Hotel brands are a crucial element in any hotel investment strategy, playing a pivotal role in determining financial success. They offer consumer recognition, trust, and provide critical booking platforms and systems that significantly impact room revenue, often constituting up to 50% of total room revenue.

Investors can choose to acquire brands from recognised international or domestic chains or successful independent hotels, typically through franchise licence agreements or hotel management agreements with brand operators. However, it’s important to note that a brand’s primary focus is on short to medium-term room revenue delivery rather than formulating a strategic, long-term asset value growth plan.

The key to optimising return on investment lies in comprehensive property asset management. So, let’s look at how to optimise your investment return in hospitality with successful property asset management.

What is Property Asset Management and Why is it Important?

Property asset management, a dynamic process, is integral to the financial and reputational performance of a hotel property throughout its lifecycle. This method involves strategic property asset planning, implementation, and consistent monitoring of activities.

Professional property asset managers, like the team here at Axsia HTL, possess the expertise to set and execute these actions in alignment with the investor’s goals and market conditions.

Adding Value Through Property Asset Management

What does a property asset manager do? These figures are instrumental in adding value to a hotel investment in multiple ways:

Developing a Strategic Vision

Property asset managers analyse various facets, including the property’s strengths, weaknesses, opportunities, and threats. They assess the competitive landscape and customer segments, enabling them to define a clear and realistic vision for the property. Additionally, they outline objectives and strategies to achieve this vision.

Enhancing Operational Efficiency

Property asset managers oversee and evaluate the performance of the hotel operator to ensure they deliver expected service quality and customer satisfaction. They identify and implement operational improvements, encompassing cost reduction, revenue management, marketing and sales, human resources, and more.

Optimising Capital Expenditure

Property asset managers are responsible for planning and managing capital expenditure projects aimed at enhancing the property’s value. This may include renovations, expansions, upgrades, and other strategic initiatives. They also ensure that these projects are completed within the designated timeline, budget, and with minimal disruption to the property’s operations.

Maximising Asset Value

Property asset managers continuously monitor and adjust the asset value based on market trends and demand fluctuations. Furthermore, they provide advice on the best timing and terms for activities like refinancing, repositioning, or selling the property.

The Role of Hotel Brands in Investment Strategy

Hotel brands play a pivotal role in shaping the investment strategy of hotel properties. These brands are not mere names; they are powerful symbols of tradition, quality, consistency, and the promise of exceptional guest experiences.

They possess the ability to instill trust and recognition among consumers, making them a crucial element in a hotel’s investment journey. However, their contribution goes beyond the superficial aspects of logos and taglines.

Consumer Trust and Loyalty

When guests choose a hotel associated with a trusted brand, they bring a level of expectation based on previous experiences or the brand’s reputation. This trust is an essential factor in the decision-making process, often leading to higher occupancy rates and consistent patronage.

Hotel brands leverage their historical performance to build consumer loyalty, ensuring that guests return for future stays.

Revenue Generation

Hotel brands are not just a name on the building; they offer a comprehensive system that encompasses booking platforms, distribution channels, and marketing efforts. These systems are designed to drive room revenue, a significant portion of the total revenue for any hotel.

The seamless integration of these brand-provided systems and strategies ensures that the hotel can effectively fill its rooms, achieve competitive pricing, and maximise revenue potential.

Quality Assurance

For investors, the inclusion of a reputable hotel brand offers a level of quality assurance. Brands often have strict standards and quality control measures to maintain consistency across their properties.

Guests, therefore, know what to expect when choosing a brand-affiliated hotel, reducing the risk of unpleasant surprises.

Distribution Power

Hotel brands come equipped with well-established distribution networks, partnerships with online travel agencies, and international exposure.

This translates into increased visibility, both for direct bookings and through third-party platforms, ultimately resulting in higher room occupancy and revenue.

Operational Support

Hotel brands often provide operational support, including staff training, best practices, and access to reservation systems. This support enhances the efficiency of hotel operations and ensures that employees are well-versed in delivering a superior guest experience.

Collaboration is Key

While hotel brands offer numerous advantages, it’s important to recognise that their primary focus is typically on short to medium-term room revenue delivery. The broader strategic goals and long-term asset value growth plans fall beyond their immediate scope.

This is where property asset management comes into play, complementing the efforts of the brand and focusing on the holistic performance and value of the property over its lifecycle. The alignment of these two strategies, and the collaboration between parties, is instrumental in achieving optimal investment returns and positioning a hotel property for long-term success.

Investor Strategies for Property Asset Management

While investors with multiple hotel properties tend to employ in-house asset managers who recognise the value of property asset management for their investment returns, this may not be the case for those with smaller portfolios.

Some may not fully appreciate the benefits or may perceive property asset management as too costly, which is a common misconception that can potentially limit their returns.

Property asset management, however, is not exclusive to large portfolios and offers advantages for any hotel investor seeking to optimise their returns in the hospitality sector.

Various options for accessing property asset management services exist, including outsourcing to external consultants or partnering with specialised firms like Axsia HTL.

By embracing these services, hotel investors can augment their brand strategy with a comprehensive and strategic approach, ultimately enhancing property performance and value.

Unlocking the Potential: Property Asset Management Services

Now we know why asset management is so important in the complex world of hotel investments, let’s take a look at how we actually achieve it.

When performed correctly, property asset planning and management services emerge as the key to unlocking a hotel property’s true potential. At Axsia HTL, we specialise in providing tailored solutions that cater to the distinct needs of each property owner, which is exactly what good property asset management should look like.

A Partnership Built on Success

The foundation of our approach is the alignment of objectives with key stakeholders. By fostering a relationship-centric strategy, we consistently deliver market-leading returns. Our team’s profound understanding of operator brands, their value propositions, and the hurdles they face are pivotal in shaping our property asset management services.

Driving RevPAR Excellence

Revenue management, often defined by the balance between Average Daily Rate (ADR) and occupancy, plays a pivotal role in enhancing a hotel’s performance.

Our deep insights into this equilibrium allow us to craft strategies that result in robust Revenue per Available Room (RevPAR) figures, outperforming competitors and maximising profitability.

Our property asset management services encompass a comprehensive range of activities that can assist in your property ventures:

• Develop a vision statement: To align stakeholders and set a clear and achievable direction for the property.
• Review annual budgets and Capital Expenditure Planning: Ensuring that financial planning is not only realistic but optimised for asset growth and success.
• Key staff recruiting, onboarding, and appraisals: Assisting in acquiring and managing the right talent to steer the property toward its goals.
• Refinance and support asset valuations: Offering insights and guidance for timing and terms when it comes to refinancing or evaluating the property’s worth.
• Operational optimisation: Enhancing efficiency and effectiveness in hotel operations, including areas like restaurants, retail, and amenities.
• Sales and marketing: Crafting strategies that drive occupancy and revenue growth while maintaining the property’s unique appeal.
• Project management: Ensuring that property improvement and expansion projects are executed on time, within budget, and with minimal disruption.
• Contracts, deals, and negotiations: Expertly navigating the complex landscape of agreements to secure the best terms for the property.
• Renovation and repositioning Strategy: Identifying opportunities for renovation and enhancement, aiming for long-term growth.
• Grow revenue and enhance guest experience: Maximising revenue and guest satisfaction by going beyond room rates to include other services, such as F&B, spa, events, and more.

Achieving Consensus for Strategic Success

In the contemporary landscape, progressive asset managers play a crucial role in fostering consensus among investors, brands, and employees.

They possess an in-depth understanding of consumer demographics and their evolving requirements, focusing on engaging all stakeholders toward a common goal. Achieving consensus is pivotal, as no strategic plan can succeed without it.

Enlist a Property Asset Manager Today

Property asset management is an indispensable tool for optimising investment returns in the hospitality sector. It offers a holistic and strategic approach that compliments brand strategies, leading to improved property performance and value.

