Regardless of where we are in the hotel cycle, the importance of high-performing asset management is critical to the success of any hotel owner. Over the last 20 years I have had the pleasure to work closely with this community assisting clients, such as public REITS and private equity groups, recruit high-performing executives, allowing owners to maximize value for their hotel property and/or portfolio. My thoughts regarding some important human capital misconceptions in the world of asset management will hopefully help shape the future for 1) hotel owners to attract and retain top talent and 2) for asset management executives thinking about charting their future career path.
Misconception #1: “I am underpaid”
For better or for worse there is a “herd mentality” when it comes to setting compensation within the asset management community—a tendency for owners to follow and/or copy what the competitive set is doing. Due to the incestuous nature of the business, organizations can draw competitive compensation information as easily as an asset manager can obtain data from a STR report. I have reviewed many asset management compensation programs and can confidently say that more than 90% of asset managers are competitively paid. Where most people seeking market compensation data go wrong is when they compare only one or two components of a total rewards program. To gain accurate data, it is necessary to consider the entire compensation mix—base salary, annual cash bonus, long-term incentive/equity, and benefits.
Misconception #2: “There is plenty of talent out in the market”
As mentioned in my introduction, I have worked with great leaders in the industry recruiting the highest performers for their organizations. When it comes to the current state of asset manager “supply,” I have to report the hotel industry is in trouble with a woefully low number of qualified executives. Even worse, there is a very lean group of next-generation talent to fill roles as current executives advance. As an example, let me point to a recent search I conducted—a hotel ownership group seeking a Vice President Asset Management with 7 to 10 years of experience, desired track record of managing 7 to 10 full-service hotels with “traditional” asset management experience (i.e., strong financial, analytical, and strategic background with previous experience working for a private equity group, REIT, and/or consulting firm). My recruitment candidate pool consisted of only 135 individuals. Hotel owners who are truly committed to this industry need to recognize the current asset management “supply” challenge and proactively execute on critical initiatives, including partnering with universities to better train students entering the workforce, designing more strategic internal succession planning programs, and very seriously considering executives currently doing extraordinary work in other parts of the hospitality industry with transferable skill sets.
Misconception #3: “A limited service portfolio is not for me”
Recent trends indicate that many sophisticated investment groups are taking a much closer look at the limited service and extended stay segments of the hotel business (i.e., acquisitions by Brookfield, Blackstone, and Starwood Capital). Currently, a majority of the talent within the asset management community view managing limited-serve/extend stay properties as a “step-down” and avoid these opportunities, where I believe it is a great strategy to diversify experience. The current thinking is, “If I have a proven track record managing more complex assets (i.e., full-service and luxury), my skill set is seamlessly transferable.” This is flawed thinking. Asset managers who diversify, experiencing as many segments as possible, will be the preferred talent for organizations of the future.