“The role of asset manager is as important as ever now during the pandemic, so those with asset managers within their ranks should think carefully about how they manage their teams.”
As first published by HotelNewsNow
The hotel industry faces an extraordinary challenge today: how to operate a hotel in the “new normal.” With the near future so cloudy, it is close to impossible to effectively set accurate property and company forecasts; at this time occupancies and revenue per available room numbers are at painfully inadequate levels.
Following the COVID-19 outbreak, and as company balance sheets are exposed, many lodging establishments have reduced staff at unprecedented levels across all competencies. One area of expertise that hospitality organisations have targeted for cuts is the asset management role, but can these firms really afford to take this step?
In January (pre-COVID-19), AETHOS conducted an asset management study receiving more than 1,500 data points from 240 survey respondents that included portfolio oversight trends. Specifically, the median number of properties under the supervision of VPs of Asset Management (seven-plus years of experience) was nine, and for Directors of Asset Management (three-plus years of experience), it was five.
I estimate that the hotel asset management workforce has shrunk by 10% to 15% since the start of the pandemic. Although I appreciate the need to preserve cash in the current environment, I believe letting go of experienced asset managers will be a much more costly mistake. The industry requires the intelligence and experience of these professionals to guide their organisations through asset and portfolio restructurings, as well as the eventual resurgence of the hospitality industry.
The 10% to 15% asset management workforce contraction is saddling portfolio asset managers with additional property responsibility. Although redistributing one to two full-service properties to the remaining team members may seem manageable on paper, this added responsibility will significantly dilute the time an asset manager needs to focus on each respective property within their portfolio.
Even in normal times, overseeing a complex portfolio to maximise each asset’s full potential in critical areas such as revenue generation, net operating income, employee engagement, guest satisfaction, capital investment/planning and asset preservation is a challenging mandate.
What I anticipate happening over the next three to six months is similar to what occurred when we emerged from the Great Recession. When the economy tanked, hotel companies quickly cut seasoned asset managers to preserve cash. As conditions improved, those same firms leveraged less tenured and lower-salaried asset managers who were kept on staff. Some went as far as moving their acquisition team executives into asset manager roles believing the skill set was reasonably transferable. While this allowed up-and-coming asset managers to take on greater responsibility, many organisations lacked the comprehensive asset management expertise needed for a complex recovery.
As I continue to listen to public company investor calls and speak with clients, I have found that the leading organisations have successfully worked with their lenders to secure financing to ride out this horrendous storm. Even though I recognise that due to the current lack of clarity, cash preservation is critical, but hotel organisations should not take a penny-wise and pound-foolish approach when it comes to asset management staffing. A seasoned and high-performing asset manager earning annual cash compensation of USD $225,000 to USD $250,000 will create a more than justified return on investment for their organisation.