By embracing property asset management services, investors can gain a competitive edge and achieve their investment goals in the dynamic world of hospitality.

Contact us today to consult with our experienced Asset Managers, who can provide recommendations and a path forward to increase the value of your asset.

The landscape of revenue management in the hospitality industry is undergoing a seismic shift. In an age defined by technology and changing customer preferences, the tried-and-true practices of revenue management have evolved, creating both challenges and opportunities for businesses.

With the emergence of innovative tech, shifts in customer expectations, and ever-changing market conditions, revenue management professionals are at the forefront of a dynamic industry.

In this article, we’ll explore some of the trends and developments that are shaping the future of revenue management in the hospitality industry, and how revenue managers can leverage them to optimise their revenue performance.

Definition of Revenue Management in Hospitality

Revenue management in the hospitality industry is the art of applying data-driven strategies to maximise revenue and profitability.

It encompasses everything from predicting demand, determining the best prices, managing inventory, and distributing products and services through various channels. It has played a pivotal role in the success and competitiveness of many hotels and resorts for decades.

At Axsia HTL, we have extensive experience in designing and optimising such strategies. One of our best examples of revenue management and asset management is our recent collaborative approach for a 5-star resort, which showcases how using data and trends can elevate success even during and after the turbulence of COVID-19.

Speaking of the pandemic, it’s clear that the hospitality industry has changed drastically over the last several years. Even before this abrupt change, however, we were seeing things beginning to shift in the hotel industry.

The Changing Landscape

It’s no secret that good revenue management strategies have been key factors in the success and competitiveness of many hotels, resorts, and other hospitality businesses in the past decades.

However, the hospitality industry is undergoing rapid and profound changes due to the emergence and evolution of new technologies, customer preferences, market conditions, and business models. Let’s take a closer look at the changing landscape of hotel revenue management strategies.

Technological Advancements

Advancements in technology have revolutionised revenue management practices, enabling revenue managers to collect, process, analyse, and act on large amounts of data from various sources. Think valuable and data-rich streams like customer behaviour, market trends, competitor actions, social media, online reviews, weather, events, you name it.

Technology also allows for the automation of many tasks that were previously manual and time-consuming, such as pricing, inventory management, distribution and reporting. Tech programs that streamline these administrative processes have been game-changers in the industry.

Despite these positive outcomes, we’re also seeing technology increase the complexity and dynamism of the market environment. This presents an interesting new landscape that poses some challenges, particularly in customer preferences.

Shift in Customer Preferences

Thanks to technological shifts and subsequent market changes, customers have more choices, information, and power than ever before.

They can easily compare prices, products, and services across different platforms and channels, such as online travel agencies (OTAs), metasearch engines, direct booking websites, and mobile apps. Customers can also switch between different providers and channels at any time, depending on their preferences.

It’s therefore crucial that revenue managers adopt a customer-centric approach to revenue management strategies in the hospitality industry. Managers can effectively use technology to:

• Understand the needs, preferences, expectations, and behaviours of their customers across different segments, markets, channels, and touchpoints.
• Segment their customers based on various criteria, such as demographics, psychographics, booking patterns, and loyalty status.
• Monitor and measure customer satisfaction and loyalty across different channels and touchpoints.
• Communicate and engage with their customers before, during, and after their stay.

Evolving Market Conditions

Alongside these fast-moving tech advancements, the hospitality industry is constantly evolving, with unforeseen disruptions and changing customer preferences driving shifts in market conditions.

To remain competitive, businesses must adapt and innovate. Revenue managers are essential in helping companies navigate these dynamic changes, such as:

• Global events and uncertainties like the COVID-19 pandemic: Revenue managers play a crucial role in adjusting pricing models, assessing trends, and handling uncertainties, ensuring businesses can thrive during such disruptions.
• Intensifying competition: With increased competition, businesses need to innovate continually. Revenue managers offer valuable insights into pricing, distribution, and market trends, enabling businesses to identify growth opportunities and enhance revenue performance.

Embracing Innovation

With so much rapid change in the hospitality industry at the moment, it can be easy to feel overwhelmed. Our core piece of advice when devising new revenue management strategies is to embrace innovation.

Businesses who dare to push the envelope with bold ideas and new technologies will not only stay afloat in times of change, but will rise above the competition to new and exciting heights.

The Need for Creativity and Flexibility

In the ever-changing world of revenue management, adaptability and innovation are non-negotiable. It’s no longer enough to rely solely on traditional methodologies.

Creative solutions and flexible strategies are key to thriving in this dynamic landscape. Revenue managers must go beyond the numbers and embrace a holistic perspective. They need to craft inventive pricing structures, leverage advanced data analytics, and embrace innovative technology to stay ahead.

These imaginative approaches help set new industry standards and create a clear path towards enhanced profitability.

The Role of Revenue Managers

In the current hospitality landscape, revenue managers have evolved into customer-centric strategists. Their role extends far beyond mere number-crunching.

By understanding and segmenting customers based on a myriad of criteria, revenue managers can tailor experiences to meet specific needs and preferences. They employ cutting-edge technology to track satisfaction and foster loyalty throughout the customer journey.

These managers act as conduits between data and guest expectations, ensuring that each visitor’s experience aligns seamlessly with the brand’s vision and market positioning. Their customer-focused approach leads to not only increased revenue but also enriched brand loyalty, setting the stage for continued success in a competitive market.

Trends Shaping the Future

When looking ahead, we’re seeing several clear trends emerging in effective hotel revenue management strategies.

While it’s always important to tailor your own strategies to the needs and circumstances of your business, we recommend looking out for these areas and implementing them as core ways to expand and improve your planning.

Personalisation and Customisation

Personalisation and customisation can increase the revenue and profitability of a hospitality business in a few key ways. It can:

• Enhance customer satisfaction and loyalty, as customers feel more valued and appreciated by the hospitality provider.
• Increase customer willingness to pay, as customers perceive more value and differentiation from the hospitality product or service.
• Create more cross-selling and up-selling opportunities, as customers are more likely to purchase additional products or services that match their needs or preferences.

So, what are some examples of revenue management personalisation strategies?

• Revenue managers who effectively use technology to collect and analyse data about their customers across different segments, markets, channels, and touchpoints.
• Customer profiles and personas created from this data that capture the needs, preferences, expectations, and behaviours of the target demographics.
• Customised products or services offered to customers across different channels and platforms.
• Revenue managers who monitor the impact of personalisation and customisation on customer satisfaction, loyalty, revenue, and profitability.

Benefits of Integrated Systems

Integrating different revenue management systems is vital to overcoming inefficiencies and errors in the process, such as incomplete data, analyses based on faulty models, inaccurate forecasting due to insufficient data, or inconsistent pricing across different platforms.

To overcome these issues, integrated systems are starting to be operated by different departments or functions within many hospitality businesses, such as sales, marketing, operations, and finance.

We’re also seeing them being used by different external partners or providers, such as OTAs, metasearch engines, and revenue management software vendors.

An integrated system enables revenue managers to:

• Access and consolidate data from various sources in a single platform.
• Apply consistent and comprehensive analysis and forecasting across multiple services.
• Implement optimal and dynamic pricing strategies.
• Manage inventory effectively and efficiently.
• Distribute products or services optimally and strategically.
• Generate timely and clear reports on revenue performance and outcomes.

Expanding Beyond Room Rates

The final trend that’s making waves is expanding beyond room rates. While room rates remain the main source of revenue for most hotels, it’s important to remember that they’re not the only source – far from it.

Customers are more and more seeking a holistic experience from their accommodations that extends beyond their rooms. Expanding revenue management to include other products and services, such as F&B, spa, events, and parking, increases total revenue per available room (RevPAR). This KPI plays a major role in enhancing profitability and customer satisfaction.

