Hotel assets Hotel management Quantitative development Efficiency, continuity and sustainability of value-added investments

Original: Li Sheng

News and trends in investment, development, operation and asset management in large consumer industries such as hotels, tourism and leisure

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As Chinese hotel market has entered an era of increasing asset inventories in recent years, hotel owners have gradually begun to pay more attention to ROI.

It has again become a buzzword among hotel population. But for concept of asset management

Did you have a deep understanding? What does good asset management mean for hotel owners in context of post-pandemic era? Today I will make a report, let's read it in detail

01Two key questions about asset management

Perhaps some newcomers to hotel business are still not familiar with concept of asset management

Let's first understand, what is asset management? Why Hotel Owners Should Manage Assets Well

For hotel owners, the ultimate goal of investing in a hotel is to maximize return on investment

So how do you increase your ROI? Judging by formula for calculating return on investment ROI

Hotel investors want higher ROI

It is necessary to increase operating cash flow while controlling investment costs of hotel. Asset management is a means of achieving "down denominator and up numerator" to maximize ROI

Based on almost 30 years of experience in China, the overall ROI of Chinese hotels is not optimistic

Firstly, due to unwise planning and design of hotel at an early stage, cost of developing and investing in hotel as a whole is high, that is, denominator is too high

On other hand, due to current oversupply of China's hotel industry in general, as well as black swan events such as epidemic

As a result, operating cash flow is limited, so numerator is too low. Thus, if denominator is too large and numerator is too small, natural return on investment will be low

In order to make changes, hotel investors should conduct an analysis at beginning of investment

Will money generated from hotel's future operations be greater than money invested now and in future?

How to achieve stable cash flow through quality management and operation, and long-term retention and operation in subsequent operational process

02 Asset Management Lifecycle Enlightenment

After understanding why hoteliers should manage assets properly

We need to introduce concept of "Object cycle"

To clarify what hoteliers should do at each important time node in an asset's lifecycle

To optimize asset value and achieve good ROI

Typically, hotel assets go through following six stages: from "design evaluation and feasibility study" when hotel project is approved at an early stage, to "operations and value added management" after opening of hotel, and to final "asset exit"< /p>

Hotel owners should think about feasibility of their investment when starting to invest in a hotel

To avoid situations where denominator in an equation is too large. This requires hotel owners to first conduct a market assessment during hotel planning phase.

It is necessary to take into account market positioning of future hotel and needs of main customer groups

Does design of hotel suit location and needs, and is space used effectively

Increasing value of target brand, etc. to ensure rationality of investment in project

After that, at hotel financing stage, hotel owners must submit product positioning of project to feasibility study

Create a reasonable overall investment plan and loan ratio to complete appropriate financing

This is also an important link that allows hotels to control development costs. Although an unreasonable credit ratio and a high loan interest rate reduce initial investment

However, this could put more pressure on each year's net cash flow in future, reducing number of molecules, which does not help improve ROI.

Finally, during construction phase of a hotel, hotel owners should focus on controlling cost per square meter

With support of data provided in preliminary feasibility study

Control cost per square meter and average area of ​​each room to achieve optimal use of space

So when denominator is basically defined

Hotel owners can focus on asset maintenance and operational oversight after opening a hotel to maximize operating cash flow

Turn ROI into improvement

03The myth of asset management

It should be noted that

Currently, many owners have two misconceptions about hotel asset management. The first is that people think that hotel asset management is only necessary during post-opening operation phase, and second even thinks so. p>

The hotel manages assets only when there are operational problems

But in fact, already at very beginning of asset management lifecycleinvestors should have an understanding of asset management

And these two misunderstandings also reflect that hotel assets in China are always "passively seized"

In other words, these hotels do not opt ​​out at peak of market, but are forced to withdraw funding when hotel's funds cannot be revolved, or even at low asset valuations. But actually

More mature asset management will actively seek exit when hotel's assets are at their highest value, for example, owner completes an ownership transaction or allocates assets, packs hotel into an asset package, and re-evaluates asset allocation.

Or decide to partially exit, introduce strategic partners and dilute some of capital

And this voluntary exit

Hotel owners also need to pay attention to important times in asset management life cycle and hotel life cycle (Hotel Life Cycle)

A newly opened hotel usually goes through above four stages. It should be emphasized that

Hotel owners should monitor real estate values ​​as hotel revenues approach a mature stage of high stability

Find best time to exit assets and start thinking about upgrading when hotel enters a recession

Asset managers need to understand that

Modernization and refurbishment is really an opportunity to reinvest and re-develop.This is also in earliest equation

Possibility to rearrange relationship between numerator and denominator

Therefore: first thing hotel owners should do nowadays is to measure ratio between numerator and signwearer and re-invest in repairs.

Reexamine return on investment; secondly, owner should also start optimizing space efficiency

And area that didn't give square effect; finally, reanalyze source of target customer to satisfy new market demand

The so-called asset management, in essence, consists in hope that owners of hotel will invest in operation of hotel

If you want to increase value of your assets

You need to think about how to actively withdraw assets at market highs

Hotel owners must be clear

Good work actually contributes to a better output

The value of assets of future exit from hotel is determined by rate of return on investment

This is also result of combined effect of cost control during operation of hotel and investment in development

Leaving hotel is not end, but beginning of next asset lifecycle

In a mature asset management market, after hotel closes and cash is returned, owner will be able to participate in a new round of investment in hotel

After undergoing transformation and development, invested hotel has entered a new phase of its life cycle and received a new period of growth

Until this hotel facility starts a new exit wave

Such a reciprocating process forms a closed loop of entire life cycle, which is very important‼ ️