1. Why is there demand now for hotel asset managers?
Hotel demand is currently weakening in many markets, hotel profits are slipping and asset values
are declining. Hotel owners need to take aggressive action to restore or maintain balance, and
assure that the operators fully understand and remain focused on the owner’s goals. Currently
most owners are making their mortgage payments, but it is not be always the case. Even lenders
are starting to hire independent asset managers to salvage problem properties that they came to
own through foreclosure.
2. How and when did the concept of asset management start - particularly in relation to
the hospitality industry?
In the late 1980s and the early 1990s, the U.S. lodging industry struggled through the worst period
of its history since the Great Depression. The hotel overbuilding of the early 1980s collided with a
declining economy and the travel slowdown resulting from the first Gulf War, so equity investors
and lenders turned to workout specialists to regain some fraction of the value they had lost. This
disaster control activity was arguably the single most important factor in increasing the prominence
of the hotel asset management function.
3. What are the advantages of employing the services of an asset manager?
Asset managers provide full oversight of the operation and physical asset, as well as maximize real
estate value; however, as the asset management function is highly owner specific, the scope of the
assignment and the depth will vary dramatically from property to property and from owner to
owner. For instance, if the owner wants to sell the property, the asset manager will prepare the
property by completing renovations and working to maximize current profitability levels, thus
enhancing the value to the buyer.
4. What should an owner/investor look for an asset management company?
In my opinion, hotel owners should look for independent asset management companies:
independent from traditional hotel consulting companies to avoid conflict of interest (e.g. leaking of
financial information), and independent from the owner to guaranty complete objectivity and
superior results.
These third-party companies are often directly tied to the oversight of a particular asset. They
direct much of their attention to maximizing current revenue, controlling expenditures, increasing
value and sometime positioning the property for a transaction. Beside the operational know-how,
they should have extensive experience in the finance and financial consulting fields, and valuation.
After all how do you want to add real estate value, if you don’t know how to evaluate an asset?
5. How does an asset manager relate to the owner? to the operator?
Asset manager provides the information tools to ownership to make appropriate decision and
assuring that the property is handled and maintained as an investment. We serve as a
counterbalance to the operator and ensure that they are managing effectively the hotel, this
includes: operational and financial review, approve and monitor capital expenditures, sales and
marketing. We make sure that the hotel teams understand the requirements and motivations of its
owners with a focus on profitability, cash flow and returns on investment.
For instance, when a hotel is doing well and hitting initial budgeted projections, that does not mean
there are not areas of improvement or opportunities that might be uncovered by the operator. Our
performance expectations are to never be completely satisfied until properties are at a peak,
sustainable level and to consistently challenge the operation to do more, all for the benefit of the
investment and the owner.
6. Being the 'eyes and ears' of owners - what are your responsibilities?
When the hotel ownership and operational responsibilities are separated, there is strong attention
on investment returns on the part of the owner which in turn leaves a smaller margin for error for
the operator. As the ‘eyes and ears’ of the hotel owner, we offer an external perspective to the
hotel and act as the bridge between asset owners and operators. Our primarily objective is to
assist hotel owners to realize the full value of their assets through a continuous process of value
creation and enhancement.
7. What critical issues do asset managers face or address?
The most frequent issues that we have to address are when the operators are holding large
amount of cash flow, mismanaging capital expenditures and on-going maintenance program,
accumulating large unnecessary inventories, holding important facts, building their brand
standards on the owner’s expenses, complying with operating agreements, mishandling the
marketing budget...
8. Do you also get involved when a project is still under development or construction?
Asset Manager’s responsibility is to assist hotel owners/developers in realizing their investment
goals. Therefore, it is their responsibility to provide accurate and professional services to guide
developer/owners in the complex process of planning and ensuring a suitable return on investment
is made. At the same time, asset manager often supervise the hotel pre-opening, support the
development of new operations and then, provide the conventional long-term asset management.
We also get involve with renovations, takeover and acquisition supports, supervision of mixed-
used development, and assistance for fractional ownership (e.g. sale of apartments or villas).
Branded residences are unique when it comes to real estate sales. While the large operators have
specific brand requirements, the actual sale remains the primary responsibility of the
developer/owners. Therefore we had to adapt and undertake this alternative support role of
coordinating sales and act as consultants throughout the project until the completion of the sale.