Adapt to the Future of Revenue Management With Axsia HTL

As revenue management transforms, revenue managers must embrace innovation, flexibility, and customer-centric practices to optimise revenue performance and drive success in the evolving hospitality industry.

By leveraging trends and developments, revenue managers can also optimise their revenue performance and create more value for their customers and stakeholders.

If you’d like assistance with creating your revenue management strategies, the team at Axsia HTL is here for you. Our extensive experience in hotel asset management and advisory services, and with a keen eye on the market and latest trends, we know what makes things tick when it comes to hotel management.

Get in touch with us to talk about your revenue management strategy today.

Hotel investment requires a unique set of skills and insights, given its dynamic nature and complex operations. At Axsia HTL, we bring over 150 years of collective experience to the table, helping investors bridge the knowledge gap and maximise their return on investment.

Our Managing Director, David Simpson, offers valuable insights into the asset management landscape, outlining how our expertise sets us apart in this competitive industry. Let’s take a look at how we can help you unlock your own hotel investment success with our tried and true asset management strategies.

Key Benefits of Asset Management

Hotel asset management plays a pivotal role in driving business results for property owners. While operators are essential, owners must also actively engage in setting and monitoring the business strategy to ensure optimal performance.

This alignment with the owner’s vision and investment objectives fills a crucial void, leading to better returns and more successful outcomes.

Several key benefits of approaching asset management in this way include:

• Strategic Alignment: Asset management aligns owner and operator strategies, ensuring every decision advances the owner’s vision and investment goals.
• Optimal Performance: It optimises operations, enhancing service quality, cost control, and overall performance.
• Risk Mitigation: Asset management mitigates uncertainty by proactively addressing challenges, and maintaining the course toward success.
• Enhanced Returns: The process maximises financial performance, resulting in higher returns for owners and investors.
• Operational Efficiency: It aligns operations with the owner’s vision, enhancing efficiency and profitability.
• Customised Strategies: Tailored approaches, from marketing to pricing, ensure the property reaches its unique potential.

We might be biased, but the truth remains: asset management is more than a tool for owners; it’s the driving force behind business success for hotel development. It forges an unbreakable connection between ownership vision and operational execution, harmonising all efforts to deliver enhanced returns, optimised performance, and a shield against uncertainty.

In an ever-evolving industry, asset management is the compass that guides the hotel towards its owner’s vision of prosperity.

Top Trends in Hotel Development

The resurgence of travel, both for business and leisure, has sparked a demand for new, personalised, and experiential offerings. This trend has given rise to innovative lifestyle brands, such as Ace Hotels, 1Hotel, Treehouse, The Standard, and Ennismore.

Additionally, there is a growing interest in franchising and white-label management, giving investors greater control over their business ventures.

Engaging with Axsia HTL

When clients approach us for a hotel project, we emphasise the importance of careful due diligence to determine project viability. We focus on aligning the developer’s vision with realism and optimisation, ensuring a bankable and market-valued project.

For mixed-use developments, we explore how the hotel component can enhance the broader project for maximum investment benefits.

Meet the Axsia HTL Team

Our team comprises seasoned experts who have worked with international hotel chains across the Asia Pacific. They bring a wealth of experience in various facets of hotel operations. At Axsia, we adopt a multidisciplinary approach, providing invaluable insights to property teams and ensuring a strategic approach across all aspects of the business.

Axsia HTL was founded back in 2019 by a dedicated team of professionals, including Ian Knight (Executive Chairman), Bill Edwards (Executive Director), and David Simpson (Managing Director). We later welcomed David Fraser (Executive Director) as a valued shareholder.

At the heart of our team, Bill and David excel in operations and work closely with our asset management portfolio to ensure optimal performance across all our assets. Together, they bring a wealth of expertise to our projects, which encompass new hotel development, feasibility studies, market research, and operator selection, all culminating in comprehensive asset management strategies.

Our team has recently expanded to include several exceptional individuals who further enhance our capabilities:

• Daniella Tonetto, an expert in sales and marketing, specialises in driving revenue optimisation.
• Robert Scullin offers valuable insights and consultation across all aspects of our business.
• Nicole Grainger serves as our Research Analyst, ensuring we remain up-to-date with the latest market trends and information for our projects.

Additionally, we collaborate with a select group of specialist consultants, covering areas such as regional tourism, technical services reviews, and non-HTL property matters, to offer a comprehensive and diverse range of services.

What Sets Axsia Apart

What sets Axsia HTL apart from competitors is our focus on revenue growth, backed by a strategic approach, to achieve above and beyond client expectations in the asset management and hotel development sector.

We take a comprehensive view of the business, emphasising vision, and strategy to achieve better returns. While we of course look at the hard numbers, everything we do at Axsia is built on the solid and evidence-based foundations of clear, effective, and well-researched strategies.

Our team’s diverse background, with experience in big brand international chains, also allows us to offer a unique perspective on asset management that we feel isn’t being tapped into by many other companies on the market.

Exciting Hotel Projects in Our Portfolio

In our portfolio, we have several exciting hotel projects that showcase our expertise:

• 1Hotel Melbourne: This upcoming hotel in Australia is the first of its kind by SH Group, set to launch in late 2024. Axsia HTL assisted in sourcing this cutting-edge brand, adding to Melbourne’s luxury hotel landscape.
• The Tasman Hobart, A Luxury Collection Hotel: This new build Luxury Collection Hotel in Australia demonstrates our ability to develop concepts and source brands suitable for specific markets, winning numerous awards since its opening.
• Ace Hotel, Sydney: As the first Ace hotel in Australia, this development successfully integrates an upper upscale brand into a smaller footprint, offering thriving F&B spaces and regular community engagement events.
• Holiday Inn and Indigo Bourke Street: Currently under construction and expected to be completed in early 2026, this dual-branded property in a prime location takes advantage of shared back-of-house operations for efficiency.
• Sheraton Grand Mirage Resort, Port Douglas: A long-standing asset management project in our portfolio, we’ve worked closely with the owner and hotel management team to renovate and reposition the property, resulting in numerous awards and enhanced investor returns. Our strategic philosophy has optimised the owner’s value and nurtured the development of a top-tier hotel executive committee.

Work With Axsia HTL

Axsia HTL’s expertise in hotel asset management and development, coupled with our team’s vast experience, allows us to bridge the knowledge gap for investors and property owners. Our focus on revenue growth, aligned with a strategic approach, sets us apart in this competitive industry.

Join us in unlocking the success of your hotel investment ventures today!

In this compelling case study, we showcase how a collaborative approach involving owners, hotel management companies (HMCs), and dedicated employees, guided by strategic asset management, can yield remarkable financial benefits and propel market positioning to new heights.

The success story we present demonstrates that a united effort can translate into financial gains for owners, increased brand recognition and fees for HMCs, and elevated employee satisfaction leading to enhanced guest engagement, ultimately resulting in improved market positioning and substantial financial rewards for all stakeholders involved.

Let’s take a look at how our team at Axsia HTL collaborated with these key players in a 5-star resort to generate an impressive 70% capital value growth, estimated at over $30 million. To kick things off, here’s a quick snapshot of the case study and its details in question:

Challenges and Opportunities

This engaging case unfolds over a five-year asset management engagement at a luxurious 5-star resort. In the initial year, the Revenue Generation Index (RGI) stood at 125. Fast forward to year six, and the RGI had surged to 195. However, this journey was not without its share of challenges, including the disruptive impact of COVID-19 during years three and four.

Revisiting Vision and Positioning

The story begins in 2017 when the hotel had recently completed a comprehensive refurbishment of rooms, public spaces, and dining venues. Managed under a major brand, it was celebrated as a successful turnaround post-refurbishment, boasting an RGI of 125, signifying a 25% premium over the industry standard benchmark of 100.

While this was considered a significant achievement, the potential for even greater performance became apparent through a detailed competitor analysis.

