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0:00
Hi everyone, I'm Sally Chang.
I'm an Asset Management
Analyst at Hotel AVE,
a hotel consulting and
asset management firm
headquartered in
Providence, Rhode Island.
After graduating from
Sookmyung Woman's
University in Korea,
majoring in hospitality
management,
I got my master's degree
at Boston University,
also studying
hospitality management.
Before joining Hotel AVE,
I worked as an analyst at
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 centered in
hotel real estate
and investment work.
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 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 more intuitive
and straightforward insight
into how owner and
operator could have
different interests,
let's take a look at the
summary P&L of a hotel.
1:31
Okay, 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 of
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
that 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 are 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 the 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 condition.
For example, there was
a damage on the roof
due to parking.
The hotel has an option
to patch a leak for
a cost of $30,000 or replacing
the entire roof for
$300,000 between
management company and
insurance company owner.
Who do you think
they would pick?
Which option and why?
Now, operators went with
one cheaper alternatives which
is $30,000 to fix the issue,
which will help to
reduce the cost to
fix roof, but owners would
want to do the full
examination on
the entire roof or safety
system of the hotel,
which would cause higher
costs of $300,000.
That choice would
benefit the hotel
in the long run.
