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.

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 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.