The All-Inclusive Plan

Compared to its competitors, the hotel had the potential to trade at a minimum premium of 40%, if not 50%, above the natural RGI benchmark of 100. Achieving this premium required revisiting the hotel’s vision, positioning, and target markets, and aligning service offerings with the refurbished product. An overhaul was needed to attract a premium customer base that matched the hotel’s enhanced offerings.

To execute this ambitious vision, a comprehensive and all-inclusive plan was developed. The successful execution of this strategy necessitated a collaborative approach between the owners, HMC, and the managerial staff. Each stakeholder had a vital role to play:

• Owners: Provide capital and accept short-term operating expense adjustments.
• HMC: Recognise the need for personnel changes and corporate support enhancements.
• Management Team: Emphasise service quality, enhance guest engagement, maintain luxury operational standards, and deploy strategic marketing efforts to connect with the refreshed target clientele.

Pre-COVID-19 Success

The plan was set into motion before the onset of COVID-19 and began yielding results in 2019. The hotel achieved a remarkable 90% market share premium (RGI 1.90) and witnessed EBITDA growth of 26%. This growth was primarily driven by a 20% increase in Revenue per Available Room (RevPAR) via room rate optimisation.

Despite beginning our plan before the challenges posed during COVID and the subsequent major shifts to the hospitality industry in a recovering post-COVID landscape, we continued to see successes drive us through this period. This is a testament to the positive effects of the core collaborative approach initially adopted.

2023 Achievements

As we step into 2023, the hotel has not only sustained its success but has exceeded expectations. It now commands a market share premium of 95% (RGI 1.95).

The shift away from major occupancy gains and instead into a strategic focus on average room rates played a pivotal role. While occupancy saw a modest increase, the elevated guest demographics resulted in significant room rate growth.

This exceptional performance has led to a 70% improvement in EBITDA and an estimated capital value growth of over $30 million.

The collaborative approach necessitated an additional $3 million in capital expenditure from the owners, increased dedication from the HMC, and meticulous planning from the management team. However, the value gained far surpasses the collective investment, underlining the power of collaboration and strategic asset management.

Investment and Returns

In summary, this case study underscores the remarkable outcomes that can be achieved through collaboration and strategic asset management. Owners, HMCs, and management teams working in harmony can unlock the potential of a property, drive financial growth, and elevate market positioning.

The returns on this collaborative investment far exceed the initial capital outlay, demonstrating the immense value of embracing a united vision and approach.

Achieving Success in a Collaborative Approach

This case study stands as proof of the efficiency of a collaborative approach led by strategic asset management. It highlights that even in the face of challenges, such as the COVID-19 pandemic, the right strategy and commitment from all stakeholders can lead to exceptional financial benefits and improved market positioning.

As we navigate the ever-evolving landscape of the hospitality industry, this success story exemplifies the power of unity and strategic planning in achieving remarkable results.

Interested in exploring some of our other success stories? Check out our portfolio of works across advisory, asset management, hotel acquisition, hotel disposal, and project development sectors.

The COVID-19 pandemic has been a devastating blow to the hotel industry, causing unprecedented declines in travel demand, occupancy, revenue, and profitability. Hotel owners are facing significant challenges and uncertainties as they try to survive the crisis and prepare for the recovery.

One of the most important decisions that hotel owners can make is to engage a professional and proactive hotel asset manager who can help them navigate the recovery process and maximise the value of their hotel assets.

In this guide, we explore the future of asset management in the new and often challenging landscape of the post-COVID hospitality industry. From the crucial role of asset managers to the expanding scope of asset management itself, we’ll investigate fresh ways to generate success with modern hotel asset management.

The Challenging Landscape for Hotel Owners

The COVID-19 pandemic has left an indelible mark on the hospitality industry, reshaping the landscape in profound ways. Hotel owners, in particular, have faced an unprecedented set of challenges as they navigate through the post-pandemic era.

Understanding these challenges is the first step in redefining hotel asset management to ensure long-term success in the new reality.

Demand Uncertainty

The pandemic introduced an unparalleled level of uncertainty into the demand dynamics of the hotel industry. Travel restrictions, lockdowns, and changing consumer preferences have made it exceedingly difficult to predict occupancy rates and revenue streams. Hotel owners find themselves grappling with the challenge of optimising their assets in an environment where demand can fluctuate dramatically from one month to the next.

Evolving Guest Expectations

The pandemic has also fundamentally altered guest expectations, which is now a key component to the future of asset management. Health and safety concerns now top the list of priorities for travellers.

Hotel owners must adapt by implementing rigorous cleanliness protocols, contactless services, and health-conscious amenities. Meeting these evolving expectations requires not only operational changes but also strategic investments in technology and infrastructure.

Revenue Volatility

With occupancy rates fluctuating, revenue management has become an intricate dance. Hotel owners need to employ sophisticated pricing strategies to maximise revenue during peak periods while remaining competitive during lulls in demand.

This calls for real-time data analytics and revenue management tools that can adapt to rapidly changing market conditions.

Labour and Operational Challenges

The pandemic disrupted labour markets and staffing dynamics. Hotel owners are grappling with labour shortages and increased costs as they strive to maintain the quality of service that guests expect. Balancing operational efficiency with labour costs has become a delicate task in the post-COVID era.

Debt and Financial Resilience

Many hotel owners are contending with debt incurred during the pandemic to weather the storm. Part of the future of asset management is ensuring financial resilience and servicing this debt. Navigating refinancing and restructuring options while optimising asset performance is a complex puzzle that hotel owners must solve.

Sustainable Practices

Sustainability has gained even greater prominence in the wake of the pandemic. Hotel owners are under increasing pressure to adopt eco-friendly practices and demonstrate a commitment to environmental and social responsibility. Achieving sustainability goals while managing costs presents an ongoing challenge.

The Crucial Role of a Hotel Asset Manager

One of the most important decisions that hotel owners can make is to engage a professional and proactive hotel asset manager who can help them navigate the recovery process and maximise the value of their hotel asset.

A hotel asset manager is a specialist who works on behalf of the owner to oversee and optimise the financial and operational performance of the hotel. A hotel asset manager typically performs tasks such as:

• Monitoring and analysing the hotel’s financial results and key performance indicators.
• Benchmarking and analysing the hotel’s performance against its competitors and the market.
• Inspecting and assessing the condition and maintenance of the physical asset.
• Assisting with the preparation and review of annual budgets and forecasts.
• Liaising and negotiating with the hotel operator on various issues and opportunities.
• Providing strategic bespoke advice and recommendations to the owner on how to improve the hotel’s performance and value.

However, in the post-COVID era, these tasks are not enough to ensure the recovery and sustainability of the hotel. The future of asset management means that a hotel asset manager needs to deliver more value for the owner by taking a holistic and long-term view of the hotel’s life cycle.

This involves understanding when the hotel reaches its peak performance and value, and when it is time for the owner to exit the hotel and reinvest in another opportunity.

Expanding the Scope of Hotel Asset Management in the Post-COVID Era

The seismic shifts brought about by the COVID-19 pandemic have prompted hotel owners to reevaluate their approach to asset management. In the post-COVID era, the traditional scope of hotel asset management must expand to encompass a broader range of considerations and strategies that align with the new realities of the industry and the future of asset management.

Hotel asset managers can achieve this through the following approaches:

• Data-Driven Decision-Making: Utilise real-time analytics to inform pricing, marketing, and operations.
• Health and Safety Protocols: Implement stringent cleanliness and safety standards.
• Technology Integration: Adopt guest-friendly tech and property management systems.
• Flexibility in Business Models: Be ready to adapt, repurpose spaces, and explore new revenue streams.
• Sustainability Initiatives: Reduce operational costs and appeal to eco-conscious travellers.
• Strategic Partnerships: Collaborate for enhanced offerings and cost-efficiency.
• Marketing and Branding: Promote safety measures, cleanliness, and flexibility to attract guests.

