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Fading Away: Sunsetting the Asset Manager Role in Hospitality Real Estate Ownership & Investments

Study Findings and Predictions 2002-2025 - analysis, research report, editorial

The Usefulness, Changing, Diminishing Role of Hotel Asset Managers:

A Difficult Truth, and hard to admit....


In the world of hospitality, roles and responsibilities have evolved over time, adapting to an ever-changing industry landscape. Among the positions that have undergone significant transformation is that of the hotel asset manager. Once hailed as a vital player in the realm of hotel ownership and management, this role is now facing a crossroads. It may not be a popular opinion, particularly among those who have embraced this profession, but it's a message worth considering as we collectively seek to rebuild the industry in a post-pandemic world.

The Asset Manager Proliferation:

In the years leading up to the global pandemic, the hotel industry experienced remarkable growth, fueled by a robust economy and a seemingly insatiable demand for new hotel properties. This boom created opportunities for various professionals, including the emergence of the hotel asset manager. These individuals, often equipped with strong financial backgrounds and prestigious university degrees, played a crucial role in bridging the gap between hotel owners and operators. Their primary mission was to add value and reduce risk, making them an attractive addition to hotel ownership structures.

As the industry flourished, the role of the asset manager flourished with it. With the promise of financial optimization, asset managers were frequently welcomed into the fold by owners and investors eager to maximize their returns. Hotel management companies, which had long focused on the operational side of the business, now had financial experts influencing their strategies. It was an era of growth and collaboration, or so it seemed.

Figure A: The Evolution of Asset Management in Hospitality Real Estate

In Figure A, we present a comprehensive depiction of the transformation within the asset management landscape of the hospitality real estate sector. This graph underscores a significant shift that occurred during the COVID-19 pandemic and its aftermath. From 2002 to 2019, the industry predominantly relied on financially focused asset managers, marked by heavy-handed decision-making and influence.

This contributed to the commonization and decline of the operationally focused 3rd party hotel management company, the business operators in the field.

Figure A

However, the urgent demand for expertise in building management, revenue growth, operational flow, local relationships, property safety, security, maintenance, and human capital resources during the pandemic era led to a sharp decline in the productivity and effectiveness of traditional financial asset managers.

The post-pandemic period, spanning 2020-2022, witnessed a fundamental change in ownership dynamics. Real estate owners, many of whom were in their 30s-40s and had not experienced the industry's earlier peak of collaboration in the early 2000s, began to take ownership decisions in-house. They increasingly engaged directly with lenders and investors.

This shift in focus allowed owners to recognize the wealth of knowledge possessed by field managers in property operations and building-project management.

Property operators also evolved, becoming more financially literate, some even reaching expert levels, largely thanks to direct engagement, motivation, and knowledge-sharing from asset managers.

The result was a diminishing of the asset manager's traditional role and influence. Owners realized that operators and building project managers had become just as proficient in areas previously dominated by asset managers. As a consequence, the asset manager's role in the industry began a gradual sunset, as ownership took a more active role in decision-making, drawing upon the newfound expertise within their organizations. This transformation signifies a pivotal moment in the evolution of asset management in hospitality real estate, as the industry's focus shifts towards a more holistic, operationally driven approach to success.

This insightful graph, Figure A, captures the industry's changing landscape, reflecting the pivotal shift from financial asset management dominance to a more diversified, hands-on approach in the post-COVID era.

The Divide and Resentment:

However, beneath the surface, a divide was forming. The rise of asset managers meant that the individuals responsible for drafting business plans and financial strategies were increasingly distanced from the day-to-day operations of hotels. These asset managers often earned significantly more than property-level hotel general managers, despite their lack of hands-on operational expertise. This financial disconnect created resentment and a growing divide within the industry.

By the time COVID-19 hit, the vulnerabilities of this model were exposed. The asset manager's role, which had thrived during times of economic prosperity, suddenly appeared fragile and less essential during a crisis. It became evident that this divide, this high barrier between financial expertise and operational acumen, was not sustainable.

The Changing Landscape:

The pandemic accelerated shifts within the hospitality sector, forcing a reevaluation of roles and priorities. Hotel management companies, owners, and investors found themselves navigating an unprecedented crisis, one that required agility, adaptability, and an intimate understanding of the operational intricacies of running a hotel business.

Many asset managers, who had built their careers on financial acumen and strategic planning, were ill-equipped to provide meaningful support during the pandemic's operational challenges. It was a harsh reality that prompted industry leaders to rethink their reliance on this role.

The Warning and the Opportunity:

As we look to rebuild the hospitality industry in the wake of the pandemic, it's essential to acknowledge that the traditional role of the asset manager may not be as relevant as it once was. This is not a critique of those who have faithfully served in this capacity, but rather a warning of the changing tides in the industry.

The opportunity now lies in rebuilding with those who have remained deeply connected to the operational leaders of the industry, who understand the complexities of managing a hotel business unit, and who have weathered the storms alongside their colleagues. It's about fostering a culture of collaboration, benchmarking, and shared knowledge that empowers all stakeholders to take a proactive role in owning and operating these businesses.

Sunsetting the Traditional Hotel Asset Management Role in Hospitality Real Estate Ownership and Investments:

The hotel asset manager, as we know it, is fading into the annals of industry history. The challenges of the past few years have exposed the limitations of this role and highlighted the need for a more holistic and collaborative approach to hotel ownership and management. While it may not be a popular opinion, it's a perspective grounded in observation and experience, with the aim of helping everyone involved in the industry rebuild and thrive in the years to come. Let us embrace the changing landscape and seize the opportunity to create a more resilient and adaptable hospitality sector.

Conclusion and Future: The Shaping of the Future of Hotel Ownership is Happening Already

The research findings point to a compelling vision for the future of stability and productivity in hotel ownership. The heart of this vision lies in the symbiotic relationship between 3rd party hotel management companies and cross-functional project management firms. The key takeaway is that the most effective and productive path forward involves these entities collaborating and working in unison, pooling their collective knowledge and expertise directly for the benefit of ownership.

This paradigm shift towards greater collaboration and transparency is expected to usher in a new era in hotel ownership, one marked by unprecedented stability, productivity, and innovation. By releasing control and freely sharing knowledge and information, these industry stakeholders are poised to create an environment of trust and mutual support.

As we look ahead to 2025, the forecast brims with verified optimism. This transformative change has the potential to be the catalyst for the greatest period of hotel ownership productivity.

It promises to garner respect and reliability from the banking and investment community, while also minimizing risk profiles and boosting profitability. Furthermore, it's anticipated to deliver a holistic service experience for team members, resulting in the most exceptional guest experiences worldwide.

Confidence in building safety and security, as well as industry relations, is set to reach unparalleled heights.

In essence, this shift represents a monumental turning point in the history of the hospitality industry. By fostering collaboration, sharing knowledge, and embracing a forward-thinking mindset, the future of hotel ownership is poised to achieve new pinnacles of success, benefiting owners, guests, team members, and the entire industry.

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