industry experience;
- owner empathy;
- operator empathy;
- ability to think strategically;
- keen “general” business acumen;
- creativity (problem solving and opportunity creation);
- management and leadership skills;
- influential relationships with brands and operators;
- good judgment (knowledge is knowing a tomato is a fruit… judgment is knowing not to put it in a fruit salad); and
- trustworthiness (meaning they will always work for the hotel owner’s best interest—even if it is not in their own best interest).
Beyond the claims or promises promulgated by any given asset management firm, how would a hotel owner really separate fact from fiction to make the right selection? Fortunately, the formula is not rocket science—and it is tried and true:
1. Evaluate and verify the track record through owner-selected reference checks. I stress “owner selected” because it is not sufficient to accept references offered by the company. Do you know anybody who, when asked for references, would provide the names of people who would not say good things about them? Of course not. The key is to pick (purposefully or at random), a list of hotels from those advertised, and then ask for the names of the owners of those hotels. For a list of specific questions/issues to pursue, send “request info” to firstname.lastname@example.org.
2. Investigate the relationships and reputation the asset manager has with brands/operators. While you do not want the relationship between the management company and the asset manager to be “cozy,” you do want there to exist a level of collegiality and respect. Asset managers cannot—I repeat, cannot—optimize performance through brute force, intimidation, smothering oversight, etc. In today’s world, that approach is about as effective as nailing Jell-O to a wall. Managers will let you know if the asset manager is someone they can/will work with to get the most out of the relationship.
3. Ascertain the degree of “relevant” experience. If you needed heart surgery, would you be happy if the person you saw holding the scalpel just before anesthesia took hold was … your dentist? Relevant experience, as I define it, means that the person responsible for your hotel has been there and done that. Multiple times! Successfully! It means they should understand the proposed role of everyone likely to be involved in the asset, look closely at their resumes and critically assess whether they have the relevant experience to be effective. And ask yourself whether the hotel management team (local, regional, corporate) will respect and take direction from the asset manager who will be providing it. Remember, some of what is necessary can be taught, but most of it comes from active involvement in hotels of various types, in many different markets, during good times and bad.
4. Because of the resources required in today’s environment, it is a virtual certainty that a company will outperform an individual in hotel asset management—especially when it comes to large and/or complex assets. That being the case, a fourth decision point is to determine whether the company being considered is large enough to:
- Have multi-disciplinary resources and subject-matter experts;
- have meaningful benchmarking data at its fingertips; and
- have meaningful influence with the brand/operator.
5. Determine whether the company’s team consists of full-time personnel, or “stringers” (i.e., freelancers) with little connection to the contracting party other than a periodic fee. Why does this matter? A full-time team of professionals is more stable, is more likely to have tested/well-developed methodologies, is less vulnerable to rogue behavior, can more easily motivate team members through longevity and career growth, and has a better opportunity to build and execute a desired culture.
6. Determine whether the company’s primary business is asset management. If it is a sideline, you may be disappointed with the results.
Few things in life are axiomatic, and asset manager selection is no exception. But when the consequences are so great, playing the odds seems to be a good way to mitigate the risk of a sub-optimal decision.
Richard Warnick is Managing Director and Co-Chairman of CHMWarnick, the leading provider of hotel asset management and owner advisory services. The company asset manages over 60 hotels comprising approximately 27,000 rooms valued at roughly $15 billion, and is advising on development projects valued at over $2 billion. CHMWarnick’s owner advisory services include asset management, hotel planning & development, acquisition due diligence, owner-entity accounting, management/operator selection & negotiation, capital planning and disposition strategy. CHMWarnick has eight offices nationwide, including locations in Boston, New York, Los Angeles, Phoenix, Fort Lauderdale, Minneapolis, San Francisco and Honolulu. For more information, contact 978.522.7000 or visit www.CHMWarnick.com. For the latest company news, follow CHMWarnick on Twitter @CHMWarnick and LinkedIN.
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