Expanding the asset management scope means embracing innovation and agility while addressing evolving traveller needs. Incorporating these considerations positions hotel owners for success in the new hospitality landscape. Subsequent sections will delve into specific strategies and best practices.

Axsia HTL: A New Approach to Asset Management

Axsia HTL is a leading hotel asset management company that offers a new approach to asset management that goes beyond traditional tasks. Axsia HTL believes that the key to recovery lies in creating a shared vision and alignment among the four key stakeholders of the hotel: the owner, the operator or brand, the customer, and the employee. Axsia calls this Stakeholder CalibrationTM, which is achieved through:

• Developing a clear and compelling strategic vision for the hotel that defines its product positioning, target market segments, competitive advantages, and financial goals.
• Communicating and implementing the strategic vision across all stakeholders, ensuring that everyone understands their roles and responsibilities, and how they contribute to achieving the vision.
• Monitoring and measuring the progress and outcomes of the strategic vision, using data-driven tools and feedback mechanisms, and making adjustments as needed.
• Celebrating and rewarding the successes and achievements of the strategic vision, creating a culture of collaboration, innovation, and excellence.

These four components make up the future of asset management, and will go a long way in ensuring you effectively and successfully navigate the new waters of the hotel industry in a post-COVID world.

How Axsia HTL Helps Hotel Owners Recover from COVID-19

Our innovative approach to asset management is designed to provide hotel owners with a comprehensive recovery strategy to navigate the challenges posed by the COVID-19 pandemic. Here’s how the expert team at Axsia HTL assists hotel owners in their post-pandemic recovery journey:

1. Revenue Restoration

At Axsia HTL, we focus on reviving revenue generation by developing and executing effective marketing and sales strategies. These strategies are tailored to attract and retain customers, ultimately leading to increased occupancy rates and higher average daily rates.

Through meticulous market analysis and targeted campaigns, we help hotels regain their competitive edge and grow their market share in a rapidly evolving landscape.

2. Cost Efficiency

Efficiency is a key driver of post-COVID recovery, and we recognise the importance of improving cost efficiency. By conducting thorough operational assessments, our team identifies areas for improvement, leading to reduced expenses that aren’t considered long-term investments.

This includes streamlining operations, enhancing productivity, and maintaining a commitment to service quality, all of which contribute to cost savings and financial sustainability.

3. Asset Appreciation

We emphasise the significance of enhancing asset appreciation through strategic investments. By identifying opportunities for capital improvements that enhance the physical condition, functionality, and overall appeal of the hotel, we help owners unlock the full potential of their properties.

These investments not only improve guest satisfaction but also contribute to the long-term value and marketability of the hotel asset.

4. Financial Strategy

In a volatile market, explaining the importance of maintaining and growing market share to financiers is crucial. At Axsia HTL, we collaborate closely with hotel owners to develop compelling financial strategies that align with their recovery goals.

These strategies not only demonstrate the potential for financial resilience but also provide a clear roadmap for attracting the necessary investment and financing to support the hotel’s recovery and future growth.

In essence, our multifaceted approach to the future of asset management is a catalyst for hotel owners seeking to rebound from the impacts of COVID-19.

By restoring revenue, optimising costs, enhancing assets, and formulating persuasive financial strategies, our experienced team at Axsia HTL equips hotel owners with the tools and insights needed to thrive in a post-pandemic hospitality landscape.

Rethinking Asset Management for a Successful Hotel Recovery

In the ever-evolving landscape of post-COVID hotel management, the need for a fresh perspective on asset management has never been greater.

Hotel owners must collaborate with a seasoned partner who can craft a visionary strategy, fostering alignment among stakeholders, optimising performance, and driving maximum value through tailored guidance.

Axsia HTL stands as your trusted ally, offering a transformative approach to asset management. Our expertise and dedication are your keys to navigating the challenges and seizing the opportunities that lie ahead. It’s time to reimagine your hotel’s potential and secure its success in the post-pandemic era.

Ready to embark on this transformative journey to the future of asset management with Axsia HTL? Contact us today and discover the path to a resilient, thriving future for your hotel. Together, we’ll redefine the standards of hotel asset management in this new era.

You can check out our history of success with hotel asset management in our online portfolio, which highlights major players in the Australian hotel industry and how we assisted with their asset needs.

When we think of hotel development, many of us likely think of shiny high-rise establishments standing tall in CBDs and city precincts. However, suburban hotel development is quickly growing in popularity all over Australia with a rise in suburban demand, creating more exciting opportunities in the hospitality space.

In this article, we will discuss some of the key factors and considerations that are involved in suburban hotel development, including benefits and risks. We’ll use Victoria as an example, which has seen a significant increase in suburban hotel development in recent years and can act as a good use case for future endeavours to be guided by.

Suburban Hotel Development: Opportunities and Advantages

Suburban hotel development holds several compelling advantages, including cost efficiency driven by lower land and construction expenses. These areas provide a more budget-friendly option without sacrificing quality, ultimately leading to better returns on investment.

Additionally, suburban markets typically offer reduced competition compared to urban counterparts, resulting in higher occupancy rates and more stable revenue streams for new developments.

Another significant benefit lies in the access to untapped or emerging markets. Suburban growth attracts diverse demographics, including business travellers, families, and tourists seeking a quieter atmosphere.

These evolving markets allow hotels to cater to unique preferences, fostering guest loyalty and positive word-of-mouth marketing. In essence, suburban hotel development presents a promising avenue for cost-effective ventures and the opportunity to thrive in less competitive, emerging markets.

Recently, Victoria has been at the forefront of suburban hotel development with successful projects such as Sage Ringwood, M-City, Mercure Doncaster, and the recently announced Standard Hotel in Fitzroy. These projects reflect the state government’s policy to create activity centre zones in suburban locations, to alleviate the pressure on traffic flow in and out of the CBD. They also reflect the emergence of commercial office precincts, retail centres, education institutions, health facilities, and entertainment venues in suburban locations.

Challenges and Risks in Suburban Hotel Development

However, suburban hotel development also comes with its own challenges and risks. Not every suburban location is suitable or feasible for hotel development. Developers and investors need to carefully analyse and evaluate the potential of each location, based on the underlying fundamentals of demand and supply.

They also need to tailor their product and service offering to the specific needs and preferences of their target customers. They need to create a unique and distinctive value proposition that differentiates their hotel from other alternatives.

Understanding Demand Drivers

The first step in suburban hotel development is to understand the demand drivers for paid hotel accommodation in a particular location. Demand drivers are the factors that influence the volume and nature of demand for hotel rooms, such as business travel, leisure travel, events, or other purposes. Demand drivers can vary depending on the location, season, day of week, or time of day.

Some of the most common demand drivers for suburban hotel accommodation include present or planned developments, such as:

• Infrastructure Investment: Suburban areas experiencing significant infrastructure development can create a need for hotel accommodations, catering to contractors, consultants, workers, or project-related visitors. Infrastructure projects encompass road construction, railway expansion, airport upgrades, port developments, utility enhancements, and public facility construction.
• Commercial Offices: Office complexes and precincts play a pivotal role in driving demand for hotel accommodations, primarily among corporate travellers conducting business or attending meetings within these areas. Examples of such office settings encompass business parks, industrial zones, and innovation hubs.
• Education: Educational institutions serve as a source of demand for hotel accommodations, serving students, faculty, and visitors associated with these establishments. These institutions may include universities, schools, colleges, and training centres.
• Healthcare: The presence of healthcare facilities can generate a need for nearby hotel accommodations, accommodating patients, healthcare staff, and facility visitors. Healthcare settings include hospitals, clinics, medical centres, and aged care facilities.
• Retail: Retail hubs draw in shoppers, staff, and visitors, fostering the demand for hotel accommodations in close proximity to these bustling centres. Examples encompass shopping malls, outlets, and various markets.
• Entertainment & Sports: Entertainment venues and sporting attractions create a demand for hotel accommodations, attracting attendees, staff, and visitors to these venues. Notable examples include stadiums, arenas, theatres, cinemas, and casinos.

