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:
|Year 1 RGI
|Year 6 RGI
|Asset Management engagement
|5-star Luxury Resort
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.
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.
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.