Interview of Mr. Alex Sogno for Hospitality Magazine 2008
Hotel demand is currently weakening in many markets, hotel profits are slipping and asset values
are declining. Hotel owners need to take aggressive action to restore or maintain balance, and
assure that the operators fully understand and remain focused on the owner’s goals. Currently
most owners are making their mortgage payments, but it is not be always the case. Even lenders
are starting to hire independent asset managers to salvage problem properties that they came to
own through foreclosure.
2. How and when did the concept of asset management start - particularly in relation to
the hospitality industry?
In the late 1980s and the early 1990s, the U.S. lodging industry struggled through the worst period
of its history since the Great Depression. The hotel overbuilding of the early 1980s collided with a
declining economy and the travel slowdown resulting from the first Gulf War, so equity investors
and lenders turned to workout specialists to regain some fraction of the value they had lost. This
disaster control activity was arguably the single most important factor in increasing the prominence
of the hotel asset management function.
3. What are the advantages of employing the services of an asset manager?
Asset managers provide full oversight of the operation and physical asset, as well as maximize real
estate value; however, as the asset management function is highly owner specific, the scope of the
assignment and the depth will vary dramatically from property to property and from owner to
owner. For instance, if the owner wants to sell the property, the asset manager will prepare the
property by completing renovations and working to maximize current profitability levels, thus
enhancing the value to the buyer.
4. What should an owner/investor look for an asset management company?
In my opinion, hotel owners should look for independent asset management companies:
independent from traditional hotel consulting companies to avoid conflict of interest (e.g. leaking of
financial information), and independent from the owner to guaranty complete objectivity and
superior results.
These third-party companies are often directly tied to the oversight of a particular asset. They
direct much of their attention to maximizing current revenue, controlling expenditures, increasing
value and sometime positioning the property for a transaction. Beside the operational know-how,
they should have extensive experience in the finance and financial consulting fields, and valuation.
After all how do you want to add real estate value, if you don’t know how to evaluate an asset?
5. How does an asset manager relate to the owner? to the operator?
Asset manager provides the information tools to ownership to make appropriate decision and
assuring that the property is handled and maintained as an investment. We serve as a
counterbalance to the operator and ensure that they are managing effectively the hotel, this
includes: operational and financial review, approve and monitor capital expenditures, sales and
marketing. We make sure that the hotel teams understand the requirements and motivations of its
owners with a focus on profitability, cash flow and returns on investment.
For instance, when a hotel is doing well and hitting initial budgeted projections, that does not mean
there are not areas of improvement or opportunities that might be uncovered by the operator. Our
performance expectations are to never be completely satisfied until properties are at a peak,
sustainable level and to consistently challenge the operation to do more, all for the benefit of the
investment and the owner.
6. Being the 'eyes and ears' of owners - what are your responsibilities?
When the hotel ownership and operational responsibilities are separated, there is strong attention
on investment returns on the part of the owner which in turn leaves a smaller margin for error for
the operator. As the ‘eyes and ears’ of the hotel owner, we offer an external perspective to the
hotel and act as the bridge between asset owners and operators. Our primarily objective is to
assist hotel owners to realize the full value of their assets through a continuous process of value
creation and enhancement.
7. What critical issues do asset managers face or address?
The most frequent issues that we have to address are when the operators are holding large
amount of cash flow, mismanaging capital expenditures and on-going maintenance program,
accumulating large unnecessary inventories, holding important facts, building their brand
standards on the owner’s expenses, complying with operating agreements, mishandling the
marketing budget...
8. Do you also get involved when a project is still under development or construction?
Asset Manager’s responsibility is to assist hotel owners/developers in realizing their investment
goals. Therefore, it is their responsibility to provide accurate and professional services to guide
developer/owners in the complex process of planning and ensuring a suitable return on investment
is made. At the same time, asset manager often supervise the hotel pre-opening, support the
development of new operations and then, provide the conventional long-term asset management.
We also get involve with renovations, takeover and acquisition supports, supervision of mixed-
used development, and assistance for fractional ownership (e.g. sale of apartments or villas).
Branded residences are unique when it comes to real estate sales. While the large operators have
specific brand requirements, the actual sale remains the primary responsibility of the
developer/owners. Therefore we had to adapt and undertake this alternative support role of
coordinating sales and act as consultants throughout the project until the completion of the sale.
Interview of Mr. Alex Sogno for Hospitality Magazine 2008
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