Market Research and Analysis for Suburban Hotel Development

To identify and quantify the demand drivers for a suburban hotel location, developers and investors need to conduct thorough market research and analysis. This typically involves collecting and analysing data on the current and projected supply and demand of hotel accommodations in the location and its surrounding areas.

Developers and investors also need to assess the competitive environment and the performance of existing or proposed hotels in the location and immediate surroundings. It’s important to identify the gaps and opportunities in the market and estimate the potential occupancy, ADR, RevPAR, GOP, and NOI of their hotel project.

This is a pivotal step in suburban hotel development and can often mean the difference between failure and success. Simply put, if the research shows that there’s not enough demand in a particular area, there’s little point in trying to generate interest there. This is often not obvious until after thorough market research and analysis have been conducted, so we highly recommend taking time and a little extra effort with this step.

Determining the Product and Service Offering

The second step in suburban hotel development is to determine the product and service offering that will best suit the demand drivers and target customers of a particular location. The product and service offering refers to the physical and intangible aspects of the hotel that create value for customers, such as the size, class, design, amenities, facilities, services, brand, or operator of the hotel.

Some of the common product and service offerings for suburban hotel accommodation are:

• Size: This focuses on the number of rooms or keys that the hotel has. The size of the hotel should match the demand drivers and target customers of the location. For example, a suburban location with strong corporate demand may require a larger hotel than a suburban location with mainly leisure demand.
• Class: This includes both the hotel product and service. The class of the hotel should also align with the expectations and preferences of the target customers. A suburban location with affluent customers may require a higher-class hotel than a suburban location with budget-conscious customers, for instance.
• Design: The hotel’s style and appearance, both exterior and interior, are part of its offerings. The design should reflect the identity and character of the location and its community; a suburban location with a historic or cultural heritage could be infused with a more traditional or culturally specific design than a suburban location with a modern or trendy vibe.
• Amenities: Think room types, bedding, furniture, appliances, bathroom, internet, TV, minibar, safe, etc. The amenities of the hotel must meet the needs and desires of the target customers. For example, a suburban location with family or leisure customers may require more spacious and comfortable rooms with kitchenettes and balconies than a suburban location with business or solo customers.
• Facilities: Covering common areas and services that the hotel provides for its guests, such as the lobby, reception, restaurant, bar, lounge, gym, pool, spa, business centre, meeting rooms, function rooms, and more. The hotel’s facilities should create demand and value for its customers – a suburban location with corporate or event customers may require more extensive and flexible meeting and function facilities than a suburban location with leisure or transient customers.
• Services: This includes interactions and experiences that the hotel staff provide for its guests, such as check-in, check-out, housekeeping, room service, concierge, and valet. These are the types of elements that not only need to meet demand, but also need to exceed customers’ expectations with a personalised touch that goes a little ‘above and beyond’.
• Brand: This refers to the name and reputation that the hotel has in the market. The brand of the hotel should convey a clear and consistent message and image to the target customers of the location. For example, a suburban location with brand-conscious or loyal customers may require a well-known and established brand than a suburban location with brand-agnostic or new customers.
• Operator: This is the company or organisation that manages and runs the hotel on behalf of the owner or developer. The operator of the hotel should have the expertise and resources to deliver a high-quality product and service to the target customers of the location. A suburban location with complex or specialised demand may require a professional and experienced operator than a suburban location with simple or generic demand.

Feasibility Studies and Market Testing

To determine and deliver the product and service offering for a suburban location, developers and investors need to conduct thorough feasibility studies and market testing. They need to evaluate and compare different options and scenarios for their hotel project. It’s also important to select and negotiate with suitable partners and stakeholders for the hotel project, such as architects, designers, contractors, suppliers, brands, operators, etc.

Above all, it’s essential to ensure that the product and service offerings are aligned with the market positioning and value proposition of the suburban hotel development.

Selecting Partners and Stakeholders

In suburban hotel development, selecting the right partners is pivotal for success. These collaborators significantly influence various project aspects, including financing, construction, operation, and marketing. Here are essential considerations for choosing partners wisely:

• Financial Backers: Choose investors or lenders experienced in hospitality and suburban markets, ensuring they align with your project’s goals.
• Development Experts: Partner with reputable real estate developers, architects, and construction firms with suburban experience.
• Hotel Management: Select a trusted hotel management company with a proven suburban track record and alignment with your vision.
• Local Authorities: Build strong relationships with local authorities to navigate regulations, secure incentives, and streamline approvals.
• Community Engagement: Engage with the local community, addressing concerns, gathering feedback, and fostering positive relationships.
• Marketing Allies: Collaborate with marketing agencies, OTAs, and tourism boards to create effective strategies for attracting guests.
• Sustainability Advisors: Work with sustainability experts to incorporate eco-friendly practices into your suburban hotel.

Is Suburban Hotel Development the Right Move?

Suburban hotel development can be an attractive and viable option for developers and investors who are looking for new opportunities in the hotel industry. Suburban hotel development can offer lower costs, higher returns, and less risk than CBD hotel development. However, suburban hotel development also requires careful planning, analysis, and execution.

To excel in suburban hotel development, it’s crucial for developers and investors to grasp the unique demand drivers and craft an exceptional hotel experience tailored to their target audience. This entails seizing opportunities and surmounting challenges inherent to suburban development.

With Axsia HTL, your suburban hotel project is in expert hands. We boast a rich track record of successfully delivering and advising on suburban hotels across Victoria and beyond. Count on us to identify and assess prospective suburban locations, enabling you to make informed decisions. Our expertise extends to designing and delivering a product and service offering optimised for market potential and profitability. Further, we excel at risk management and mitigation, safeguarding your suburban hotel project from uncertainties.

If you’re interested in suburban hotel development, please contact us today. We would love to hear from you and discuss how we can assist you with your hotel project. We look forward to working with you on your suburban hotel development journey.

Hotel valuation plays a critical role in development projects, as it determines the feasibility and profitability of hotel investments. You may have grand aspirations for a stunning hotel project, but without a proper valuation, you’re like a ship adrift at sea. That’s why being well-prepared and informed are the keys to unlocking your hotel’s full potential.

The hotel valuation process can be complex. It involves various factors and assumptions that are influenced by the purpose, timing, and market conditions of the project. But don’t panic; in this article, we outline key steps for hotel developers to maximise their hotel valuation success and how we can assist you in your ventures as part of our holistic services.

Key Steps for Hotel Developers in Preparation

There are several key points to obtaining a valuation that accurately reflects the value and potential of a hotel project.

You might find that hotel valuation software can best assist you with the process and methodologies. Programs like Preno, Hotel Valuation Software and HVS come equipped with user-friendly software and tools to guide you through your investment valuation process.

Despite these softwares, it’s still important to understand the steps involved to ensure you’re making informed and calculated decisions.

1. Independent Financial Projections

As a developer, it’s important to create your own financial projections based on your own market knowledge and industry experience. Relying solely on brand or operator projections may be misleading, as those projections are often designed to persuade developers to choose a specific brand or operator.

By using your independent projections, you can have a primary source of data for investment feasibility, while using brand or operator projections as a secondary source for validation. This is a much more reliable method to use when casting financial projections and ensures your decisions remain unclouded by third-party influences.

2. Understand the Valuation Methodology

Developers need to understand the various methodologies used to value hotel properties. While there are various methods and approaches to value a hotel property, the income approach is the most commonly accepted. This method essentially values a hotel property based on its ability to generate income or cash flow.

