This article was first published in Finance Digest – Business news.
Finance Digest is a quarterly print and online publication providing in-depth coverage and analysis of the global financial community covering a wide range of topics from Business, Finance, Banking, Technology, Insurance, Investments, Lifestyle and more.
By Jonathan Humphries, Chairman HoCoSo and Course Leader of the MSc in Finance, Real Estate and Hotel Development and Head of International Hotel Development and Asset Management specialisations at Glion Institute of Higher Education.
A hotel is more than just a piece of real estate. It is a large, complex organism, founded on human experience and generating different and often fluctuating revenue streams.
There is plenty of emotion involved in creating great guest experiences in the hospitality industry – but there is also a need for a clear-headed, analytical approach to asset management. This is especially true when it comes to investing capital wisely, so that its value to the business is maximised. All the more reason, then, for hoteliers to view their properties through the analytical eyes of an asset manager.
By doing so, the more financially-knowledgeable Hotel General Manager (GM) will possess the right language and dialogue to use when dealing with owners and/or investors. This keeps everyone on the same page, which ultimately makes for more constructive relationships.
It is also becoming ever-more relevant as the hotel investment market becomes ‘professionalised’, with global institutional capital flowing into the market in record quantities. In this environment, any significant investment – room upgrades or a new food and beverage concept, for example – will require far more comprehensive and meaningful cost/benefit analysis in order to be signed off.
Professional investors will not commit their cash without a compelling business plan, showing guest differentiation, investment costs and supportable revenue/ROI models, all written in a financial language they can relate to. We need the new generation of hotel company executives to have these financial analysis skills in their toolbox, if we want to see the industry continuing to move forward.
In future, I hope to see some of the sophistication around revenue management that is common among the major players percolate through to the smaller, independent operators. Sadly, there are still numerous hoteliers out there who simply do not have the skills or resources to yield manage or maximise RevPAR (revenue per available room), leaving them at the mercy of the online travel agents (OTAs) and their commission structures.
Inevitably, this brings us back to data. Hotel GMs have to understand where data comes from, how to make the numbers talk and how to use data-driven knowledge to their advantage. The good news is that data for KPIs and benchmarking has never been more plentiful. There are several specialist data providers, such as STR and HotStats, along with consultants such as Duetto, who will help you to use data to predict the future and price your offer appropriately, but it is critical to use benchmarking correctly if you want to identify best practice behaviours.
The challenge in hospitality is that a good proportion of GMs come through the operational side of the hotel business, rather than progressing through the finance route. This can leave them potentially exposed – so my recommendation, to the younger generation, would always be to try to spend some years working in a finance area before entering the GM’s office.
Education, and the need for financial upskilling in hospitality management, is paramount and this bigger picture provides context for Glion’s new MSc in Finance, Real Estate and Hotel Development, which launches in September.
We want our first, and future, student cohorts to think like financiers, investment analysts and real estate professionals – not just because it will open up professional opportunities in these fields, but also because it will give our students the tools they need to be effective 21st century hoteliers. So we will teach modules on financial analysis, valuation and innovation, among others. There is also a core component we are calling the Real Estate Challenge, which will enable students to analyse different opportunities, then devise and pitch a fully-priced investment strategy.
We make no apologies for the highly vocational slant of our Master’s degree; indeed the feedback we have received from the market to date is that it provides a real USP for the programme. By giving our students an insight into how things work in the finance, real estate and hospitality industries, we hope they will realise the level of expertise required to pull all the elements together to drive asset value.
It also shifts the paradigm in hospitality management education; something which we are looking to achieve across our programmes, not just with our new Master’s. Hotel schools typically focus on areas such as branding, operations and other traditional aspects of the GM role. That does not always create a mindset that sees the hotel in asset terms. When they understand their role in creating value for the asset, it brings a fresh perspective to GMs.
The stage is set for a new breed of financially-savvy hotel GMs to lead the industry to greater heights. Who is ready to step up and seize the opportunity?
HoCoSo are advisors with a difference. We create tailor-made and innovative solutions for clients’ hospitality-led projects by bringing together the optimum team of sector specialists. Jonathan Humphries, Chairman and Owner of HoCoSo, and his direct team specialize in the extended-stay, co-living, and hotel-alternatives hospitality market; luxury, lifestyle and boutique hotels; and resort developments in Europe, the Middle East and Africa (EMEA). Our strengths lie in the following core services:
- Product & Concept Creation, for portfolio & individual asset developments
- Strategic Development Projects with a focus on new-market / new-concept business expansion planning, operator selection, market and financial feasibility studies
- Transformative Asset Management for brand re-positioning, asset re-evaluation and concept re-structuring.
- Hospitality Education for companies and academic institutions, with a focus on bespoke course development, training and teaching
- Workshops, Keynotes and Conference Moderating for boards, leading international conferences and incubators