From the customer’s perspective, the hospitality industry is entirely different than the perspective of hotel asset managers who need to make complex capital investment decisions to keep the business running. The goal of hotel asset management is to manage lodging investments to meet specific objectives of ownership. Hotel assets are analyzed at the property level as well as the portfolio level. To meet the objectives of ownership in hotel asset management, individuals must have a firm grasp on valuation, financing, equity structuring, exit strategies, and more. A manager of hotel assets needs to have a broad base of knowledge while also understanding the intricacies of the business.

One of the most important aspects of hotel asset management is to administer and renegotiate management contracts. This is based on evaluations of capital expenditures and monitoring expenses to reduce cost. In order to develop a strategic vision, managers must be aware of their own business as well as local and global competitors. Through training in hotel asset management, individuals learn how to benchmark a property’s revenue and expense performance against the market. With proper benchmarking, managers can then evaluate refinancing to reduce debt costs and thus free up capital for future investments.

Capital investment in the hotel business requires strong forecasting and a firm grasp on the entire business before any capital should be invested. As is true in all businesses, financial forecasts are only as strong as the starting assumptions. In the hotel business, that includes projections of occupancy, average rates of customers, cash flow and real estate values. Every aspect is crucial when it comes time to appraise investments and present the value of returns to ownership groups. Some methods used for investment appraisal include calculating average rate of return, internal rate of return, net present value, or payback period. Each method has its merits, but often, a combination of an analysis of those financial decision-making tools and thorough research are necessary. Capital investment decisions need to use this analysis to ultimately make decisions on the value of an investment’s risk versus the return. Improving the long-term value to the business and hedging against risk is paramount to hotel asset management.

Individuals looking to take part in the field of hotel asset management must be confident as well as meticulous in order to be successful when making capital investment decisions. Proper schooling in all aspects of the hotel business is vital. Asset managers need to be able to effectively refinance and free up capital to make investments, but that is just the beginning. Once the capital is available, the decision to make investments requires strong initial assumptions in order to forecast correctly, followed by accurate appraisals of the feasibility of the investments. Gaining certificates in hotel asset management and learning how to make these complex decisions from investors can be invaluable to a business and to individuals maintaining a career in this exciting, demanding field. Hotel asset managers are crucial to maintaining the future success of a hotel and must use every tool available to make these difficult decisions.

David Shoemaker is Vice President of Learning Solutions and Innovation at eCornell. For more information on hotel asset management, capital investment decisions, or eCornell, please visit http://www.eCornell.com

David Shoemaker is Vice President of Learning Solutions and Innovation at eCornell. For more information on hotel asset management, capital investment decisions, or eCornell, please visit http://www.eCornell.com

Author Bio: David Shoemaker is Vice President of Learning Solutions and Innovation at eCornell. For more information on hotel asset management, capital investment decisions, or eCornell, please visit http://www.eCornell.com

Category: Finances
Keywords: hotel asset management,capital investment decisions