The income approach can be further divided into two sub-methods: the direct capitalisation method and the discounted cash flow (DCF) method:

• The direct capitalisation method values a hotel property by applying a capitalisation rate (or cap rate) to its net operating income (NOI). The hotel valuation cap rate is the ratio of NOI to property value and reflects the risk and return of the investment.
• The DCF method values a hotel property by projecting its future cash flows and discounting them to their present value using a discount rate. The discount rate is the required rate of return for the investment and reflects the time value of money and the risk of the cash flows.

Familiarising yourself with these methods and how they can be applied to your potential investment property is essential in accurately calculating the valuation.

3. Consider Timing and Market Conditions

Hotel valuation is not a static process. It evolves with time and market conditions. Developers must consider external factors such as COVID-19 and its impact on the hotel industry, including demand, occupancy, revenue, and costs.

Developers should be aware of how timing and market conditions affect their project and adjust their projections accordingly. Additionally, understanding how the appointed valuer perceives the market and the assumptions they make in their valuations is crucial, as it can lead to different outcomes.

4. Conduct a Sensitivity Analysis

A sensitivity analysis is a valuable technique that evaluates the impact of changing variables on project outcomes. As a developer, you should conduct a sensitivity analysis to assess how changes in occupancy rates, average daily rates (ADRs), operating expenses, cap rates, or discount rates affect the value of your hotel property.

This analysis also helps to identify components that add or reduce value to the project and enables you to address these factors beforehand. It also helps to assess risks and uncertainties while developing necessary contingency plans.

5. Present the Project to the Valuer

Last but not least, presentation matters. Developers should effectively present their project to the valuer in a clear and convincing manner. This includes providing comprehensive information on the location, market, demand, supply, competition, brand, operator, contract, design, construction, operation, and performance of the hotel.

It’s key to establish a coherent narrative that links your vision, market research, financial projections, and valuation assumptions. Supporting evidence and documentation should be provided to substantiate claims and validate arguments.

Benefits of Following the Preparation Process

By following these preparation steps, hotel developers like you can maximise their chances of success in the hotel valuation assessment. There are many benefits to following the process outlined above, including:

• Accurate and Reliable Valuation: Independent financial projections and a solid understanding of valuation methodologies ensure the valuation more accurately reflects the project’s value and potential.
• Risk Identification and Mitigation: Conducting a sensitivity analysis helps developers identify potential risks and develop contingency plans. This enables them to pre-emptively address factors that may affect the project’s value.
• Clear Communication: A well-presented project helps valuers understand the developer’s vision and the process employed to develop that vision. It enhances communication and clarity between the developer and valuer.
• Securing Funding and Achieving Desired Return on Investment: A thorough and well-prepared valuation report increases the likelihood of securing bank funding. Developers have a robust framework against which they can assess the valuation findings and challenge them if needed, thereby increasing their chances of achieving their desired return on investment.

The Bottom Line: Equip Yourself for Successful Hotel Valuation

Hotel valuation is a critical step in development projects. Hotel developers must be well-prepared and informed to ensure a successful valuation process. By following the key steps outlined above, you can maximise your hotel valuation success, identify risks, and secure bank funding.

Understanding the importance of independent financial projections, valuation methodologies, timing and market conditions, conducting sensitivity analysis, and effective presentation to the valuer are instrumental in achieving accurate valuations that reflect the true value and potential of their hotel projects.

Wondering what the next step is in your investment project valuation journey? At Axsia HTL, our experienced team can assist you with the management, planning, refinancing and support of your asset valuations. Speak to us today to get started.

Hotel development is a multifaceted and intricate undertaking, laden with uncertainties and challenges. Among the paramount concerns that developers and investors face is execution risk – the looming possibility of not meeting the anticipated financial projections that justify the investment decision.

This risk can manifest in various forms, from construction delays and unforeseen expenses to operational hiccups, evolving market dynamics, and heightened competition. The consequences of mishandling execution risk can be dire, affecting revenue streams, expenses, cash flow, and overall return on investment.

In this comprehensive guide, we will delve deeper into the intricacies of execution risk in hotel development and explore effective strategies for managing it.

Understanding Execution Risk in Hotel Development

Execution risk in hotel development is essentially the gap between initial underwriting projections and the actual performance and outcomes of the project. It emerges when the intricate web of factors influencing a hotel’s success does not align perfectly with the initial assumptions made during the investment decision.

To comprehend execution risk fully, it’s essential to dissect its components and drivers. These include construction-related risks, market-related risks, operational risks, financial risks, and legal and regulatory risks:

• Construction-related risks encompass the potential for delays, cost overruns, design flaws, and construction quality issues.
• Market-related risks revolve around changes in market demand, shifts in competitive landscapes, and unforeseen economic downturns.
• Operational risks involve challenges in managing day-to-day operations, ensuring guest satisfaction, and maintaining efficient processes.
• Financial risks pertain to financing difficulties, unexpected expenses, and revenue shortfalls.
• Legal and regulatory risks encompass compliance issues, permitting delays, and unexpected legal disputes.

The Importance of Managing Execution Risk

Efficiently managing execution risk is pivotal for safeguarding the profitability and value of a hotel development project. It requires a proactive and vigilant approach throughout the development lifecycle, starting with the initial market research and extending to post-opening operations.

Successful execution risk management entails recognising potential pitfalls, promptly mitigating emerging challenges, and dynamically adapting strategies to ensure project success. You might even consider working with a dedicated advisory board to assist you in a thorough analysis and evaluation of all of these execution risk factors.

Effective execution risk management fosters investor confidence and reduces the chances of costly setbacks. It serves as a critical element in achieving sustainable returns, attracting additional investment, and enhancing the reputation of the project’s stakeholders. Devising executive risk solutions and seeing them through as a team can go a long way in the success (or lack thereof) of execution risk management.

Key Factors Contributing to Execution Risk

To address execution risk comprehensively, it’s crucial to identify the key factors contributing to its emergence. These factors often interplay and compound each other, making their mitigation a complex endeavour.

• Delays: Unforeseen construction delays can lead to increased costs, financing challenges, and missed revenue opportunities. Factors such as weather conditions, labour shortages, or supply chain disruptions can all contribute to delays.
• Design Flaws: Poorly conceived or executed design plans can negatively impact guest satisfaction and operational efficiency. Addressing design flaws often requires costly modifications and can disrupt the project timeline.
• Operational Issues: Inadequate management and operational procedures can lead to service deficiencies, negative guest experiences, and reduced profitability. Staff training, efficient workflows, and adherence to brand standards are essential in managing this risk.
• Market Changes: Rapidly shifting market dynamics, including fluctuations in demand and competition, can disrupt projected revenues. Accurate market analysis and flexible pricing strategies are essential tools for mitigating this risk.
• Financial Risks: Securing financing and managing project finances are inherent challenges. Unanticipated expenses, changes in interest rates, or a shortfall in projected revenues can all impact the project’s financial health. Robust financial planning and regular financial monitoring are crucial risk management tools.

Proactive Management of Execution Risk

To mitigate execution risk effectively, hotel developers and investors must adopt proactive measures. This includes:

• Realistic Projections: Ensuring that initial underwriting projections are grounded in thorough market research, industry expertise, and historical data. A comprehensive feasibility study should encompass market demand, competition, construction costs, and revenue projections.
• Continuous Monitoring: Rigorously monitoring project progress from planning and design to construction and operation. Regular project status updates and performance tracking can uncover issues in their infancy, allowing for timely intervention.
• Issue Identification: Identifying and addressing potential issues and challenges promptly to prevent escalation. An early warning system, combined with contingency plans, is instrumental in risk mitigation.
• Adaptation: Flexibly adjusting strategies to accommodate changing circumstances, such as those brought about by global events like COVID-19, which arguably changed the hospitality industry to a degree of permanence. This adaptability is key to resilience in the face of unforeseen challenges.

