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Hi, everyone.
I'm Sally Chang.
I'm an Asset Management
Analyst at hotelAVE.
A hotel consulting and
asset management firm,
headquartered in
Providence, Rhode Island.
After graduating from Sookmyung
Women's University in Korea,
majoring in hospitality
management,
I got my Master's degree
at Boston University,
also studying
hospitality management.
Before joining hotelAVE,
I worked as an analyst at a
hotel real estate company,
working mostly on
distressed assets.
Today I'm going to talk about
what asset managers actually do
and why they are essential in
the hotel real estate
and investment world.
0:40
Let's start with what
asset managers do.
The overarching goal
of the asset manager
is to increase the value of
the hotel real estate
on behalf of the owner.
If you look at the
hotel as an investment,
generally, there are
three main groups
that are involved in
that hotel asset.
The owner who provides the
main capital to the hotel,
the management company
in which they operate and manage
the hotel day by day,
and the asset manager.
The asset management team plays
a role to connect and
match the interests of
the owner and
operator to achieve
the best possible
profit for both groups.
To give you a more intuitive
and straightforward insight
into how the owner
and the operator
could have different interests,
let's take a look at the
summary P&L of a hotel.
1:31
If you look at the P&L
on the right-hand side,
all the lines above GOP,
which stands for gross
operating profit,
are in the hands
of the operator.
They generate revenue and
manage expenses accordingly.
Aside from the base
management fee,
which is usually based off the
percentage of gross revenue,
operators could
gain incentive fees
if they could efficiently
manage or control
the hotel's expenses above
their budgeted or certain
debt operating income margin.
Their main goal is to
minimize the costs
as much as possible.
On the other hand, from
the owner's perspective
who is in charge of
the bottom part of
the P&Ls as you can
see on this slide,
they want the hotel to
be maintained well in
a long-term perspective
considering
the value of the
hotel in the future.
This is where owners
and operators
could potentially have
conflicting opinions on
how they want to
manage expenses.
Now we're going to take a look
at this small question here.
Insurance company owners
are often interested in
long-term cash flow
of the hotel which
requires to be operated under
well-maintained conditions.
For example, there was
damage to the roof
due to a hurricane
and the hotel has
an option to patch a leak
for a cost of $30,000
or replacing the entire
roof for $300,000.
Between the management
company and
the insurance company owner,
who do you think would
pick which option and why?
Now, operators would want
cheaper alternatives,
which is $30,000
to fix the issue
which will help to reduce
the cost of fixing the roof.
While owners would want to do
the full examination
of the entire roof or
the safety system of the
hotel which would cause
higher costs of $300,000,
and that choice would benefit
the hotel in the long run.