Collaboration and Alignment of Stakeholders

Efficient execution risk management goes beyond the developer or investor; it requires a synchronised effort from all stakeholders:

• Owner: Responsible for overseeing the development process, securing financing, and actively managing the asset after opening to maximise returns. The owner plays a pivotal role in setting the project’s vision, goals, and risk tolerance.
• Operator or Brand: Manages and markets the hotel on behalf of the owner, striving to deliver consistent quality and revenue optimisation. The operator or brand’s hotel management and marketing expertise is invaluable in mitigating operational and market-related risks.
• Employees: Key to delivering excellent guest experiences and ensuring operational efficiency. Employee training, engagement, and adherence to operational standards are vital components of risk management.
• Guests: The ultimate arbiters of the hotel’s success, as their choices and reviews directly impact occupancy and reputation. Guest feedback mechanisms and responsive service are integral to managing reputation and mitigating market-related risks.

Establishing a Clear and Shared Vision

Alignment among stakeholders is crucial. A shared vision that defines the ideal guest, their needs, and how the hotel will meet those expectations is essential. Transparent, regular communication fosters trust and resolution of conflicts constructively.

A shared vision encompasses the selection of the target market, the positioning of the hotel within that market, and the strategies for capturing market share. It should align with the project’s financial goals and risk tolerance, ensuring that all stakeholders work cohesively towards a common objective.

Synergy for Performance and Value Enhancement

When all stakeholders collaboratively work towards a shared vision, synergy is created. This synergy enhances the overall performance and value of the hotel project, helping achieve underwriting projections and ensuring a competitive edge in an ever-evolving market.

Synergy encompasses various aspects, including operational efficiency, brand consistency, guest satisfaction, and financial performance. The coordinated efforts of all stakeholders contribute to the project’s overall success, resulting in optimised returns on investment and long-term sustainability.

Achieving Success: The Holistic Approach

Managing execution risk in hotel development is a complex yet vital endeavour. Success hinges on realistic projections, vigilant monitoring, issue identification, and proactive adaptation. Moreover, it requires harmonious collaboration and a shared vision among stakeholders to harness the power of synergy.

By effectively addressing execution risk, hotel developers and investors can safeguard their investments, optimise returns, and secure a prosperous future in an ever-changing hospitality landscape.

This holistic approach to execution risk management ensures that all facets of the project, from construction to operation, are orchestrated seamlessly, ultimately leading to the realisation of the project’s financial and strategic goals.

If you’re seeking advice or guidance on execution risk in project management, our experienced team at Axsia is always happy to assist you. Get in touch with us to find out more.

Hotel franchising is a dynamic and evolving business model that’s gaining momentum in Australia. If you’ve ever asked, “How do hotel franchises work?” then we’re here to clear the air. Alternatively, you may be familiar with the ins and outs, but aren’t sure whether going into the hotel franchise business is a smart move. In this article, we’ll delve into what hotel franchising entails, why it’s becoming increasingly popular, and what the future holds for this innovative approach to hospitality.

What is Hotel Franchising?

Hotel franchising is a strategic partnership between a hotel owner and a franchisor, wherein the hotel owner licences the brand name, logo, and operational standards of a well-established hotel chain. This partnership allows the hotel owner to maintain independence in running the hotel while benefiting from the brand’s recognition and support.

In exchange, the hotel owner pays fees to the franchisor, granting them access to the brand’s marketing, distribution, and loyalty programs. It’s a collaborative approach that fosters growth and success for both parties.

Noteworthy Hotel Franchises in Australia

Australia’s hotel industry has witnessed the emergence of several major hotel franchises, each contributing to the growth and diversification of the hospitality landscape. Among them, some of the biggest hotel franchise groups in the country include well-known names such as AccorHotels, IHG (InterContinental Hotels Group), and Marriott International.

These global giants have made significant inroads into the Australian market, offering a wide range of brands and accommodation options to travellers.

With their vast networks, extensive experience, and commitment to quality, these major hotel franchises continue to play a pivotal role in shaping the future of hospitality in Australia, ensuring that travellers have access to world-class accommodations and experiences across the continent.

While it’s not always necessary to embark on your hotel franchise journey with sights of being one of the big guns, these key players can act as helpful roadmaps with which to guide your own process.

The Rise of Hotel Franchising

Hotel franchising has a rich history, dating back over 80 years in the United States, where it now dominates the hospitality landscape with over 90% of hotels operating under this model. Europe, while adopting it later, also boasts a significant share of franchised hotels, surpassing 50%.

In Australia, hotel franchising is a relatively new concept, but its popularity is skyrocketing as hotel owners and brands recognise the advantages it offers over traditional hotel management agreements (HMAs).

Key Factors Driving Hotel Franchising in Australia

If you’re interested in the hotel franchise industry, or perhaps you’re wondering how to get involved in the best hotel franchise in Australia, there are a few key factors to consider:

Growing Availability of Third-Party Management Companies

One of the driving forces behind the surge in hotel franchising in Australia is the increasing number of experienced third-party hotel management companies. These firms offer invaluable operational support to hotel owners under franchise agreements.

They provide options such as asset management and white-label management, wherein they operate the hotel under the franchised brand, eliminating their own branding. Further, they often commit to achieving key performance indicators (KPIs) related to financial returns, ensuring a win-win scenario for all parties involved.

Brand Management Companies’ Strategic Expansion

Brand management companies have strategically embraced hotel franchising as a means to enhance their distribution networks. Research from Cornell University reveals that these companies can secure superior returns from franchise contracts compared to HMA contracts.

This is due to reduced operating costs and more stable cash flows, enabling them to focus on brand development and marketing while delegating operational aspects to franchisees and partners.

Enhanced Owner Control and Flexibility

Hotel franchising empowers owners to exercise greater control over hotel operations, which can translate to higher returns. Under HMA agreements, owners often relinquish significant decision-making authority to the brand or management company, potentially misaligning with their interests.

In contrast, franchise agreements allow owners to implement customised strategies that cater to their specific market, property, and vision. This agility proves crucial in adapting to evolving customer needs, especially in times of crisis, such as the challenges posed by COVID-19.

Challenges and Risks of Hotel Franchising

While the hotel franchise industry presents numerous benefits, it’s not without its challenges and risks:

• Successful franchising hinges on strong alignment of values and expectations between franchisors and franchisees, along with clearly defined roles and responsibilities.
• Effective communication and trust are paramount, requiring ongoing monitoring and feedback mechanisms to maintain quality standards.
• Additionally, it’s crucial to note that hotel franchising may not be suitable for every property or market, as some may demand more direct involvement or guidance from the brand or management company.

If you’re unsure whether entering into the hotel franchise world is the right move for you, we recommend speaking to one of our experienced team members. We can assist you with navigating the process, evaluating your assets, and determining what kind of franchise would best suit your business goals.

The Future of Hotel Franchising in Australia

Given the current trends and opportunities in the Australian hotel industry, hotel franchising is poised for continued growth and success. It offers a flexible and cost-effective strategy for owners to leverage the reputation and reach of established brands while retaining control over their assets.

Simultaneously, it provides brands and management companies a means to expand their footprint without excessive capital investment.

Hotel franchising is a model that continues to evolve and adapt to meet the changing needs of hotel owners, operators, customers, and markets. It represents a smart and promising path toward better outcomes for all stakeholders in the hotel industry.

Speak To Us About Your Hotel Franchise Needs

In conclusion, the future of hotel franchising in Australia is bright. With its numerous benefits, including increased control for hotel owners and strategic growth opportunities for brands, it’s becoming the preferred choice in the hospitality sector.

If you’re interested in exploring hotel franchising or looking for the best hotel franchise options, consider partnering with Axsia HTL to gain access to leaders in the industry. Embrace the future of hospitality and embark on a journey toward success with the bright future of hotel franchising.